Sorry, this is a long (roughly 1,700 word) post. If it’s too much to take in all in one read, try reading down to the heading “What the hell are these “innovative ownership” models?“, and then come back later and read from there to the end.
When the current West Yorkshire & Harrogate Sustainability and Transformation Plan leader Rob Webster was still Chief Executive of the NHS Confederation he put his name to a Report: Capital, capacity and capability – Independent sector providers helping to develop a strong Sustainability and Transformation Plan.
The NHS Confederation represents organisations working in the NHS, and these include the NHS Partners Network – a powerful and influential lobby group of private healthcare companies which is at the heart of the corporate rip off of the NHS and a trustee on the NHS Confederation Board.
Rob Webster’s NHS Confederation report announced:
“[Y]our partners in the independent sector can provide vital support as STPs are developed: providing crucial access to capital, capacity and capability and helping to make local services sustainable.
Many areas are already working well across organisational boundaries and bringing in for-profit and not-for-profit providers as a matter of routine. We are also seeing much needed plurality and partnership being driven by collaboration. The STP development process is a great opportunity to strengthen and broaden these partnerships and leverage the capital, capacity and capability which the independent sector offers.”
An example is Cornwall Sustainability and Transformation Plan which includes a Public Private Partnership for a £48m 5 year contract for the GP out of hours service and NHS111. It starts on 1 December 2017.
This is in line with the government’s 2015 Spending Review settlement for the NHS which committed the government to encouraging long-term partnerships with the private sector in a number of key areas including:
- development of new models of care including Accountable Care Organisations
- the upgrade of diagnostic capabilities
- hospital groups and acute care collaborations.
The Public Private Partnership is between Royal Cornwall Hospitals Trust, Kernow Health Community Interest Company – a GP-owned provider, and a private company – Vocare Limited – that already provides urgent care services to nine million patients across the UK.
To cut costs in line with a £246m funding shortfall in 2020/21, the Cornwall Sustainability and Transformation Plan says:
“radical change is needed in the way we deliver our services across the entire health and care system, as well as the way people use them.”
As part of this “radical change”, community hospitals will be replaced by “Integrated Community Hubs” (p42) “co-located with Urgent Care Centres to ensure workforce and financial viability, working in partnership with the acute trusts.” (p42). This is to cut £24m costs.
Reconfiguring the NHS 111 and out of hours GP services, through the new Public Private Partnership, is “an essential component of a wider urgent care pathway which is aligned, efficient and appropriately resourced.”
More public private partnerships
This requires the sell off of “surplus” NHS estate and the development of “innovative ownership” models through the Cornwall Sustainability and Transformation Plan estates strategy – part of the One Public Estate scheme.
It will develop Public Private Partnership models that will, among other things:
- Transform primary care and social care into big hubs funded by Estates & Technology Transformation Funding and Private Public Partnerships, through “Innovative ownership models”
- Modernise rationalised community hospitals
- “Streamline” the Urgent Care and Minor Injuries Units estate
- Fund capital development of the acute hospital Emergency Department “to facilitate the new urgent care spine linked to integrated 111 and Out of Hours”
‘Project Phoenix’- Fire Sale of NHS Land Via Public Private Partnerships
The Naylor Report expects Public Private Partnerships, being hatched way down under the radar by ‘Project Phoenix’, to be the route to private capital. These new Public Private Partnerships will be worth £3bn-5bn.
Due to go live later in 2017, six regional Public Private Partnerships covering all of England would oversee sales of “surplus” NHS Estate, with the proceeds from asset sales being shared between NHS organisations and private firms.
‘Project Phoenix’ is the mission of the project team (that includes PwC) that was assembled in late 2015 on the instructions of the Department of Health, to examine what role Public/Private Partnerships could play in implementing Sustainability and Transformation Plans and moving on from the Local Improvement Finance Trust (LIFT).
LIFT was set up in 2001 to involve the private sector in financing primary care, social care and community infrastructure. It also receives public funding for the NHS primary and community estate through Community Health Partnerships (CHP), a wholly owned subsidiary of the Department of Health (DoH).
As part of Project Phoenix, England has been split up into six regions. The first public sector tenders were expected to be published in late June the ‘Official Journal of the European Union’ (OJEU), with the first Public Private Partnerships going live later in 2017.
This channelling of public money into Public Private Partnerships comes at a big cost. It means the state doesn’t have to finance and pay capital costs upfront – but we know from the disastrous Private Finance Initiative history that these projects end up costing much much more than publicly financed projects, because of ruinous interest and facilities management costs. We also know that they compromise safety and usability standards during the construction stage, because profit is put ahead of everything else.
What the hell are these “innovative ownership” models?
There are some examples in this 2013 Kings Fund report, NHS buildings: obstacle
or opportunity? by Nigel Edwards, a former NHS Confederation Director of Policy and acting CEO.
Splitting ownership from operation by creating one or more not-for-profit property management companies to hold assets for small and medium-sized hospitals.
These companies could incorporate the community assets taken over by NHS Property Services and could also hold assets for local government and other parts of the public sector, for example, schools and libraries which are “appropriate” as venues for many health services. The example given is Telereal Trillium which has a 20 years Private Sector Resource Initiative for Management of the Estate (PRIME) contract with the DWP to manage all its buildings.
Real estate investment trusts (REITs)
Real Estate Investment Trusts are exempt from corporation tax and the profits can be redistributed to the shareholders. They may also be listed on the Stock Exchange. “With appropriate partners”, foundation trusts could invest in REITs, which would allow them to raise money on investment markets.
Local property-backed bonds to support the financing of new schemes.
The trust as ‘issuer’ could source the funding and issue the bonds backed by its “portfolio of assets” – in other words, the hospital; they could then use the income to pay the government a proportion of the initial transferred value of the portfolio and also to raise a development fund for new schemes.
NHS Public Private Partnership roads lead to Alzira
Nigel Edwards, the author of that Kings Fund report, had previously led an NHS Confederation study visit to the Alzira regional Public Private Partnership (also known as an Accountable Care System) for healthcare, in Valencia, Spain.
In the Alzira Public Private Partnership (Accountable Care System), the private contractor receives a fixed annual sum per local inhabitant (capitation) from the regional government for the duration of the contract and in return must offer free, universal access to its range of health services that include both primary/GP care and hospital care. It differs from previous public-private partnerships by providing the whole range of population’s healthcare. The Chairman of a UK private healthcare company who was on the Alzira study visit commented:
‘As a private sector organisation,this is and will continue to be invaluable information for our use in developing an approach to delivering services to NHS commissioners.’
Ribera Salud is the health management holding company running the Alzira Public Private Partnership.
Its first public hospital was the Hospital de La Ribera in Alzira. It differs from UK Private Finance Initiative hospitals in that it provides the healthcare in the hospitals, as well as funding building and managing the building. Over 20 per cent of the Valencia region is now covered by similar contracts, with the Public Private Partnership model also used in an area of Madrid. All the hospitals are managed by the Ribera Salud Group.
The study visit noted a number of changes that would need to take place in the NHS in order for the Alzira Public Private Partnership model to work.
Surprise surprise these changes are pretty much all included in Simon Stevens’ Five Year Forward View and the Sustainability and Transformation Plans/Partnerships that are to carry out the Five Year Forward View.
Alzira screwed up badly but the rhetoric declares it a success story
The funny thing about the NHS Confederation report on the study visit to Alzira is what it leaves out: all the evidence about what has gone wrong with the Aliza Public Private Partnership/Accountable Care System from 1997-2012 – including the fact that, as with PFI contracts in the UK:
“contracts may have been designed to mitigate risks to the private sector.” (Spanish healthcare Public Private Partnerships: the ‘Alzira model’. Acerete, B., Stafford, A. and Stapleton, P. (2011), Critical Perspectives on Accounting. Vol. 22, 533-549)
A study by Dr Anne Stafford of Manchester Business School, and others, assembled evidence that the financial reality is at odds with:
“the rhetoric, which declares this project to be a success story.”
The capitation payment was set too low (204 Euros), which caused the failure of the Accountable Care System (the Ribera Salud Unión Temporal de Empresas – RSUTE – consortium). The RSUTE consortium consortium shareholders were:
- The medical insurance company Adeslas S.A. (51%), as the technical provider of health services, with regional savings bank Agbar S.A as its majority shareholder.
- Regional savings banks Bancaja, CAM and Caixa-Carlet by means of a jointly-controlled entity – Ribera Salud S.A.- (45%), which was the financial partner for the project.
- Construction companies Dragados and Lubasa, which each took a 2% holding
Compensation paid out by regional government was 69.3 million Euros. The Accountable Care System consortium was re-constituted (RSUTE II) at a higher, and progressively higher, capitation amount (379 Euros in 2004 up to 639 Euros in 2012).
Under the RSUTE II consortium there were doctor shortages, a doctors’ strike and continued staff dissatisfaction. According to a study carried out by the Universities of Zaragoza/Manchester and Manchester Business School, there were allegations that the consortium ‘cherry picked’ the most profitable medical and surgical specialities. At the same time it was referring HIV and other chronic disorders to other non-RSUTE II hospitals. The annual bill for regional government was very high.
And here is Hunt’s call to denationalise the NHS and “break down the barriers between private and public provision”.