As the Guardian reports this morning:
A private company, listed on the stock market, has been given the right to deliver a full range of hospital services for the first time in the history of the NHS, reigniting a debate about the use of business in the health sector.
Circle Healthcare, a John Lewis-style partnership valued at around £120m, will manage the debt-laden Hinchingbrooke hospital in Huntingdon, Cambridgeshire, from February after the government signed off on a decade-long contract on Wednesday.
But as the Bureau of Investigative Journalism reported in May:
[Circle's] accounts reveal a structure of fiendish complexity, with 49.9% of Circle's shares held in the British Virgin Islands, and the remaining 50.1% in Jersey, although Circle says the Jersey arm “has recently been re-domiciled as a UK tax resident company”. The Jersey company's accounts include six pages of related-party transactions.
UK tax resident does not mean UK incorporated, by the way.
As the Guardian also noted today:
However, Circle is viewed by ministers as a model "mutual" with 49% of its ownership in staff hands. It operates a scheme to allow more shares to be gained through a performance-related rewards system.
Well that may be a Tory view, but first of all this is not a mutual: it is 50.1% controlled by a private for profit company.
Second that 'mutual' bit is in the unaccountable, zero tax, regulation lite, British Virgin Islands where candidly anything can (and does) happen. Hardly 'John Lewis like', I suggest.
And third, I don't want staff in any hospital managing for profit. That means they do three things:
a) Cut corners where there is no cash incentive applied to doing things. Care does not have cash incentives attached, nor do many services for the elderly, for example. It's why we end up with consultants prescribing food and water which is otherwise not delivered;
b) Undertake too many procedures where there is a tariff payment - because this is how the hospital makes money - so look for an increase in operations in Huntingdon very soon;
c) Turns away cases where there is uncertainty and what is medically called 'multiple comorbidity' - or in other words the person is really sick, no one knows what is going on and it's not clear what needs to be done so no payment is likely to be generated but sure as heck the person needs looking after.
That's what will happen here.
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The only health being taken care of here will be that of the accounts.
BB
This is likely to be the first of many takeovers by the private sector. I seem to recollect that this hospital was deemed to be ‘failing’ because of financial problems. Perhaps the solution would have been to bring in some competent management from within the public sector ( they do exist despite Tory comments to the contrary). I have used the hospital in the past and found it to be a much more pleasant experience than Addenbrookes which is far too large to be managed properly. However there seems to be a fixation for large organisations and large contracts but often these do not work well.
“This is likely to be the first of many takeovers by the private sector”
I disagree. Circle was announced as the “preferred bidder” in Nov 2010 with the contract expected to be signed in June 2011. However, once the Treasury saw the deal the brakes were put on. It has taken 5 months for them to be reassured that Circle can operate this public asset (Circle will not own Hinchingbrooke). We do not know the details of what the Treasury were worried about, nor how Circle reassured them.
The private sector do not want to run NHS hospitals for the simple fact that they cannot provide the service at the low rate that the NHS does. The private sector likes the policy of Any Qualified Provider because this allows them to do low risk work, however, they are not happy with the low price that the NHS will pay. When it comes to a hospital, the risks escalate. A&E is expensive and emergency cases upset the workflow of elective care (which is the part of the hospital’s work that private companies want to do). It is far more difficult to do electives under the 18 week RTT target and have to accommodate emergencies.
We do not know the deal with Hinchingbrooke. If A&E is in any way downgraded then we will know that Circle have been given a sweetheart deal. Similarly, if we find that there is some relaxation of the 18 week RTT target. If they have to run A&E as it is, then be wary because Circle have never run a hospital with an A&E.
Agreed Richard. Frankly, I’ve never been able to understand why private management (especially when driven by business constraints such as profitability) should be superior to public management (based on service and the common good) even in business terms, and certainly not in clinical terms. The failure of private medicine to manage public health was amply demonstrated in the years preceding the setting up of the NHS – care for the few, and misery for the many, unless a public-spirited doctor/hospital (they DID exist, but found it hard to manage in a market driven medical environment) stepped in to help. However, the most worrying thing is the 10-year contract – so Ed Milliband’s Health Secretary won’t be able to cancel this until it expires in 2021 – dubious though it is now, and likely to be proved more dubious for the reasons you have given. A National Heist Service indeed. Shame on them!
I am sure such ten year deals will be normal – and will be signed in large numbers before 2015 – for precisely that reason
The advantge of private management is that profit will drive innovation. Currently there is little incentive to introduce new technologies into medical procedures especially where they involve a steep learning curve for the doctors and where initial upfront cost is high. An example is the use of robotic surgery machines, the prostate cancer one dramatically improve surgical results not in terms of removing the tumour but in not damaging the nerves hence not causing incontenance and impotence. The NHS has something like 20 of them, a lot bought through private fundraising, yet the US has 1,200 becasue under the private healthcare model having one attracts patients to you as a doctor, so there is an incentive to adopt the new technology. The same goes for knee surgery robots – 95 in the US, 1 in the UK and that is on loan from the company. This is why so much medical innovation comes from the US and why their spending on healthcare is so high, thery effectively pay the R&D costs for the rest of the world.
Of course how you marry that private push for innovation into a universal health system is the issue. And of course we need to remember our GPs, pharamcies, medical equipment and pharamceutical portions of the NHS are already privatised and have been for ages.
Pure dogma
Medical innovation is much more about thinking now than technical innovation
The one thing that privatisation will stop is thinking and it will encourage far too many interventions
Good doctors work out when to leave well alone
Profit motivated ones dive in
Looking to the USA is a mistake, they have worst outcomes even though there is more money being slushed about. The increase in money comes from the need to have private insurance, so more money spent but less achieved, definition of inefficiency.
There are a lot of questions that arise from this deal.
1) Hinchingbrooke has a PFI scheme, who is liable for that?
2) Hinchingbrooke has a private patient unit, will its profits go into the trust, or into Circle?
3) The trust is not a Foundation Trust, but it will have to be because the Health and Social Care Bill abolishes the status of NHS Trust, so Hinchingbrooke will have to become an FT or become a private hospital. FT’s have a membership (anyone over 16 in the area can be a member) who elect governors and the governors appoint the non-executive directors and the chair of the trust. Governors hire and fire NEDs and they can force the chief executive to resign. If Circle is taking over the management, and given a 10 year deal, does this mean that future FT governors will not be able to fire Circle? If not, then what is the point of them?
Excellent questions
I will put on the blog
Is Richard blooger you, Richard? 🙂
No!
…or even Richard BLOGGER….gad!! 🙁
Nah, you can find me at NHS Vault (click my name) or the NHS blog I write for False Economy. Anyway, from Richard’s photo he is far too handsome to be me!
Why, thank you!
I don’t konw why people have a downer on privatisation. I mean, look what a superb job private enterprise did with the trains, buses and education.
The utility companies are now much better than when they were publicly owned. You get a worse service for a astronomically higher price.
What’s wrong with that? 🙂
I put this to Charles Clark once and his justification was that privatisation is not just about price but quality also plays a part. I think we all now know that it is just about squeezing as much money from people, so that those who have plenty get more and those who have the least are asked to pay the most.
It will be the poor who will need the NHS the most, just because they are poor, it means that they will have the worst health outcomes. If this goes the way of all other privatisations, then the poor will have to pay more and receive a worst service.
It doesn’t make me feel proud to British, on days of all days!!
We always knew they intended to privatise the NHS, so that their chums could benefit financially from public funds. This despite all the promises not to do it and despite the fact there is no mandate for it.
On top of all that, to locate it in a tax haven is a breathtaking level of arrogance which just leaves me speechless.
Clearly time to join the group at St Pauls
>>>”[Circle’s] accounts reveal a structure of fiendish complexity, with 49.9% of Circle’s shares held in the British Virgin Islands, and the remaining 50.1% in Jersey… The Jersey company’s accounts include six pages of related-party transactions.”
This is pure insanity. I oppose the privatisation of hospitals of course. But if Circle was a widget manufacturer or something else where private enterprise was appropriate, this is precisely how they would be advised to set themselves up, and it would be madness too. It’s economic cancer. Commercial lawyers and the accountancy firms have so much to answer for.
[…] Welcome to the National Heist Service (NHS): UK hospital now run from Jersey and BVI Posted by: Nick Shaxson in: Thoughts From Tax Research: […]
In response to the comment above that Ed Millibands health secretary would not be able to do anything about this because they are ten year contracts – This maybe the case but if Labour had the political will they could make life difficult for private hospitals by returning all hospitals to the NHS act – that they must deliver all care to all people according to need. I would have thought this would make it economically unviable for them, as they would be forced to break a legal contract with the government or go bust. The Labour government could then renantionalise them on the basis that they would then require large government subsidies. Tax haven legislation would rout them out as well.
I would certainly be planning to trigger breaks if I was in office
Not that I am expecting to be