NHS hospitals play a central role in our healthcare system. They use around three quarters of the £100bn NHS budget and understandably their performance comes under close public scrutiny. Hospital managers are under heavy pressure to meet financial targets, as well as those related to the standards of care. Hospitals that are in regular deficit are often referred to as ‘failing’, even if they are performing well in terms of the clinical care that they are delivering.
On top of the long-term pressure to meet financial targets, there is now a drive for the NHS to make £20bn of efficiency savings and for all NHS hospitals to become foundation trusts by 2014.
Part of the current government’s solution is to give commercial companies the chance to take over the entire operational management of NHS hospitals that have persistent financial problems. The first of these schemes has been signed with Circle; the company will now be managing the debt-ridden Hinchingbrooke Hospital from February 2012. It is very likely that this is just the first of many agreements that will be signed with private companies to outsource the entire management of NHS hospitals in line with the government’s commitment towards increasing both competition and the role of the private sector within the NHS. The deal with Circle can be viewed as a test run for a business model which might then be applied to run other struggling hospitals in the hope that it
will alleviate debt and reduce costs. The major concern of any ‘business model’ applied to an NHS hospital by Circle or any other commercial organisation is that in order to reduce costs the first target will be a reduction in services.
In this report we examine the prospects for the scheme expanding and look at which companies are interested in taking up this business opportunity. The deal with Circle attracted a high level of media coverage, with its Chief Executive more than willing to outline the company’s business ethos, but many of the other
providers that might be interested in NHS hospitals are not often in the public eye. This report looks at the structure, investors and business history of all the major players in the UK’s private hospital business, and from these identies causes for public concern about how the companies’ business approach might impact upon the NHS.
We also examine the evidence to support the idea that the private sector offers a solution for the problems of the worst performing hospitals. Finally we include an analysis of the government’s plan within the Health and Social Care bill, to lift the cap on the income that NHS hospitals can generate from private patients. This is already creating interest amongst commercial providers in running private patient units on NHS sites and could be an additional impetus for companies to want to run NHS hospital services.