"The NHS will last as long as there are folk left with the faith to fight for it"
Aneurin Bevan

Wednesday, 13 February 2013

Fair Playing Field

In 2007 Circle bought Nations Healthcare and with this came the Independent Sector Treatment Centre (ISTC) in Nottingham and the Midlands Centre in Burton and a facility in Bradford. The contract for the Burton facility ended in July 2011, and the contract for the Bradford facility ended in June 2010. The following map (pdf) shows the relationship of the treatment centre (in the top right hand corner) to Nottingham University Hospital. Further, the staff who work in the treatment centre are seconded from the University Hospital under a Staff Services Agreement. It should be very clear that the treatment centre is part of the complex and depends on the NHS hospital.

Nations Healthcare was one of the first companies to be contracted to run an ISTC, the New Labour government's mechanism to privatise some NHS services. The company was created in 2002 and has its origins in the US. Nations Healthcare was contracted to open its ISTC in Nottingham in December 2007, but it missed this deadline and the facility opened in July 2008. By this time Nations Healthcare had been taken over by Circle. Thus, the Nottingham NHS Treatment Centre should be regarded as always being a Circle facility because it was not opened until after Circle took over Nations.

The contract with Circle was extremely generous compared to the NHS hospital a short walk next door. The contract is known as a Minimum Take (MT) contract. Unlike Payment by Results (PbR, the payment system for NHS providers) Circle has a guaranteed income known as the "minimum take" and this means that commissioners pay the treatment centre even if they treat fewer than 95% of the patients they are contracted to treat. Further, the commissioners pay national tariff plus 22% for all activity up to 105% of plan and are paid national tariff for any activity over 105%.

Circle crow about how "efficient" they are at Nottingham, claiming on their website in 2012 that they:
"deliver[ed] average productivity gains of 18% each year since opening,"
That is, they claimed that from 2008 to 2012 they had an "average" productivity gain of 18% every year. Put this another way, a procedure that cost £100 in 2008 would cost £45 in 2012: is this possible? A management consultancy group called IPA produced a case study of Circle (Sept 2011) and in this they say:
"Circle has only been delivering services at the Midlands Centre for three years, Nottingham for two years, and Bath for less than a year, so data on long-term productivity trends is limited. However, evidence gathered by the company shows that in 2009, Nottingham had a 22 per cent productivity gain, and the Midlands centre had a 17 per cent productivity gain. Data is not yet available for Bath. At the Midlands Centre the employees have been engaged in a turnaround operation, after a period of low performance under the previous owner, which has set a clear direction." 
This says that two of the facilities that Circle had purchased from Nations (the Nottingham ISTC and the Midlands Centre in Burton) had poor productivity in 2008 and in 2009 there were similar productivity gains at both. The study lays the blame for the poor productivity of the Midlands Centre on Nations Healthcare, however, 2009 is two years after Circle took over Nations (ie they had been running the facilities for 2008 and 2009) and in the case of the Nottingham ISTC, Nations had never run the facility, so the 22% productivity gain in 2009 was an improvement on the poor running of the centre by Circle in 2008.

The last full Annual Report from Circle is for the year ending 31 Dec 2011 (pdf). This report states that  the Nottingham treatment centre was the only profitable part of the business. In 2011 it treated 87,340 patients generating revenue of £51.2m. The operating profit was £2,4m. Compare this to the much smaller CircleBath which treated 33,174 patients (both private and NHS) generating revenues of £13.2m and an operating loss of (£9,156k). Clearly Circle are not good at delivering private healthcare. In 2011, the total loss of Circle Holdings was £32.9m.

Most of the 87,340 patients of the Nottingham treatment centre will be treated on "minimum take", so the £51.2m is 22% more than an NHS hospital would be paid. Since the profit is just 5% of revenue, one has to question whether Circle could make a profit at the Nottingham treatment centre if it was paid like an NHS hospital.

The contract for the Nottingham Treatment centre has been re-awarded to Circle. The contract is for 5 years and the tender advertisement suggests that the contract is worth between £22m and £42m. The tender was handled by Midlands and East SHA on behalf of Principa CCG. The so-called Clinical Commissioning Group did not do the commissioning, instead, it was done on their behalf by one of the four centralised arms of the National Commissioning Board. Nottingham University Hospital was one of the original bidders for the tender, and considering it provides the staff, does the same work at tariff, and is right next door to the treatment centre, it would appear to be a nobrainer that they would get the contract. Details of the contract are currently not available, so we do not know if Circle will be paid at tariff, or on a minimum take. If the contract is on the former (tariff), then it is difficult to see how the ISTC can make a profit (and difficult for Circle to have a sustainable future). If it is the latter (minimum take) then this will go against government policy of a fair playing field.

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