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.

Outlook and Consequences

Compass have just produced a document outlining what they call Plan B+ "Rebuilding Britain and a Good Society", it's an interesting read and I'll probably post more from it in a later article. This blog post, however, is about where we are going at the moment, and what Osborne's Plan A has achieved. Plan B+ gives a good narrative.

The deficit that everyone goes on about is technically known as the Public Sector Net Borrowing (PSNB) and it is usually quoted as a proportion of Gross Domestic Product. A deficit is never good, and it is puerile and wrong of Conservatives to suggest that Labour wants to keep generating deficits.

Much as I hate using a household analogy for the economy, I will make an exception for this one quote:

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

This is the Micawber Principle, after Wilkins Micawber who said this in David Copperfield. Governments have to aim for happiness rather than misery. Micawber's misery was a deficit of just 0.1% of total income, the UK government's target is much larger. The Maastricht Treaty says that governments must not exceed a deficit of more than 3%, and during the last government, right up until the financial crash, the UK deficit was below this figure. It is nonsense to say that Labour mishandled the economy (and the public realise this, Coalition MPs find it difficult to spout the trite statement "the mess we inherited").

As a result of the financial crash and the "automatic stabilisers" (that is, increases in welfare payments to pay for people put out of work by the recession) the deficit was 11% in 2010, clearly unsustainable. Just before the 2010 election Alistair Darling's final budget presented a plan to cut the "structural" deficit by a half over the period to 2012/13. This was ambitious, and would have involved pain. However, the Darling plan said that there would be real terms flat funding for the NHS, so it is completely untrue for Conservatives to say that Labour would have cut the NHS budget. Osborne's plan was to cut the deficit faster and eliminate the "structural" deficit entirely by 2015. The sad thing was that no one in the media disputed that this was even possible. As we have seen over the last two and a half years, it wasn't.

The Compass document show this very well in the following table:

The first line is the Darling Plan, the second line is the Osborne Plan and the third line is the adjusted plan after Osborne admitted in the 2012 Autumn Statement that he had failed comprehensively to deliver what he had promised. It is clear from this table that by 2012/13 the adjusted Osborne plan was behind the Darling Plan, whereas Osborne had promised that the deficit would be significantly less at that point:

"Labour had planned £42 billion of spending cuts and tax rises during the 2011/12 and 2012/13 tax years. The tax and spending plans announced by George Osborne in the June 2010 Budget and the Autumn 2010 Spending Review added £22 billion of austerity measures by 2012/13 on top of the Labour plans. And yet, despite all this extra austerity, the deficit is closing much more slowly than was forecast in the June 2010 Budget. George Osborne does not now expect the UK economy to achieve “cyclically adjusted budget balance” – i.e. eliminating the ‘structural’ deficit in the public finances – until 2018, three years later than originally planned." 

Indeed, the government appears to be going backwards, as Compass puts it:

"This is worth emphasising: Two and a half years after the Coalition took office, its central self-appointed aim of closing the “structural deficit” is further away than when it first came to power! At this rate, we can expect that by 2015, the aim will be to close the structural deficit by 2021."

The last sentence is chilling. At the 2009 Conservative Party Conference Osborne promised us five years of austerity and this marked the start of the decline of Conservative poll ratings and this decline meant that Cameron was denied a majority in 2010. In the Autumn Statement last year, Osborne adjusted his plan and promised us eight years of austerity. Compass say that it is more likely to be eleven years. To put this in context, after the second world war the country suffered a period of austerity while infrastructure and industries were rebuilt. (In addition, the country suffered one of its worst winters on record in 1947.) Austerity lasted until 1954, that is, nine years.

There is clearly something wrong if a government, blessed with infrastructure that has not been bombed to pieces, and an educated and healthy population, will give us austerity for longer than after the war when the country was in a far worst state.

So where does this leave the NHS? Under severe threat. We already have an "efficiency saving" target of £20bn (that is, assuming a 4% increase in demand, in 2015 the NHS will deliver 20% more care for, in real terms, the same money as it had in 2010). Very few people think this target is possible, and indeed, the original target set by Andy Burnham in 2010 was £15bn to £20bn, but the Tories have insisted on the upper target. The extension of austerity means that the NHS will have to "save" more. Roy Lilley quoting Prof John Appleby reckons the target will be £50bn by 2020. Lilley says that this is not possible, and an NHS faced with this challenge will revert to co-payments. Osborne's mismanagement of the economy will have dire consequences on our NHS.

AQP Madness

The current Operating Framework says that every PCT Cluster must offer three community services through Any Qualified Provider. The PCT cluster determines what the services are, and for each one it determines what the "qualified" means. That is, the PCT Cluster produces a specification for the services outlining what the provider is expected to be able to do (and just as importantly, what it is not supposed to do). The AQP services were then advertised and providers where invited to register to provide the service, which involved the PCT Cluster determining of the provider was "qualified". AQP providers can be existing NHS providers (which have a lot to lose) as well as voluntary and private providers (which have a lot to gain).

The Department of Health's website that was set up to privatise the NHS is called Supply2Health (henceforth known as the NHS Privatisation website). This website has the list of currently registered AQP providers. The providers for Adult Hearing include Ealing Hospital NHS Trust. This trust provides acute services for Ealing and community health services for Ealing, Brent and Harrow. The following image is a Google Maps image of the area covered by Ealing Hospital.

The NHS Privatisation website says that Ealing Hospital will provide Adult Hearing Services as an AQP provider for the following PCTs:

Ealing
Hammersmith and Fulham
Hounslow
Kensington and Chelsea
Westminster

The area covered by the hospital as an AQP provider is shown here:

The image shows Ealing in the top left, but it also shows that the trust is providing hearing services for a much larger population to the south, east and west. It may be easier to visualise the greater area covered when the two images are combined:

The NHS Privatisation website says that in the area covered by Ealing borough there are three AQP providers of Adult Hearing: Ealing Hospital, West Middlesex University Hospital and InHealth Ltd. Inevitably, Ealing Hospital will lose patients to these competitors, so the only way that the trust can maintain its income is by providing services outside its catchment area, and hence this is why it is an AQP provider from Hounslow in the west to Westminster in the east.

One such "competitor" is West Middlesex University Hospital NHS Trust which covers Hounslow and Richmond-upon-Thames:

The NHS Privatisation website says that West Middlesex University Hospital will provide Adult Hearing Services in the same areas as Ealing Hospital. The combined image for this trust is shown here:

The NHS Privatisation website says that the AQP providers for Hounslow are: West Middlesex University Hospital, Ealing Hospital, InHealth Ltd and Scrivens Ltd.

Thus Ealing Hospital is competing for patients in Houslow who would have gone to West Middlesex Hospital, and West Middlesex is competing for patients in Ealing who would have gone to Ealing Hospital. In both areas there are private AQP providers (InHealth and Scrivens) and the "host" trust will lose patients to them. So to make up for patients lost to them, both NHS trusts are providing hearing services in Hammersmith and Fulham, Kensington and Chelsea, and Westminster.

AQP madness? Sure. Rationally, Ealing Hospital should provide services for Ealing and West Middlesex Hospital should provide the services for Houslow, but AQP is not rational.

Slippage

In August Ali Parsa went on a PR campaign to try and get the media to think that Hinchingbrooke and Circle were doing well. He succeeded, the compliant media reported what Parsa said rather than report what was actually happening (Hinchingbrooke was behind plan financially and Circle had to beg for extra capital from its shareholders telling them it was insolvent).

In an interview with the Today programme Parsa was asked about the finances at the trust (4:30):

Justin Webb: and you're still on course? my interest is when you expect to begin to be able to take some profit from your activities at Hinchingbrooke?
Ali Parsa: we are still on course, we think the hospital should balance its books next year, it should finish this year on a balanced book, that is what we are working on

Parsa is saying that by next April the trust will have a "balanced book". Webb, unfortunately, didn't have the then recent July finance report which said that the trust was doing badly financially, and so didn't challenge Parsa on this point. (It's not Webb's fault: the quality of research in the health section of the BBC news department is extremely poor, as we have seen during the passage of the Health and Social Care Act. BBC health journalists have little knowledge of the NHS or what is happening to it.)

On Thursday Hinchingbrooke gave its finance report for quarter 2 and their finances are no better than before. HSJ report that a spokeswoman for Circle said:

"We’re confident that we're now on track to reach a sustainable break-even position by the end of the next financial year."

That's the next financial year, Parsa said that the "balanced book" would be achieved this year. So Circle are now saying that their plan has slipped by a year.

Filed under "Interesting"

I'm working through the various documents that FTs have submitted to Monitor and I came across the following in the Forward Plan (next year's plan) for Cambridge University Hospitals Foundation Trust.

In the section "Goals and milestones to deliver vision" and under "Financial strategy and goals for the the three years" it says:

Developing a mutually beneficial relationship with Circle Health, with CUH providing and/or supporting a number of services either on the Hinchingbrooke site or CUH campus.

and later on under "Strategic Position"

Hinchingbrooke Hospital The Trust is committed to seeing a sustainable future for Hinchingbrooke as part of the regional family of healthcare organisations and to this end we will develop a mutually beneficial relationship with Circle Health, with CUH providing and/or supporting a number of services either on the Hinchingbrooke site or CUH campus.

CUH runs Addenbrooke's which is local to Hinchingbrooke and, depending on your point of view, is either a partner in delivering healthcare to the local community, or a competitor.

The phrasing of the statement is important. First the "beneficial relationship" is with Circle, not with Hinchingbrooke Healthcare NHS Trust. The hospital is owned by the trust, not Circle. Circle are merely management consultants brought in to run the hospital for the next 10 years. Any relationship should be with the trust. Instead CUH has decided to have a relationship with Circle.

The second point is the statement "providing and/or supporting a number of services" does not name the services and doesn't even indicate the site for the "services" (it says, either your place or mine). That shows that the services are unimportant. It is the "beneficial relationship" that is important. Since Circle Holdings is bankrupt, it is difficult to see what could be beneficial to CUH in a relationship with Circle.

Finally, the Health and Social Care Act says that Monitor has to act to prevent "anti-competitive behaviour". Two neighbouring trusts striking up a "beneficial relationship" does not sound competitive. Monitor have had three months to look at this plan and as yet have not complained. remember this if/when Monitor comes down heavy on your local trust for being "anti-competitive" and ask why CUH and Circle are allowed to have a cosy relationship and your trust isn't.

AQP Nonsense

As part of the government's NHS privatisation plans they have produced a policy called Any Qualified Provider. They "sold" this to the electorate by saying it is "patient choice" it isn't, it is commissioner choice. And what's worse, the government are forcing it upon commissioners by telling them they have to provide at least three community services via AQP.

This is having stupid effects. The Forward Plan for Berkshire Healthcare FT (BHFT, a provider of community health services) says this:

"NHS Berkshire is extending patient choice during 2012 by offering some audiology services and podiatry services through the Any Qualified Provider initiative. Audiology services will be offered from September 2012, and podiatry services in the autumn 2012. BHFT is mitigating the potential loss of business by focussing on enhancing service quality, and patient outcomes and satisfaction levels. The Trust will also apply for AQP status to offer services in new geographical areas where the Trust can offer high quality accessible services with minimal risk."

So BHFT fear that they will lose the income for audiology and podiatry because NHS Berkshire (the commissioners) will use another provider via AQP. Like many NHS organisations they cannot afford to lose this income so they intend to register as an AQP themselves are supply these services elsewhere!

What a load of bollocks this policy is.

Leader's Speech

In spite of a slight wobble on Saturday (which was more due to a misunderstanding than anything else), the overarching theme of the Labour conference is that the next Labour government will stop the marketisation of the NHS that the Coalition government is introducing.

This is an apt time because the government have just announced the third phase of Any Qualified Provider (AQP): 398 services will be opened up to private providers. It is now that private companies will be making the decisions whether to seek the investment so that they can become an AQP provider.

Incidentally AQP has nothing to do with patient choice as was touted at the last election. It is commissioners’ choice. CCGs will be allowed to commission any provider, and in some cases will have to use private providers since the government regards a choice for the NHS to be an invalid choice. The investment providers ill make is not insignificant. Yes, there are some that are relatively low risk investments (for example audiology, where there are already providers in the private sector, who will presumably seek to expand their business by providing NHS services). But other services, for example MRI and CT diagnostics, there are significant investments needed.

Ed Milliband’s conference speech said that the next Labour government will repeal the Health and Social Care Act, and significantly, it would stop the marketisation of NHS service: the NHS ill be the preferred provider. Private companies invest to make a profit and profit depends on gaining business. In the environment of flat funding it is even more difficult for a private provider to make a profit. To make a return on their investment they will need a sustained profit over a long period of time, and that includes the time after the next election. Ed Milliband said that when a Labour government is elected that profit is not guaranteed. It is possible that Ed’s statement could curtail the number of companies willing to become an AQP and could limited the policy.