Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)



  120. Presumably Dartford and Gravesham went through the same process?
  (Mr Mason) It is difficult for me to comment on another scheme, presumably they did go through the same process. Obviously it is possible to go through that elaborate process and still arrive at a result where people hold their hands up and say there has been an error made. I cannot say 100 per cent if you looked at Durham somebody would not find something but I can say that we complied with all of the relevant guidance. All of our assumptions were reasonable and I am confident that if it was reviewed it would stand up to scrutiny. Time will tell. If it is looked at we will have a definitive answer one way or the other.

John Austin

  121. Consort Healthcare is an organisation that has just come into being for this particular purpose. I can understand Balfour Beatty are the construction firm and the Royal Bank of Scotland provided the finances, but the company is not one that traditionally would have provided services to run a hospital. I note from the brief the facilities management is subcontracted by you, to another company, Haden. The Trust's contract is with Consort?
  (Mr Rabin) That is right, yes.

  122. The facilities management are then subcontracted to one other company who may subcontract?
  (Mr Rabin) In this particular case it has been subcontracted to Haden Building Management, which happens to be a Balfour Beatty company.

  123. Who employs the staff?
  (Mr Rabin) Haden.

  124. When we come to the facilities, whether it be cleaning or catering or whatever, there is a lot of talk about an increased role for nurses and nurse managers to supervise, monitor and enforce the conditions of the contract, how easy is that to happen unsupervised when services may be contracted, contractors with one company who subcontract to another who may then subcontract to third and fourth companies?
  (Mr Mason) The first thing is to say that the new hospital in Durham has been designed under the Patient Focus Care Model which means that the local provision of those services remain the responsibility of the Trust and of the whole team. In that sense our ward managers are responsible for the provision of the cleaning services on the ward, with staff employed by the Trust. They are also responsible for serving the meals and also responsible for certain aspects of the portering service. There is an element which has been retained in-house and in that sense there is a direct line which facilitates that within the organisation. In terms of how do you manage services out with the ward, you do have a contract and that contract does state the level of service that needs to be provided for a monitoring mechanism, and in that sense there is no reason why that cannot be supervised by the relevant members of nursing staff if it is felt that is appropriate. In terms of Durham the way the model has developed has turned out to be in keeping with the national direction, but that is more fortuitous than planned because obviously the national direction has only recently been clearly established in terms of ward managers being more responsible for those areas.
  (Mr Rabin) It may be worthwhile adding, the process is entirely transparent. The adoption of Haden as a subcontractor was one that was done in full consultation and agreement with the Trust.

Dr Naysmith

  125. Talking about contracts being supervised by the nursing staff and, say, cleaning contracts in wards, and so on, does this not give rise to a bit of a conflict in terms of who actually is the boss, who actually has the right to say to somebody, this piece of work is not good enough it has to the done again—not that that would ever happen—I am just suggesting the possibility of it arising in the course of management.
  (Mr Mason) As long as the contract is clear and the management arrangements within the Trust are clear about who has the authority I do not see there would be that problem. The position with our hospital is different because the staff are directly managed by the ward manager, which gives you a direct line. In terms of a contract arrangement, as long as the mechanisms are clear and transparent you should have no difficulty. We have set up various user groups within the organisation to look at the provision of certain other services so we get the direct interface between the service provider and the clinical staff who are using those services, so we can iron out difficulties early on. There have been a number of issues that have arisen in the early part of the contract and I think given the complexity of the agreement that is entirely anticipated. The important thing is how are they resolved and dealt with, not whether they exist or not. I think our track record on that is good in terms of working together to get over some of the issues. I am sure if it had been publicly funded and the services had been retained in-house we would have been having some of this dialogue with internal managers about the provision of the service in a new environment as well. The issues are the same, it is just about being clear of who has the authority and how you approach it. As long as you spell that out it should be reasonably straight forward.

Dr Taylor

  126. I am delighted to hear about the ward cleaners and fact they are still part of the ward team and I shall certainly take that back to the PFI that is going on in my neck of the woods. We are desperate to find out the truth about best value. We had Mr Milburn this time last week flanked by four high powered accountants from the PFI unit and they are swearing absolutely blue that it is best value. Two points about that, please, if a government can borrow in the public sector for six per cent and it cannot raise the money from you for anything like that how can it be best value, that is one point. The other point, which I asked Peter Coates last week, Balfour Beatty it is well known that 20 per cent of their sales are to do with PFI and that accounts for 40 per cent of their profits. That strikes me as being rather a waste of taxpayers' money, paying that amount of their profits. Could you in a word justify how it would be best value.
  (Mr Mason) If I can answer that from a Trust point of view, the question about Balfour Beatty's profits I will hand over to my partners here. In terms of best value we have had a fairly detailed analysis in terms of net present costs of both the public sector option and the private finance initiative. In terms of the calculations that we did actually the position was at the end of 30 years the public sector option was better value and at the end of 60 years they were of equal value or equal cost, so there was not a difference between the two options. In the rationale of the decision to go down the PFI route in terms of the North Durham scheme it was felt that that would facilitate the earlier delivery of the new hospital, so they were of equal value at the end of 60 years. The rationale for using 60 years was that that is the life of the hospital effectively, whereas if you look at 30 years in terms of the PFI deal you still have effectively another 30 years of life in the building, so it is a more accurate reflection. That was the basis of the decision. The reason that you arrive at that is you have to look at all of the costs implicit in both deals and you have to try and assess the level of risk that the PFI contract transfers to the private sector. We complied with the relevant guidance that existed at the time in terms of how we assessed that risk. If anybody subsequently goes in and changes any of those underlying assumptions then you will get a different result when you run the calculations. On the basis of the assumptions that were accepted as realistic and capable of being justified in terms of the process that is the result that we came out with. It was not better value, it was equal value in the case of North Durham.
  (Mr Rabin) I am not sure I can answer it in a word, I will do my best. From memory I think you started by saying it was well known that 20 per cent of . . . I am not sure what particular figure you were picking up?

  127. I am quoting something out of an article in The Observer, 20 per cent of Balfour Beatty's sales are to do with PFI and yet that 20 per cent of sales accounts for 40 per cent of their profits.
  (Mr Rabin) Can I take that in segments? It is not, I believe, true as a matter of fact to say that 20 per cent of our sales account for PFI, it depends on how you measure these things. If the Committee would like an exact figure perhaps I can come back to you. My guess would be at this stage it would be somewhere in between five per cent and seven per cent. If you would like a more exact figure I can come back to you.


  128. We would be very grateful.
  (Mr Rabin) The next part of your question relates to the profits that we get out of whatever that particular figure is. I think there is a very fundamental mistake in whosoever analysis that is. As a very simplified example I can point you to our interim results, which require a little bit of careful reading, as much accountancy does, if we start with a figure of say £83 million, which is not the entire total of our PFI related turnover, it is most of it, it is the figure that is most apparent here, then our operating profit from the £83 million, this is in terms of last year, the year ended December 2000, would be £30 million, which is perhaps what The Guardian is picking up, which would represent 40 per cent. What they are failing to look at is the figure below which shows the interest charged, which is £20 million, therefore the net is 10 out of 80, not 30 out of 80.

  Chairman: You will come back to us on that in more detail.

Julia Drown

  129. Some of these things we have discussed as we walked round the hospital but for the purposes of getting it on the record, what is clear is that the big advantage to you as the Trust is getting the hospital built in three and a half years rather than double that time under the public sector scheme. Why is it that the hospital can be built so much more quickly under a private scheme?
  (Mr Mason) The reason behind that was in terms of the business case we were looking at two fundamentally different designs and the design under the public option was a two phase design and therefore it was over a longer period. The reason it was over a two phase was there were other technical difficulties of developing it on an existing hospital site. One of biggest advantages brought to the deal by the private sector was they completely changed the design of the hospital. They said, "if you put the hospital at the top end of the site you can do it in one phase", and that was single, most important factor that resulted in that difference. Under the rules that apply you cannot then say, I now have a bright idea under PFI, I will put that into my public sector comparator and do it because you are not allowed to do that because you have to give credit in terms of evaluation to private sector innovation. If the public sector took the same design, built it and then you could build it for broadly the same cost in the same time scale as you could do under the PFI because why would it take longer because it was publicly funded. You might then get into issues about the availability of public funds and there has been a history in the past of hospitals being built in a phased manner and therefore you might argue that public funds being available to have it basically built in one go. But it is difficult for the Trust to answer that question because we do the business case as opposed to the Regional Office who prioritise.
  (Mr Flook) I think this three years or this seven and a half years is relevant when it comes back to considering best value/equal value. There was, certainly from where I was sat on the Health Authority, no realistic prospect of public sector capital, on the scale that was required to rebuild Dryburn Hospital and rebuild Bishop Auckland Hospital, being available. The public in this county have had a quarter of a century of being second or third best on the priority list. There was always another scheme across the region that came top and that had to be drawn to an end and we had to get these hospitals built essentially.

  130. As far as this scheme is concerned it was private finance or nothing.
  (Mr Flook) My professional view from being in the service at that time there was not a reasonable prospect of public sector capital being made available to the same time scale.

  131. Would you say that is still true today?
  (Mr Flook) I think that is less true today.

Siobhain McDonagh

  132. On the tour round we got an opportunity to talk to two of the ward sisters about how they and who they contacted about means for repair and maintenance, clearly there does seem to be a system up and running for measuring response times, how are you actually measuring the quality of the work being done?
  (Mr Mason) I think, first of all, it is worth trying to explain in the period that we are in at the minute there are a number of snagging issues connected with the provision of the new building which are being dealt with separately from the provision of the on-going maintenance service. There are actually two streams of work running along side each other, which sometimes can cause confusion. A lot of the adverse publicity has been round snagging issues and not all of those have been accurately reported, a lot of the publicity has been round snagging issues. In terms of how do we look at quality, we have a monitoring team in-house who monitor the completion of work, which includes the work is done to an acceptable standard. The way the contract is written, it is not in the interests of Consort to do work to a poor standard. If you looked at a broken window you could argue they could do a very good job or a substandard job. If they do a substandard job and the window leaks then they fall down on the availability criteria, so you pick them up there. Also, you would eventually pick them up in the standard of the overall works, it is on going monitoring with Trust staff but also some monitoring from Hayden as well, so there are two streams of monitoring running that picks up the standard of work that was provided. We also have user groups now that are looking at services which are regularly picking up issues from a service point of view and feeding those back. We have a continuing cycle of the review and it really is not in their interest to do substandard work.
  (Mr Rabin) In addition to that we are responsible for the lifetime fabric of the building, and to use Steve's example of a window not only do we get hit directly financially by the Trust but if, for example, it were to be substandard and it would let the rain in ultimately the further costs of maybe a rotten windowsill, or something even worse, would fall down to us, so it is simply not in our interest to do anything other than the appropriate job.

  133. You will beware that we have received information about a number of specific complaints about things that have happened. Why was it necessary to use the satellite unit dispensing to outpatients for a different purpose and does this suggest it was missed out in the design stage and are there any other things that you missed out that you are still having to negotiate on?
  (Mr Mason) One of points I would emphasise is that it is a very complex process designing the hospital that we now have within Durham, it is inevitable that there will be errors made and there have been errors made. When we look at the satellite unit it is quite interesting because there are two themes running, the first theme that was running was in terms of whether you had the resource available within the pharmacy department to staff it and if not whether it was a good use of scarce resource. A review was carried out and it was felt it would be an inappropriate use of the pharmacy time that we had to staff that facility. A decision had been taken, with some reluctance, obviously we have a number of priorities and it was decided it was not a good use of the pharmacy time to have that facility open. It was also decided that in terms of the actual, if you like, service and financial settlement for the current year it could not be put as a priority for additional investment against a lot of the other pressures we had. We took an early decision not to open that as a satellite unit. We then did get the snag with the medical records department where there had been an assumption made by the Trust that the area was big enough to house the staff that worked in that area. There had been an assumption there were always so many people out of the office. Quite clearly you cannot have a set up where you allow so many people not being at a desk and people having to share desks. We recognised that was an error that the Trust had made and we entered into dialogue with Consort about doing a change relatively late in the process to ensure that we could accommodate all of the staff to an acceptable level. We did use the fact that we were not using that area to accommodate some of the staff. One of problems that is often faced by the NHS is that you often design for today and not for tomorrow and you are often forced to design for today because you do not have the financial flexibility to put in flexibility in terms of additional office accommodation or additional bedded areas in terms of the design and North Durham is no different from anywhere else. There has been expansion in a number of areas over the last four years and one of the issues we did face was, did we have enough office accommodation in the new development to accommodate everybody. The straightforward answer to that was no. We have had to look at a number of schemes on the retained estate to provide that additional accommodation. We have done that now and that is all been managed in accordance with the timetable. Obviously it would have been nice if there was some flexibility in the initial scheme, but quite frankly there was not the financial headroom at the time, whether it be PFI or publicly funded option, to build in some of that flexibility. I think that has been a historic problem for the NHS.
  (Cllr Earley) It is always dependent on how good your managers are in any one section. There are some good partners that have come up with shinier, gleamier, roomier departments than one or two others, whose head people were not quite on the ball or did not involve their staff or look to the future in terms of what they needed to provide. What the answer to that is for everybody else to learn from that mistake and to double check everything and double check it against other hospitals who have been through the performance. Do not just perhaps take the first stab at a design for a department.

Andy Burnham

  134. Following on from those questions I would like to focus on the specific question of bed numbers in hospitals. This is one of the areas that has attracted some criticism, whereas some of the other faults quite possibly blown up in the media the bed numbers issue is a difficult one. It seems there has been a reduction at every stage of the procurement process. For the purposes of the record I wonder if you can tell us what the figure for bed numbers was in the outline business case and then what the figure was in the final business case, the full business case?
  (Mr Mason) Bed numbers have been subject to a lot of debate. One of the points we have tried to make as an organisation is that bed numbers have been determined by numerous reviews. We have had more bed reviews, we are now up to about 11 in terms of bed reviews, and the final one did involve an external, clinical panel. There have been concerns expressed of bed numbers both internally within the organisation and also within primary care. In terms of the actual bed numbers the outline business case had 507 beds, the full business case had 484.


  135. What did that replace with the previous hospital? It is difficult for us to get a full understanding of the beds that were available previously.
  (Mr Mason) We have given details of the number of beds, the biggest bed reduction occurred at the time of the outline business plan.

  136. I have not seen the evidence, I am asking for the record. I apologise.
  (Mr Mason) It may be useful if we give you a paper on bed numbers for the record.

  137. Can you give me a rough idea on the previous numbers?
  (Mr Mason) Obviously we talked about bed numbers at great length. Originally within North Durham there was 910 beds, that also included mental health beds and younger disabled beds. It was about 780 that existed at the time and the out line business case reduced that had to 507. There have been a number of bed reductions throughout North Durham over the last five or six years. Bed numbers are very difficult because there have been a number of models and there has been pressure within the Health Service to reduce bed numbers in terms of general efficiency savings. There has also been added pressure on any Trust wanting to redevelop a hospital or rationalise services to look at bed numbers very closely. Certainly the bed numbers in the full business case were signed off as capable of being achieved. If we are honest we have to say as a hospital we do face tremendous pressure in terms of bed numbers, that is partly because of the reduction that occurred when we moved to the new hospital but it also linked to delayed discharges being more of a problem this year as well, which has removed 55 beds from the system, which is worse than it has been in previous years, and that is against rising trend of emergency admissions, particularly of people 75 and above.

Andy Burnham

  138. Did this reduction in bed numbers have anything do with the PFI process per se or would the Health Authority and the Trust together have reached the same conclusions? Given the nature of guidance that was coming out of Richmond House at the same time would you have done the same thing again?
  (Mr Mason) The easiest way to answer that is if we had a publicly funded hospital I strongly believe we would have had the same number of beds as we now have. Unfortunately PFI has been associated with bed reduction because most of the large hospital developments recently have been by PFI and therefore you do not have the public sector alternative. I would say that given the guidance at the time then we would have arrived at the same number of beds.

  139. You were talking about pressure, is that financial pressure? It was not a clinical decision.
  (Mr Mason) There has been pressure on the NHS in terms of efficiency for a number of years and one of the ways that has been looked at in terms of efficiency is increasing patient throughput which by default means you see the same number of patients with less beds. That has applied in a number of areas. Where you have had a large scale development there has been added financial pressure, so those organisations have been expected to deliver higher levels of efficiency savings. I certainly think that within North Durham the level of efficiency expected to be delivered has been higher than comparable trusts who have not gone through a new hospital development such as ourselves. That has forced us to look at being in the upper quartile of performance and it is debatable whether you can be in the upper quartile across all the services. There have also been added pressures, admissions are rising, we have an elderly population and delayed discharges have added to an already pressurised system.

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