Examination of Witnesses (Questions 100-119)
THURSDAY 6 FEBRUARY 2003
MS JOAN
ROGERS, MR
NIK PATTEN,
MS MOIRA
BRITTON, MRS
CHRIS WILLIS,
MR KEN
JARROLD CBE, MR
DAVID JACKSON,
DR IAN
RUTTER OBE AND
MR PETER
DIXON
Sandra Gidley
100. Some submissions have said that the financial
freedoms given to foundation trusts will effectively have the
potential to limit money available to other areas of the NHS.
Is this something which concerns you at all, particularly though
the trusts may be primary care trusts and not foundation trusts?
(Mrs Willis) I am sorry; what was the question?
101. Some organisations have given us evidence
which suggests that as foundation trusts have the potential to
borrow more, expenditure actually contributes to NHS expenditure
as a whole and has the potential to reduce the available money
to the rest of the NHS. Does this concern any of you or are you
all going to be pleased to have a bigger slice of the cake at
the expense of other people?
(Mrs Willis) My understanding of it is that they will
only be able to borrow if they can guarantee the revenue to pay
it back. In a sense what commissioners are able to pay to foundation
trusts and other hospitals will be a limiting factor in it because
they have to have a revenue stream to pay back whatever they have
borrowed. As commissioners, we are going to have to identify what
the needs are and where we can buy those services from. It will
be our assessment of need for our local populations which will
drive where the funding goes and they will have to have our support
to apply to borrow that money.
(Mr Jarrold) The other safeguard is that the independent
regulator will set a prudential borrowing requirement for the
foundation trusts and they will not be able to borrow in excess
of that prudential borrowing requirement. There is still a lot
more detail to come, but there clearly is an intention at high
level to provide an additional safeguard through the independent
regulator as well as through the commissioner.
(Mr Patten) In the context of the three-year planning
that we have now, the three-year allocations of both revenue and
capital, the capital allocations have significant increases for
the NHS of 20 to 30 per cent in each year, so for the NHS generally
the capital allocation is much greater.
(Mr Dixon) Two angles on this. I am an ex banker.
I do not believe that the capacity of trusts to borrow money is
going to be that great initially. They do not have the cash flows,
the revenue streams just are not there and a three-year revenue
stream or even a seven-year revenue stream is not going to excite
many bankers. I have also been involved in borrowing a lot of
money for registered social landlords. The reason that works is
because you have very easily identifiable cash flows and it is
simple and you can borrow several hundred million pounds without
any great problem. I have just done it twice. You are not going
to be able to replicate that in the foundation trusts for a long
time, until you get a much more sophisticated system, until funds
flows are understood, you can model them adequately; in my judgement
it is not going to happen as far as borrowing money from the banking
sector is concerned.
Chairman
102. Are you familiar with what the Secretary
of State said yesterday in a speech?
(Mr Dixon) Yes, I am.
103. What are your views on that as an ex banker?
(Mr Dixon) I think it needs further development, shall
we say.
104. Do you want to expand on that answer?
(Mr Dixon) Not yet. There are big differences between
getting money from the banking sector or via bonds into things
like housing and getting into the NHS. I am not saying it cannot
be done, but I do think it is a process which is going to take
some time. The key to it is having clearly identifiable cash flows
which the bank is going to be comfortable with or some measure
of government support which immediately puts it back into
the PSBR again which is a problem. We should not get over-excited
about large amounts coming in from the private sector rapidly.
May I also comment on the issue of taking money away from the
rest of the health service? We do that every time we have managed
to get a PFI scheme through, or every time we managed to get a
development through. We should not be holding back the organisations
which are more successful and are more able to deliver services.
We all have to defend our own positions as being responsible for
individual organisations to a large extent. Some of us are better
than others and we are glad we are. Everything we do is to that
extent competitive because we are fishing within a fixed pot.
However, my organisation has probably had more than its share
of that fixed pool because we have a very big PFI scheme at the
top of Tottenham Court Road. We also managed to get central funding
to buy a brand new hospital last year via rapid route. I do not
know whether you have seen the report of the Committee of Public
Accounts which was done on the investigation into that. By working
with the London Region, we actually managed to buy ourselves a
slightly used private hospital for £30 million, which has
been a great success. As a result of that we have brought our
waiting list for cardiac surgery down from more than 12 months
to typically no more than three months, not just for us but for
people within London and we are starting to treat people from
outside. If we have some way in which foundation trusts, whatever
you want to call them, have access to decent sums of money like
that at short notice, which between us we can demonstrate we can
use and use properly, then that is what we need to have. At the
moment, there is nothing in the proposals which is going to produce
more examples like the Heart Hospital. There should be; it is
a very sensible way forward. It would be nice to think we could
apply that elsewhere. That was funded because there was some slippage
in the capital programme for the NHS that year. They were able
to drag that money out of the slippage, give it to us to do something
tangible. I think we should be doing similar things for other
trusts, which can demonstrate they can do it and use it well.
As it happens, we were a two-star trust when we managed to persuade
people to back us on that. We were lucky but it would be nice
to think that you could extend that. At the present time, the
foundation proposals are not going to enable us to deliver deals
like that. That is what everybody here would like to be able to
do
Sandra Gidley
105. That makes a certain amount of sense, but
does not necessarily make a case for foundation trusts solely
having the ability to do it.
(Mr Dixon) Except in so far as three stars, however
you judge it, are at least a measure of some sort. It is the only
measure we have at the moment. If you scramble through that particular
hoop, the chances are you can scramble through some other hoops.
You do have to scramble through a set of hoops; you have to know
how the system works and have to work towards it. A CHAI review
is very similar. If you put enough effort into a CHAI review and
you put enough work into it and you persuade people that it is
important, you can actually get through that positively. We have
all managed to do it somehow or other.
Julia Drown
106. You have, but you have just pointed out
that you did it when you were a two-star hospital. Would it not
be a huge shame if we created rules that only three-stars could
do it, so you would not have been able to do it when you were
the two-star hospital?
(Mr Dixon) We were lucky.
Sandra Gidley
107. Can we move on to unregulated assets? Quite
a lot of concern has been raised about selling off the family
silver, but what sort of assets in reality do you think will fall
into the category of those which can be disposed of? How realistic
is it that you will be using them and in what way?
(Ms Rogers) I was hoping you might avoid me. This
is one I usually hand to the Director of Finance thankfully.
Chairman
108. If you are not happy about answering, you
can always think about it and come back to us.
(Ms Rogers) It is the detail; others will probably
say the same. We do not know. To be blunt, I have already checked
out because I could see that if you were in a mental trust years
ago with vast amounts of land available, which was actually the
case in Newcastle, they sold it off for residential housing, terrific.
My trust has no assets worth discussing which we could sell of
so that is not a major feature of any positive kind to us.
(Dr Rutter) There is one area there which is a potential
cause for concern. If you look at Kayser in the States, one of
the things they have done is very successfully reduce lengths
of stay in secondary care and put people into community settings.
The reason I say there is one cause for concern is that there
may be some trusts which have community hospitals and there is
a potential risk they may choose to sell those when there would
be a lot of mileage in exploring the use of intermediate care
facilities in those units. That may be one element of lack of
forward—
Chairman
109. You are looking at Mr Jackson.
(Dr Rutter) I am not talking about Mr Jackson whatsoever.
I would wish to state categorically that I am not talking about
Mr Jackson. I could see, as somebody who has actually opened an
intermediate care hospital in our locality in Shipley, which has
worked very effectively for our benefit and also for the acute
trust, that there is a potential danger and risk there.
Sandra Gidley
110. Would that money not have to be spent somehow
in the local health economy?
(Dr Rutter) Yes, but I still think this is about a
journey of thinking about how you manage patient care and we still
have a very secondary care driven system in the NHS at the present
time.
111. At the risk of treading on the Chairman's
toes here, if there were more integration between health and social
care, would that be less of a problem or more of a problem?
(Dr Rutter) It would make it more complex in one way,
but it would support the culture of community development.
(Mr Jarrold) May I slightly disagree with Ian, which
is extremely unusual? There is still a lot of detail to come through
about the financial regime. Certainly my understanding is that
anything as substantial as a community hospital will be a regulated
asset not an unregulated asset and therefore would not be able
to be disposed of in that way. The implication is that an unregulated
asset, and the examples given are those used for income generation
such as franchises and car parks, are very much at the margin
and I would not have thought a community hospital would be an
unregulated asset.
112. Does this not in effect mean that these
proposals mean that trust development becomes a bit of a lottery
depending on what assets it may or may not have to dispose of
at the moment? Is there not a case for pooling assets, maybe on
a regional basis, so that the benefits could be spread more widely?
A strategic health authority is probably the most appropriate.
(Mr Jarrold) I am very happy to respond to that. It
is very important to give people incentives at a local level and
therefore I would not wish to see any restriction on the limited
freedoms which are set out here for individual organisations.
It is important to remember that strategic health authorities
will have access to strategic capital which they can use across
their patch. That will be a safeguard to compensate those organisations
which do not have substantial assets of their own. If you are
going to incentivise an organisation, there are already substantial
limits here which I certainly would not want to increase.
Andy Burnham
113. Following up on this issue of regulated
and unregulated assets, one of the things people associated with
trust status when it came along was a more commercial attitude
to things like car parking fees. In my own area that is one of
the most unpopular things which ever happened within the National
Health Service and still is. Do you think there is potential for
a very aggressively commercial approach to some of these assets,
particularly in a city centre location, like car parking where
there might be parking restrictions locally, so looking at people
who are not hospital users but bringing them in to use the car
park? Do you think there is a possibility that things like child
care facilities which were there for staff could be open more
generally, so the trust becomes a much more openly commercial
entity within the local economy? Is that something to worry about
or is that just something which will find its own level and work
its way through? Is there a London perspective on that?
(Mr Dixon) I rather doubt that is going to be significant
for many trusts to be perfectly honest. Car parking charges are
probably necessary just to keep the car park going. I do not see
many people going into anything more in the way of shopping malls
and so forth than you will see, if you go down to Guy's and Thomas's
or anywhere else.
114. Trusts always argue that the fees from
car parks just pay for the maintenance. Is that true? Are they
a significant income generator for some?
(Mr Dixon) I do not know the answer to that but I
should be very surprised if people were seeing them as significant
income generators. The point about hospitals is that we are trying
to serve local communities and serve patients. Although it may
not always seem like it, we do not actually do things to upset
people deliberately. If you have a multi-storey car park, you
have to maintain it and keep it and it is occupying a valuable
chunk of space. You have to recognise that in some sort of charging
policy.
(Mr Patten) In our trust car parking fees are reserved
and ring fenced for security guards, car park maintenance, lighting,
security cameras, etcetera. That is a peripheral part of what
we do in the hospital. We treat patients, that is our core business;
the rest, car parking, creches are for patients and staff.
115. What I am getting at is do you think the
freedoms which come with foundation status might start the trusts
looking at other areas and looking at how they can make money?
(Mr Patten) I should be surprised.
(Mr Jackson) I do not think that is any different
from the freedoms we have now. You have to look at how we behave
now. I do not think it will change.
Dr Taylor
116. Can we turn to the restrictions on private
patient income and what your views are about those? In the guide
it actually says that the fixed percentage a NHS foundation trust
will be allowed to charge is the level they have obtained from
private practice this year. Is there any sign that there is a
huge increase in private income this year to try to capitalise
on that? No?
(Mr Jackson) I have to say that for most of us private
patient income is at the periphery of what we do. It has a lot
of benefits in many ways and I would argue that once you get past
the principle of private practice, once you get past that and
recognise that it is allowed within the NHS, then there are many
benefits to hospitals in having a small private patient facility.
The income is trivial; certainly in my case it is trivial and
most private patient units are being used extensively at the moment
to treat NHS patients. I expect our income this year from true
private patients to be down on previous years, because we are
using every available bed for NHS patients to hit the waiting
list targets.
117. Does that go for a large London teaching
hospital as well?
(Mr Dixon) A lot of us are not very good at private
patients in London, I have to say.
Chairman
118. What do you mean?
(Mr Dixon) We do not make enough money out of it.
We manage it badly and we do not always chase the debts adequately.
People leave the country without paying us; it happens to all
of us and we are not as good at it as we should be. We have a
particular problem in my trust, because our PFI scheme is predicated
on the top two floors of our new hospital treating private patients,
which is actually many more private patients than we currently
treat. We have a specific problem there both in terms of filling
it to pay for the PFI and also in the rules around foundations.
That is something we have to reach. I agree entirely with what
Mr Jackson was saying. We are actually doing all we can to treat
NHS patients. When we bought the Heart Hospital last year it was
exclusively private and there are no private patients in it at
all now, they are entirely NHS patients. That is not because we
have refused to do any private treatment there, we have managed
to fill it with NHS patients. That is the experience of most people
around.
Jim Dowd
119. Is it not true that one of the reasons
the Heart Hospital came over was because they could not fill it
with private patients either?
(Mr Dixon) Absolutely; they were filling about 30
beds out of 90. We now have it full of NHS patients.
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