Examination of Witnesses (Questions 80
- 99)
WEDNESDAY 16 NOVEMBER 2005
DEPARTMENT OF
HEALTH AND
NORFOLK AND
NORWICH UNIVERSITY
HOSPITAL
Q80 Sarah McCarthy-Fry: Was this
Octagon's first venture into the PFI market?
Mr Coates: As far as I am aware,
yes.
Q81 Sarah McCarthy-Fry: So you could
have sold it to them on the basis that, "If this one works
and you agree a better deal, that we prove this works and you
go on to get further work"?
Mr Coates: There is a secondary
market in PFI transactions where people want to buy the equity
and certainly there is potential for Octagon to sell their equity
on after this transaction, as happened at Dartford and Gravesham,
where Carrillion sold their equity to another partner.
Q82 Sarah McCarthy-Fry: So you do
not feel that at the point of the refinancing there might have
been an argument to go to Octagon for the 50-50?
Mr Coates: We did haggle around
the share on the extension to the contract but 50-50 was the best
we could do. The private sector took the view that they were living
with the code and that meant that both sides had to live with
the code and do what the code said.
Q83 Sarah McCarthy-Fry: Even though
circumstances may have changed since the code was drawn up?
Mr Coates: The code had just been
published, from memory, at the time the negotiations were taking
place
Q84 Sarah McCarthy-Fry: Can I come
back to the extension of the contract term and come back to the
Trust. Do you not think that you have brought in a much greater
risk by extending the terms of the contract?
Mr Forden: No, our analysis was
very much based on the National Audit Office's methodology used
for Fazakerley Prison, and on that basis it clearly demonstrates
that actually there is a sensible financial decision for the Trust
to take, and that is evidenced in the Report[4].
Q85 Sarah McCarthy-Fry: I am not
talking financial, I am talking in terms of clinical need. With
respect, a prison is not the same as a hospital. What are we going
to say, with extending the terms for that length of time? If we
look back over the last 20, 30 years for things that are required
for the infrastructure of a hospital it is radically different
now. How have you assessed the risk of whether in the service
you are getting you might even have the same sort of building
as the requirements you have now?
Mr Forden: That is very much why
we are much better in this hospital than we were in the old hospital.
The old hospital was built of an original type of construction,
which is very inflexible in trying to change for patient need.
The design of the new hospital is such that we can actually flex
it much more simply, and that is something of which we are very
conscious.
Q86 Sarah McCarthy-Fry: If we are
looking to the future and we look at the new paper commissioning
a Patient Led NHS, which is looking to moving much more out into
the community and having less inside the hospital, could you be
stuck with a building that is far too big for your requirements,
which you are servicing?
Mr Forden: I think if you look
at acute care over the past 50 years many times we have actually
asked the question, is it likely that the number of patients will
reduce? I have not seen it in any year of my analysis yet. I think
it is true that some services will move into the community but
there are more things that we are doing now than ever before as
well, which will have to start off in the acute setting. I think
it is just a cycle.
Q87 Sarah McCarthy-Fry: If you look
back to your original requirements your bed requirements changed
dramatically from when you first drew up the deal to when you
closed.
Mr Forden: What happened originally
was that it was actually that the regional office commissioned
a Report to see how many beds we would need. It assumed that there
would be more movement towards community hospitals, et cetera.
They made the decision to go with the lower end of the spectrum
and that has proved to be not as accurate as it should have been.
The Trust's view at the time was that we needed about 950 beds
and we actually have 950 beds.
Q88 Sarah McCarthy-Fry: Do you believe
that that is enough now on the forecasting you are doing?
Mr Forden: Based on everything
we know at the moment, yes, and that allows us also to move down
to the 18-week target.
Q89 Sarah McCarthy-Fry: Back to the
point, based on what we know at the moment and the point I am
trying to make is that things have moved so much over, how can
you be sure that what you have now is going to serve you going
forward? What processes do you have in place to manage that?
Mr Forden: We try to plan our
demand five years in advance. We cannot be certain that it is
accurate but we have to take as best educated guess as we can,
as you would in any walk of life, whether it was in a hospital
or any other field.
Q90 Sarah McCarthy-Fry: To come back
to my original point. One of the points that comes in the book
is that the Report says that you received a benefit earlier. By
closing early you received a benefit earlier and you had the hospital
quicker than you would have done. Do you have statistics to prove
the clinical benefit of having the hospital earlier in terms of
statistics of delivering patient needs?
Mr Forden: We have treated an
extra 23,000 patients more each year now than we could in the
old hospital in real terms, and that is about a 20% increase.
We have reduced our waiting list lower than 10,000 for the first
time in 15 years. So I believe that there are real clinical benefits,
and we are actually delivering a wider range of services than
we ever could as well. We are now moving towards things like
interventional cardiology, et cetera.
Q91 Sarah McCarthy-Fry: I accept
the second part of your point. The first part of your point, how
do you know that it is the new building that has delivered those
additional 23,000 patients and not additional nurses, additional
doctors?
Mr Forden: Because we know how
many beds we would have needed to be able to do that and we know
the types of beds and the types of layouts, et cetera,
we required, and that is on what we made that analysis.
Chairman: Thank you. Greg Clark.
Q92 Greg Clark: Mr Forden, did you
follow national guidance from the Department of Health on how
many beds you would need when you were planning this project?
Mr Forden: I know that the regional
office gave us guidance as to how many beds they believed we would
need, and that was clearly indicative of the guidance from the
centre.
Q93 Greg Clark: So it was in conformity
with guidance, and then you found that you needed 40% more beds.
Did the guidance change?
Mr Forden: No, I believe what
had was that there were a number of assumptions made in the Report
for the regional office. Some of those came to fruition, some
did not, but there were also changes in policy at the time which
changed. Trying to reduce waiting lists, et cetera, was
not in the original guidance and that was something that started
to come along. Also the actual change in the population of Norfolk
is changing constantly.
Q94 Greg Clark: These policy changes
had a big impact because you had to pay one-fifth more in terms
of your annual charge as a result of these changes, did you not?
Mr Forden: We certainly had to
pay more. We paid one-fifth more for a 40% increase in beds, yes.
Q95 Greg Clark: A major component.
Can I ask Mr Coates, has additional capacity been added at other
PFI hospital projects because of a new commitment to reduce waiting
lists that was not around at the time?
Mr Coates: I feel certain that
there has. I do not have details with me but from memory this
is the largest variation to a PFI hospital that I am aware of.
Q96 Greg Clark: Mr Coates, would
you mind writing to the Committee perhaps with a full account
of all the variants for PFI projects up and down the country that
have been caused by an increase in the number of beds?[5]
Because we have seen that there has been a big increase in the
cost here and I imagine that is the case around the country and
I think it would be interesting for the Committee to know how
much the Department of Health is responsible for increasing unnecessarily
the annual bill for these things. We know from this Committee
that variations to contracts once they have been let tend to be
very expensive, and this seems to be an example which, through
no fault of the Trust, the Department has caused some increasing
costs. If you can provide us with that note?
Mr Coates: I can provide you with
a note but, as I say, I think this is the most exceptional and
large one that I am aware of.
Q97 Greg Clark: That is helpful to
know. Are you expecting any changes in the guidelines coming up?
Do you think that the recommended number of beds for new PFI projects
is now right or is that something that you are reviewing?
Mr Coates: Bed numbers within
PFI hospitals are not set by the Department of Health, they are
set by the local health economy. They may, for example, take
independent Reports on trends and development trends, et cetera.
Q98 Greg Clark: But you were given
guidance on the type of provision they should make, I assume?
Mr Coates: We have just started
checking or looking at OBCs, which are Outline Business Cases,
which are the statement of need Trusts state for a new hospital.
That goes to our capacity people who check to make sure that the
assumptions—
Q99 Greg Clark: You have started,
but that has not been done before?
Mr Coates: No, up to that point
it was left to the local health economies.
4 Note by witness: The methodology of the Prison
Service's advisers NM Rothschild & Sons as set out in the
National Audit Office's Report on the Refinancing of the Fazakerley
PFI Prison contract (HC 584 1999-2000). Back
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