Department of Health: The Franchising of Hinchingbrooke Health Care NHS Trust and Peterborough and Stamford Hospitals NHS Foundation Trust - Public Accounts Committee Contents

Conclusions and recommendations

1.  The strategic management of health resources across the East of England SHA has failed. The Department is ultimately responsible for establishing systems that protect health service users and taxpayers. But the way that the health organisations involved exercised their responsibilities left gaps and meant nobody looked at the overall impact on the local health economy. The SHA failed to shape the structure of local supply or assess capacity effectively, leading to financial instability across the health economy. The status of Peterborough and Stamford as a foundation trust did not justify the SHA abdicating their responsibilities in these areas. There were failures of leadership at all levels in relation to the Peterborough and Stamford PFI deal, but ultimate responsibility rests with the Department. The Department placed too much reliance on the Trust's board when it had much more experience of PFI schemes itself. Hinchingbrooke was an innovative deal, but the decision to award a contract appears to have been taken in isolation of other pressures within the health economy and against the government's own stated intention to move care out of hospitals. The Department must clearly set out who has responsibility and accountability for the strategic management of health economies.

2.  Risk assessment in both business cases was poor. Risk was not effectively assessed in either deal. For Hinchingbrooke, demand risk and some financial risk was transferred to Circle, but in the event of failure, Circle could walk away and service delivery risk ultimately remains with the NHS. In relation to the Peterborough and Stamford PFI deal both Peterborough and Stamford Hospitals NHS Foundation Trust and the Department ignored independent advice from Monitor on affordability and ploughed on with the PFI regardless of these concerns. The Department should review its risk assessment procedures to ensure that risk is assessed on a consistent and realistic basis and ensure that warning signs are acted on.

3.  There is not enough funding in the local health economy for both trusts to thrive as currently configured, and their financial viability will be further eroded if more care is provided outside hospitals. Hinchingbrooke will need to achieve unprecedented levels of savings to maintain financial viability. In Peterborough and Stamford's case even this may not be enough and the taxpayer is potentially liable for hundreds of millions of pounds of future support at the expense of other much needed NHS expenditure and services. Local commissioners have struggled financially and relationships with Peterborough and Stamford have been strained, which has increased financial pressure. Commissioners and providers need to work to develop affordable and transparent plans for both trusts that are based on realistic savings targets with mutually understood triggers for further action.

4.  Monitor lacked the power to veto the PFI deal in 2007 and failed to act later on warning signals that Peterborough and Stamford Hospitals NHS Foundation Trust was heading towards a financial meltdown. Monitor raised serious concerns about the affordability of the PFI scheme but these were ignored. In addition, Monitor's financial risk ratings do not take into account concerns about the long-term financial health of a trust beyond the current financial year. As a result, Monitor's internal concerns about Peterborough and Stamford's future financial stability were not reported publicly. Monitor should:

  • revise its risk rating regime so that it is forward-looking, transparent and enables risks to be identified and acted upon before they materialise;
  • maintain oversight of major financial commitments by foundation trusts and have the ability to stop unaffordable schemes from proceeding; and
  • develop a regime of regular, in-depth financial reviews of foundation trusts.

5.  Management consultants have been used at great expense to little effect. Peterborough and Stamford Hospitals NHS Foundation Trust's reliance on management consultants, costing some £9 million in the last two financial years, has not resolved its financial difficulties and a further expensive review has now been commissioned. Monitor has announced that a Contingency Planning Team will be asked to develop a plan for ensuring the sustainability of Peterborough and Stamford's services. This exercise will cost the taxpayer £2-3 million but risks duplicating work already performed by the many consultants who have worked with the Trust to establish the causes of its past failings. Monitor's review should be scoped to include the financial sustainability of the whole local health economy, focus on the future, and be binding on all parties.

6.  Successful outcomes for the Hinchingbrooke franchise have not been defined. Stakeholders hold differing views on what success would look like. This makes performance management of the franchise difficult, and offers the franchisee and the SHA the opportunity to paint an overly positive picture through selective use of information. The savings required to make the business model succeed look over ambitious and extremely challenging. The Department should urgently develop a clear and agreed set of indicators covering both clinical and financial performance and clarify whether this includes repayment of the Trust's £39 million accumulated deficit.

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© Parliamentary copyright 2013
Prepared 7 February 2013