1 Strategic Management |
1. In 2007 Peterborough and Stamford NHS Trust failed
to recognise that a PFI scheme to build a new hospital, Peterborough
City Hospital, would place considerable strain on its finances
for years to come. The then board compounded the decision to proceed
with the scheme, which it could not afford, with a failure to
monitor other changes affecting its income and costs with the
result that the Trust faced a very large, recurrent deficit once
the new hospital opened in December 2010.
1. Hinchingbrooke Health Care NHS Trust is a
small district general hospital in Cambridgeshire, some 24 miles
from Peterborough. The Trust suffered financial difficulties and,
between 2004-05 and 2007-08, developed a cumulative deficit of
£39 million on an annual income of around £73 million.
Between 2006 and 2008 the Department of Health (the Department)
gave the Trust around £40 million in working capital to support
its cash position while it attempted to return to in-year financial
balance. However, the Trust's financial recovery attempts were
unsuccessful and it required non-recurrent support from its main
commissioner, NHS Cambridgeshire, and the NHS East of England
Strategic Health Authority (the SHA) to prevent the deficit from
2. In 2007 the Department gave the SHA approval
to explore options to implement a new management structure at
Hinchingbrooke, which was financially sustainable and enabled
the trust to repay its cumulative deficit. In July 2009 the SHA
obtained approval from the Department to seek a partner to run
the Trust as an operating franchise. Following a competition,
in November 2011, the SHA awarded a ten-year operating franchise
to Circle, a private company.
3. We asked the SHA why, given the fragile state
of both trusts' finances, they had allowed both projects to proceed.
The SHA told us that its role in respect of the Peterborough
PFI scheme was to attest whether the commissioners' activity forecasts
looked reasonable and whether there was an argument for a new
hospital in Peterborough because of the circumstances of the city
and its needs. The SHA had felt that the activity forecasts "were
reasonable" and it had been "persuaded and convinced
that there was a necessity for a hospital in Peterborough."
The SHA also believed that there was a case, and continued to
be a case, for "the continuation of a vibrant hospital in
Huntingdon called Hinchingbrooke hospital" and that the two
were "not inconsistent."
At the time of these decisions, the Primary Care Trusts (PCTs)
in the area were in financial difficulty and there was an over-provision
of acute district hospitals, but these factors appear to have
been neglected in the decisions taken.
4. The Department informed us that its approval
of the Hinchingbrooke franchise was based on the assumption that
the projections for Peterborough and Stamford were accurate, and
that the Hinchingbrooke franchise would lead to sustainable services
at that site, for that population, on a financially viable basis.
5. The SHA told us that it had no statutory responsibility
to review the business case for the Peterborough and Stamford
PFI deal, but they did have to agree the PCTs plans for activity
flows into Peterborough and Stamford Hospitals NHS Foundation
Trust. They believed that, as Peterborough and Stamford was a
foundation trust, this was where their responsibilities ended,
even though they were tasked with the strategic management of
health services within the East of England and obviously decisions
made at one hospital impact on the local health economy as a whole.
6. The Chief Executive of Peterborough Hospital
told us that the relationship between Peterborough and Stamford
and their main commissioners had improved substantially and he
was cautiously optimistic about the future. The Trust's income
growth in the last five years has come from other commissioners,
notably NHS Lincolnshire, demonstrating that the situation at
Peterborough and Stamford needs to be looked at in the context
of the whole catchment area of the Trust across the East of England
and Midlands region, rather than just Peterborough.
7. The Government has clearly stated that it
wants to reduce funding to acute hospitals and grow health services
delivered in the community. In the future, responsibility for
delivering this policy will fall to the Commissioning Board and
local authorities. Successful change will require clinical leadership,
particularly to convince patients and the public that this policy
best serves their needs.
8. Monitor, the Foundation Trust regulator, expressed
concerns at the time about the affordability of the Peterborough
PFI deal but it did not follow these through. Monitor explained
that its regulatory role had been 'light-touch', its powers to
intervene had been limited to cases where failure was imminent
and that was why it had had not been able to stop the decision
to proceed with the PFI deal.
Its risk ratings of Trusts were based on current performance not
future risks. Monitor admitted that there was a weakness in the
current system, but new legislation would allow them to intervene
on the basis of both present and future risks.
9. Peterborough and Stamford has spent a large
amount of money on consultants in recent years, including nearly
£9 million in the last two financial years. The trust told
us that it had a deliberate policy over recent months to wind
up all its consultancy contracts. The Department accepted that
more needs to be done to share good practice and benchmarks to
avoid the need for consultants to undertake this work.
10. At the same time Monitor told us that a Contingency
Planning Team would undertake a review of Peterborough and Stamford
Hospitals NHS Foundation Trust to: confirm the cost outlook in
the Trust; review options to reduce the cost of the PFI; look
at the outlook of the commissioners; look more widely beyond immediate
commissioners; and work out the best way to fill the gap in funding.
This review, to be undertaken by consultants, will cost around
£2-3 million. Monitor admitted that there was some specific
expertise that it did not possess and that it aimed to bring more
of this work in-house to reduce expenditure on external consultants.
Whatever the outcome of the review and future action, Monitor
confirmed that there will be a continuing financial gap for this
Trust and that there will be a continuing need for public subsidy
to fill the gap. The NAO in its report said that the trust will
require significant public support of up to £26 million a
year for the next 30 years to balance its books.
2 C&AG's Report, Peterborough and Stamford Hospitals
NHS Foundation Trust, Session 2012-13, HC 658, paras 2,4,7,11-13,
Q53, C&AG's Report, The franchising of Hinchingbrooke Health
Care NHS Trust, Session 2012-13, HC 628, paras 1-2. Back
C&AG's Report, The franchising of Hinchingbrooke Health
Care NHS Trust, Session 2012-13, HC 628, para 3. Back
Qq 52, 124, 261; C&AG's Report, Peterborough and Stamford
Hospitals NHS Foundation Trust, Session 2012-13, HC 658, paras
1.24, 2.4-2.5, Figure 5 Back
Q 98 Back
Qq 80-81, 85, 202, 244 Back
Q 221 Back
Qq 150, 152 Back
Q 176 Back
Qq 175-176 Back
Qq 225, 231-232; C&AG's Report, Peterborough and Stamford
Hospitals NHS Foundation Trust, Session 2012-13, HC 658, Figure
Qq 250- 256, 258-259; C&AG's Report, Peterborough and Stamford
Hospitals NHS Foundation Trust, Session 2012-13, HC 658, paras
15,16, 2.22, 3.22, Figure 11. Back