The government's decision to sign a 10-year contract worth £1bn for an untested private company to manage the heavily indebted Hinchingbrooke hospital really is the triumph of hype over experience.
The hype has come thick and fast from Circle Healthcare's smooth-talking boss, former Goldman Sachs banker Ali Parsadoust (known as Ali Parsa), who gives the impression that Circle is some kind of altruistic workers' co-operative, while in fact it is controlled by private equity and hedge funds. Far from handing control to the workers, Circle takes a negative view of trade unions and will have to resort to old-fashioned cuts in the workforce if it is to generate the "efficiency savings" it needs to put the hospital into surplus.
More hype has come from the architect of the contract, NHS East of England's director of strategy Dr Stephen Dunn, an enthusiastic advocate of private sector provision (which he denies is privatisation), whose unstinting efforts to secure this deal won him an award this year from HealthInvestor magazine.
But there is little in Circle's record to justify Dunn's belief that the company has the expertise to take on a project on the scale of Hinchingbrooke. The company has yet to make a success even of running its two tiny (30-bed) private hospitals, which were extravagantly expensive to build, and has run up six years of losses so far: hardly a good base to take on the bigger challenge of managing of a debt-ridden NHS general hospital 10 times the size and many more times more complex.
Even the NHS workforce that Circle will be attempting to manage at Hinchingbrooke is three times larger than the grand total of 568 people working for the whole Circle group. Only one of the company's senior managers has any experience of managing an NHS hospital and he has left the company to rejoin the NHS. And so far they have set out no concrete proposals on how they plan to save money and turn around the finances when they take over in February.
The uncertainty over the Hinchingbrooke contract is even greater since Circle will only be paid a share of any surplus the hospital makes. It might not make any. The PCT (and GP commissioners) are trying to cut the numbers of patients treated in hospital, and squeezing down tariffs for treatment as part of the NHS-wide drive to make £20bn of "efficiency savings" by 2014.
Far from rescuing the NHS, Circle itself is heavily dependent upon the NHS: its main current income stream comes from an NHS contract. Circle's own business plan to expand its private hospitals relies on it continuing to build a workforce by poaching consultants, nurses and other staff trained by the NHS. And now Circle's future financial health depends on drawing profits from running one NHS hospital, and hopefully generating further contract income from the NHS – assuming Andrew Lansley's health bill successfully opens up the NHS to greater private sector involvement. Circle said earlier this year it is "primarily targeting the £82bn UK secondary acute healthcare market".
The part of the company that is proudly proclaimed as a "John Lewis-style" company, Circle Partnership Ltd, is incorporated in the tax haven of the British Virgin Islands, and is indeed owned by Circle's clinicians, employees and other "partners". It incorporates all of Circle's healthcare and medical expertise.
But overall control is firmly in the hands of a separate for-profit company, Circle Holdings. This is owned by private equity firms and hedge funds, and its directors come mainly from corporate finance: only its chief medical officer, Dr Massoud Fouladi, a consultant ophthalmologist, has any health background. He ran Nations Healthcare, which was taken over by Circle, and had two independent sector treatment centres (ISTCs), which like other ISTCs made their money selling uncomplicated elective operations to the NHS at above-NHS tariff prices.
But as it takes over Hinchingbrooke, Circle's own financial situation is worrying. It has already lost two ISTC contracts: and its £34m-a-year ISTC contract in Nottingham, currently the company's main income stream, has only two more years to run. In the last three years Circle's losses were £40m, £20m and £35m. Its new showpiece hospital in Bath has only just begun to generate a modest trickle of income.
The company will be under pressure to turn a profit. Ninety five per cent of the Circle Holdings is owned by a private equity and other city interests, including some of the world's biggest hedge funds and asset managers. Over the past six years they have funnelled a massive £140m into the company, for no return. They will want to limit further investment until they see results.
So the staff and services at Hinchingbrooke will be right in the firing line when Circle eventually takes over the reins next February.
How hard NHS staff will want to work at making surpluses for Circle is open to doubt. How many of them will lose their jobs and how many services will be sacrificed in the bid to make surpluses we can only wait and see.
The Hinchingbrooke contract is a gamble with high stakes, and with only slim chances of success: yet remarkably it's already being discussed as a model for other struggling trusts. Don't ask for evidence, just go with the private sector hype. That's the future under Lansley's NHS.
by John Lister taken from http://www.guardian.co.uk/commentisfree/2011/nov/11/andrew-lansley-nhs-private-sector-circle
The hype has come thick and fast from Circle Healthcare's smooth-talking boss, former Goldman Sachs banker Ali Parsadoust (known as Ali Parsa), who gives the impression that Circle is some kind of altruistic workers' co-operative, while in fact it is controlled by private equity and hedge funds. Far from handing control to the workers, Circle takes a negative view of trade unions and will have to resort to old-fashioned cuts in the workforce if it is to generate the "efficiency savings" it needs to put the hospital into surplus.
More hype has come from the architect of the contract, NHS East of England's director of strategy Dr Stephen Dunn, an enthusiastic advocate of private sector provision (which he denies is privatisation), whose unstinting efforts to secure this deal won him an award this year from HealthInvestor magazine.
But there is little in Circle's record to justify Dunn's belief that the company has the expertise to take on a project on the scale of Hinchingbrooke. The company has yet to make a success even of running its two tiny (30-bed) private hospitals, which were extravagantly expensive to build, and has run up six years of losses so far: hardly a good base to take on the bigger challenge of managing of a debt-ridden NHS general hospital 10 times the size and many more times more complex.
Even the NHS workforce that Circle will be attempting to manage at Hinchingbrooke is three times larger than the grand total of 568 people working for the whole Circle group. Only one of the company's senior managers has any experience of managing an NHS hospital and he has left the company to rejoin the NHS. And so far they have set out no concrete proposals on how they plan to save money and turn around the finances when they take over in February.
The uncertainty over the Hinchingbrooke contract is even greater since Circle will only be paid a share of any surplus the hospital makes. It might not make any. The PCT (and GP commissioners) are trying to cut the numbers of patients treated in hospital, and squeezing down tariffs for treatment as part of the NHS-wide drive to make £20bn of "efficiency savings" by 2014.
Far from rescuing the NHS, Circle itself is heavily dependent upon the NHS: its main current income stream comes from an NHS contract. Circle's own business plan to expand its private hospitals relies on it continuing to build a workforce by poaching consultants, nurses and other staff trained by the NHS. And now Circle's future financial health depends on drawing profits from running one NHS hospital, and hopefully generating further contract income from the NHS – assuming Andrew Lansley's health bill successfully opens up the NHS to greater private sector involvement. Circle said earlier this year it is "primarily targeting the £82bn UK secondary acute healthcare market".
The part of the company that is proudly proclaimed as a "John Lewis-style" company, Circle Partnership Ltd, is incorporated in the tax haven of the British Virgin Islands, and is indeed owned by Circle's clinicians, employees and other "partners". It incorporates all of Circle's healthcare and medical expertise.
But overall control is firmly in the hands of a separate for-profit company, Circle Holdings. This is owned by private equity firms and hedge funds, and its directors come mainly from corporate finance: only its chief medical officer, Dr Massoud Fouladi, a consultant ophthalmologist, has any health background. He ran Nations Healthcare, which was taken over by Circle, and had two independent sector treatment centres (ISTCs), which like other ISTCs made their money selling uncomplicated elective operations to the NHS at above-NHS tariff prices.
But as it takes over Hinchingbrooke, Circle's own financial situation is worrying. It has already lost two ISTC contracts: and its £34m-a-year ISTC contract in Nottingham, currently the company's main income stream, has only two more years to run. In the last three years Circle's losses were £40m, £20m and £35m. Its new showpiece hospital in Bath has only just begun to generate a modest trickle of income.
The company will be under pressure to turn a profit. Ninety five per cent of the Circle Holdings is owned by a private equity and other city interests, including some of the world's biggest hedge funds and asset managers. Over the past six years they have funnelled a massive £140m into the company, for no return. They will want to limit further investment until they see results.
So the staff and services at Hinchingbrooke will be right in the firing line when Circle eventually takes over the reins next February.
How hard NHS staff will want to work at making surpluses for Circle is open to doubt. How many of them will lose their jobs and how many services will be sacrificed in the bid to make surpluses we can only wait and see.
The Hinchingbrooke contract is a gamble with high stakes, and with only slim chances of success: yet remarkably it's already being discussed as a model for other struggling trusts. Don't ask for evidence, just go with the private sector hype. That's the future under Lansley's NHS.
by John Lister taken from http://www.guardian.co.uk/commentisfree/2011/nov/11/andrew-lansley-nhs-private-sector-circle
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