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House of Commons Hansard
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Hinchingbrooke Hospital
10 November 2011
Volume 535

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To ask the Minister of State to make a statement on the decision to allow Circle to run Hinchingbrooke hospital.

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Today, a 10-year contract was signed by Hinchingbrooke Health Care NHS Trust and Circle allowing Circle to take over management of the trust, which has struggled to be financially viable in recent years. Major service problems have persisted and, despite repeated attempts to tackle it, the trust now has the largest legacy debt as a proportion of turnover in the NHS: £39 million, which amounts to almost half the hospital’s £100 million turnover. Moreover, the Care Quality Commission has expressed concern about the fact that its stroke services are failing and its cancer services under-achieving. The local NHS accepted that major changes were needed, and early in 2007, when the previous Government were in power, established the Hinchingbrooke next steps project to identify options for securing the trust's future.

In 2008, East of England strategy health authority chose a franchise model, and in 2009 it launched a competitive procurement process to identify a preferred bidder. That was agreed with the previous Government, and the power to bring in another person or organisation to manage an NHS hospital was introduced under that Government’s National Health Service Acts 2001 and 2006 and the Health and Social Care Act 2001.

At the end of last year, following a rigorous and open competition that included NHS organisations, NHS East of England announced that Circle had the most viable plans to turn the trust around. That decision has been endorsed by the Department of Health and the Treasury following an equally rigorous approval process this year. It should be noted that it was the Labour Government who set up the initial competition, a process from which many NHS organisations dropped out, leaving only private providers in the competitive tendering frame.

Circle is an established provider of services for NHS patients, although it should be emphasised that under this contract NHS services will continue to be provided by NHS staff, from NHS buildings, and that patients will continue to have access to them as they do now. No NHS staff are leaving, and assets will remain in public ownership. Hinchingbrooke hospital will continue to deliver the same NHS services, as long as commissioners continue to purchase them, adhering to the key NHS principle of care being free at the point of use. This is not a privatisation in any shape or form. Circle will help clinicians and health care professionals improve Hinchingbrooke from the bottom up. Its plans include improvement in length of stay, rationalisation of theatre usage and improvement in back offices. Commissioning leaders, hospital consultants and Royal College of Nursing representatives in Huntingdon clearly support Circle commencing the franchise. Tony Durcan, the RCN professional officer for Cambridgeshire said:

“Circle are very impressive…I welcome working with them.”

He went on to say that he believes the decision to work with Circle

“does secure the long-term future of Hinchingbrooke.”

If Circle achieves its forecasts, the whole of the trust’s accumulated deficit will be repaid by the end of the 10-year contract. Circle is paid from the trust’s surpluses, so if there are no surpluses Circle does not receive a fee. Furthermore, if the trust makes a deficit under Circle’s watch, Circle must fund the first £5 million. At deficits above that, the trust can terminate the contract, so Circle really must perform well.

The Government believe this is a good deal for patients and staff at Hinchingbrooke. It is a new management model being tried in the NHS for the first time, but the trust has had huge problems over the past decade, and it now has an opportunity to turn its fortunes round. The local NHS even stated that without this deal Hinchingbrooke hospital’s future would have been in doubt.

The local NHS will maintain close scrutiny of the contract. The Appointments Commission has appointed a chair and two non-executive director-designates to form a new Hinchingbrooke trust board from February 2012 that will appoint a franchise manager. The franchise manager will be responsible for day-to-day monitoring of contract performance. During the initial mobilisation stages, NHS Midlands and East will continue to oversee the franchise agreement.

Patients and the public deserve, and must get, a safe and sustainable NHS based on its core, historical principles. This contract will deliver that.

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Patients, the public and NHS staff will be concerned about the implications of this unprecedented agreement not only locally in Cambridgeshire, but for the NHS across the country. Let me be clear that Opposition Members accept that there have been problems with this hospital for some time. My right hon. Friend the Member for Leigh (Andy Burnham)—who is currently visiting St James’s university hospital in Leeds—will set out the background to this issue and how it was dealt with by the previous Government in a statement later this morning, but it is the current Government who have made the decision to transfer the management of Hinchingbrooke to the private sector, and it is the current Government who must account for their actions.

First, I want to deal with the practicalities of the agreement. How many bids to take over the running of the hospital did the Government receive, and what criteria were used to judge them? Circle’s chief executive confirmed on the “Today” programme this morning that Circle has no experience of running emergency and maternity services, so why was the company chosen? What confidence can patients and NHS staff have in the chief executive’s claim this morning that Circle will be able to pay off Hinchingbrooke’s £40 million debt simply by cutting waste and bureaucracy when all previous attempts have failed—at the same time as, apparently, providing patients with Michelin-star meals and delivering profits for Circle’s shareholders? Can the Minister assure the House that this agreement will not, in reality, lead to staff jobs being cut and services being closed, and can he give a firm guarantee that all services currently run at Hinchingbrooke, including accident and emergency and maternity, will remain open throughout the entire period of the deal? Will he also set out whether the agreement requires Circle to work with other local NHS services and the council, what profits are permitted under the agreement, and how decisions will be held to account locally under it? Will he also place a copy of the agreement contract in the Library of the House?

The Minister must also today answer serious questions about the implications of this agreement for the wider NHS. He must set out whether the Government envisage any limit to the role of the private sector in the NHS. We know that Department of Health officials have been discussing the takeover of 20 other hospitals by private companies, so will the Minister tell the House how many of these hospitals will be taken over by the private sector? What steps have the Government taken to ensure the financial stability of Circle and its parent company, Circle Holdings? What will be the implications if the company goes bust, as Southern Cross did, for patients and taxpayers?

Finally, important questions need to be answered about why this company has been chosen. Given its close links to the Conservative party, there needs to be full transparency about all meetings—formal and informal—between Department of Health and Treasury Ministers and this company and any of its paid advisers. So will the Minister agree to publish full details of these meetings so that patients and NHS staff can have full confidence that the Government followed proper due process in their decisions?

Patients and the public will be deeply worried that this morning they have seen this Government’s true vision for the future of our NHS with the wholesale transfer of the management of entire hospitals to the private sector. The Health and Social Care Bill currently before Parliament not only allows that to happen but actively encourages it. Patients and NHS staff do not want this and the public have not voted for it. It is time that the Government agreed to drop their reckless NHS Bill.

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I am rarely speechless, but I am left speechless by the sheer effrontery of the hon. Lady. I have to remind hon. Members that this process stems from the previous Labour Government’s legislation in 2001, which was consolidated in 2006. This process started in 2007 at strategic health authority level, when she was a special adviser in the Department of Health. It continued, and the decision to move forward from a Department of Health level was taken in 2009 by the then Secretary of State for Health, who is now the shadow Secretary of State. It is often thought that shadowing a Department that one ran is helpful because one knows where the bodies are buried. The problem for the shadow Secretary of State is that not only does he know where the bodies are buried, but he was the one who buried them in the first place.

The hon. Lady asks how many bidders there were. As she will appreciate, a number of processes have taken place. There were 11 bidders at the start, the vast majority of which were private sector bidders, although there were some NHS ones—this was in 2009, under a Labour Government. The number reduced to six in December 2009, again under a Labour Government. Of those six bids, one was from an NHS body and one was from an NHS body in conjunction with the private sector. In February 2010, when I believe the right hon. Member for Leigh (Andy Burnham) was the Secretary of State, the number reduced again, this time to five. All these bids were from the private sector, except one, which was made in conjunction with an NHS trust. In March 2010, again under a Labour Government, the number reduced to three, with one bid associated with an NHS body, and then it reduced to two, with both bidders in the private sector.

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When did that happen?

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In July last year, as part of the ongoing process started by the previous Government.

The hon. Lady also asked whether the contract and the business case would be put into the public domain. They will be published in due course although, as she will appreciate, certain commercially sensitive information will be redacted, which is only reasonable. She also asked about staffing and whether there would be redundancies. May I tell her that there will not be redundancies as a result of the operating franchise? Circle has said that it might need to redeploy and retrain some staff within the hospital, but it does not expect job losses. I reassure the hon. Lady—I think she would like this reassurance—that, as I am sure she understands, Hinchingbrooke will remain an NHS hospital, the staff will remain as NHS staff, and the services will continue, as I said in my statement, within the format of all other services provided in every other NHS hospital, which is within the format of reconfigurations, if and when. [Interruption.] The hon. Lady says I cannot guarantee that they will stay over. I can give the greatest and most honest guarantee as of now because nobody—listen carefully so that it is not got wrong—can guarantee what services a hospital will be providing in 10 or 15 years, due to different and changing circumstances.

The hon. Lady also mentioned, as a hare that she wanted to start running to frighten people, the question of the 20 hospitals within the NHS that are having financial and other problems. The fact is that in the past month or so all those hospitals have published their tripartite formal agreements with regard to the foundation trust pipeline, and I can tell her that all those are options by which to move forward, either as stand-alone bodies or possibly mergers and acquisitions with other foundation trusts within the NHS.

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rose

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Order. The Minister of State is a resilient man. Considering that he was rendered speechless, his recovery has been both quick and complete. The House will be aware that the terms of this urgent question are narrow. I appreciate that Members may want to refer to other cases, but they must do so with reference to the specifics of the issue that has been aired from the Opposition Front Bench and by the Minister of State.

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Is not the key point that the deal will lead to better NHS services for people who live in the area of the hospital? The Minister has reassured us today that if it does not, there will be changes.

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I am extremely grateful to my hon. Friend for that measured contribution. The most important thing must be providing world-class, quality care for patients, not only in the Hinchingbrooke area but throughout the NHS across the country. I am confident that this deal does that, working with the NHS within the NHS, but with a management provided by Circle to do just that.

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Can the Minister guarantee that the terms and conditions of current and new staff will be guaranteed by the private sector company, and that it will not go for the easy option of cutting terms and conditions?

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With respect, I do not think the hon. Gentleman fully understands what I have said. I said that the status of staff at the hospital will not change in any way. They will continue to be NHS-employed staff working for the NHS as they did yesterday and as they will from the day the project starts working.

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So that is yes?

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It is, indeed.

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Many of my constituents are affected directly by what happens at Hinchingbrooke hospital, and the service there has been hit hard over many years by some of the disastrous schemes of the previous Government—private finance initiative contracts that took money away, and money abstracted by the previous Government’s private treatment centre, where private providers were paid more than NHS rates. What we now need is improved service and stability of service. Will this now finally be provided?

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I am grateful to the hon. Gentleman. I can say that this is the best chance for the hospital, which has had a very troubled history, as he knows as the constituency Member for Cambridge, because of the financial problems and governance and management problems. I am confident that this is the best way forward to establish this hospital once again on a firm footing to provide the finest health care for his constituents and those of hon. Members in the Huntingdon and Cambridgeshire area.

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I do not understand how there can be a surplus to be given to the private company. Surely every penny of taxpayers’ money should be spent on the care of patients. Does this mean that Circle will be inclined to reduce care so that it makes profits?

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I have to say that I am disappointed by the hon. Lady’s question.

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You are very condescending.

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I am not. I am just being honest. If there is a loss, Circle will pick it up, up to the first £5 million. Hinchingbrooke is a struggling hospital with a deficit of £39 million. That is why we are having to take the actions that the Government that the hon. Gentleman supported instigated more than three years ago. There is a formula that gives an incentive for Circle to deliver, to raise the quality of care, to reduce and, we hope, over the 10-year period to remove the deficit altogether.

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When a hospital’s consultants have a financial interest in its performance, what safeguards will prevent their private interest in increasing the volume of treatments provided putting the hospital’s financial health ahead of that of the local national health service?

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Under the agreements that have been signed, the consultants are there to manage an NHS hospital treating NHS-only patients and to ensure the finest quality of care for the NHS. That is the safeguard.

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At a time when progressive reform of our NHS requires greater collaboration and integration of services, with more being done for patients beyond the hospital, cannot Ministers see that that will be much harder to achieve when Hinchingbrooke hospital and others have been handed over to a private company with a single commercial interest in maximising profits and getting more patients into the hospital? Cannot they accept that it is a privatisation and that it is wrong in principle and wrong in practice?

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If it is privatisation—I utterly reject the claim that it is—and if it is wrong, it was the right hon. Gentleman’s Government who gave the powers to do this in their legislation and it was his successor as shadow Health Secretary, when Secretary of State, who instigated the proceedings to bring this about. It is a little odd for the right hon. Gentleman for Wentworth and Dearne (John Healey), for narrow, grimy and party political reasons, to try to blame us for something that he and his party instigated.

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I congratulate the Minister on his excellent announcement. The Circle group runs a hospital in Peasedown St John in my constituency. It has a fantastic partnership model that is a good example of how public-private co-operation should exist and provides better services for my constituents than those that were there before, so the announcement is thoroughly to be welcomed.

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I am extremely grateful to my hon. Friend. I have every confidence that what has been decided today is in the best interests of getting Hinchingbrooke hospital back on its feet. I am heartened not only by his support, but by the fact that the vast majority of people living in the Huntingdon and Cambridgeshire area fully support it, as do clinicians and the NHS locally. I was particularly heartened by a rational statement of fact by the RCN’s area organiser for Cambridgeshire—he was on the negotiating board—who said that he was very impressed when dealing with Circle and was looking forward to working for it. The ultimate point is that there was a possibility two or three years ago that if nothing could be done to turn the hospital around it would have been closed, which would not have been in the interests of local people.

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Will Circle be able to sell off any of the organisation’s assets and separate the ownership and operation of the hospital, as was the case with Southern Cross?

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Under no circumstances will it be able to do that. As I keep saying to the hon. Gentleman and his right hon. and hon. Friends, Hinchingbrooke is and will remain an NHS hospital, but a private company is providing the management. The NHS, through that management, will continue to operate the hospital.

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I congratulate the hon. Member for Leicester West (Liz Kendall) on securing the urgent question and allowing the Government to concede that they have adopted a Labour policy by bringing in private management. Will the Minister look at the possibility of extending what we might call a pilot to Kettering hospital?

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The answer is no. I do not want to disappoint my hon. Friend, but the simple answer is that Hinchingbrooke hospital, as the right hon. Member for Leigh will know, has a historical problem that the NHS tried to solve but failed. Given that the previous Government enacted powers to allow a franchise in exceptional circumstances, it is better to use that model to turn around the hospital rather than let it fail altogether. It is not a principle that we are considering extending across the NHS.

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The Minister said in reply to an earlier question that there would be no forced redundancies. However, as he explained, Circle will pay off the deficit over a period of time and has an obligation to make profits for its shareholders. Can he explain how it will manage to do that while paying off the deficit?

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Did they not understand the policy when they voted for it?

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My hon. Friend makes a valuable point from a sedentary position. The driving force behind the arrangement and the key criterion for Circle is the need to turn the hospital around, with regard to its quality and standard of care and its finances. The challenge for Circle is to eliminate completely the £39 million historical deficit over the 10-year period and put the day-to-day running costs of the hospital on a firm footing. I am confident that, within the framework of the agreement, that offers the best change to turn the hospital around.

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I congratulate my hon. Friend on exploiting the position presented by the Opposition. Given that this is a one-off, as he has said, what is the future for the other 20 hospitals that are in a desperate financial state? Is this a blueprint for the future and can we look forward to other partnership arrangements coming forward?

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I am grateful to my hon. Friend for the opportunity to put on the record the way forward for those 20 hospitals. This is not a blueprint or model to be used by other hospitals. It is on the statute book, as the hon. Member for Leicester West (Liz Kendall) knows. Where there are problems with the 20 hospitals that are seeking foundation trust status, the SHAs, departmental officials and the trusts themselves are looking at them. They have all published TFAs in the past six weeks or so with their intention for the way forward. I think that I am right in saying that for all of them there is a variety of options that range from a stand-alone FT bid to a possible merger or acquisition with another FT or trust. There are no TFAs for a franchise arrangement. As I have said before, this is a first and, as of now, unique model.

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On 31 December 2010 Circle’s debt stood at £82 million. Does the Minister know what its debt is at the moment, and can he guarantee that its priority will be paying off the hospital’s debt rather than its own?

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I can assure the hon. Gentleman, because of the way in which the agreements have been framed, that there is an incentive and a pressure on Circle to seek to deliver on reducing and—we hope—eliminating over the 10 years the £39 million historical deficit. On the question of who has what size of a deficit, I must tell him that my concern is to remove that shackle from the neck of Hinchingbrooke hospital.

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Notwithstanding the inconsistency of the Opposition’s position, will the Minister clarify whether this marks clearly the termination of public NHS trusts as preferred providers of public NHS services?

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It was all going so well up until now, Mr Speaker. The hon. Gentleman, who has shown a keen interest in the progress of the Health and Social Care Bill, will know that we are concentrating on any willing provider—based on quality care, not price—rather than preferred bidder.

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The Minister will be aware that in an Adjournment debate some five months ago, we put forward a leaked document that stated that exactly what has happened today would happen. He denied that it was happening, but obviously it has, so will he answer the question that was put to him in that debate? Is it not the case that the only way in which the company can make a profit is by stopping the provision of expensive services, such as maternity and accident and emergency services, and by creaming off other services from neighbouring hospitals?

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With regard to the hon. Gentleman, I have over the past few months been very restrained. In the light of his question, however, I shall now share with the House what was going on.

The hon. Gentleman is referring to the foundation trust status of his local hospital. A leaked document got into the public domain, but it was nothing to do with me or other Department of Health Ministers; it was an early draft of a tripartite formal agreement. What the hon. Gentleman did then—because he is an Opposition MP and he is entitled to do so—was to run a campaign in his area stating that the Tories were going to privatise his local hospital. I assured him from day one that that was utter rubbish, that there was no truth in it and that he should wait until the TFA was finally published. It was published recently, and of course there was no proposal in it to privatise the health service—[Interruption.]

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Can I tell you, Mr Speaker, as a final thing—[Interruption.]

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Order. I want to hear the final bit.

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The cynicism of politicians is such that when that happened, so that no face was lost, the hon. Gentleman claimed that his campaign had been so successful that it had forced me to reverse my position.

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The Minister seems to believe that the continued running of the NHS is the responsibility of the previous Government, rather than of his own Department. Does he accept that this deal is his decision and that he has radically extended the role of the private sector in our health service?

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I do not know who has been briefing the hon. Lady, but the lines are wrong, I am afraid. She is right that the final decision was taken by me, in this Administration, but—[Interruption]if she will just wait a minute, I will tell her that all we were doing was following what the previous Government set in motion. I will tell her something else: if there were a Labour Government in power and not this Conservative Government, the Labour Minister of State would be standing here today and making exactly the same points—

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You don’t know that.

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The hon. Lady says that I do not know that, but surely she accepts that Labour politicians are consistent and would consistently follow their own policy. I am sure that they would be here doing so.

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I encourage the Minister to carry on drinking the peppermint tea, because then he will remain calm. Hinchingbrooke hospital does not have an A and E department, so what resources will be available to those NHS hospitals that have to absorb the extra patients?

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I think the hon. Lady is mistaken. I am advised that Hinchingbrooke does have an A and E—

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indicated dissent.

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The hon. Lady shakes her head, but of course she is a Member for the north-west, whereas I understand from the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly), who is the MP for Hinchingbrooke, that it does have an A and E. I will check and write to her immediately, and no doubt if I am right and she is wrong, she will in her charming way correct the record in due course.

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I am grateful to the Minister and to colleagues, because everybody who wanted to question him had the chance to do so.