First NHS trust run entirely by private firm racks up £4m debt in just six months:::convicted margaret in this chair!!!!!

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Health reporter,London:::(weastar times/daily mail):::The UK's first privately run NHS hospital generated a deficit more than twice as high than planned, it emerged today. 

Circle, the company in charge of Hinchingbrooke Health Care Trust in Cambridgeshire, had projected that the Trust would be in a £1.9 million deficit after six months under its stewardship, but in September it reported a deficit of £4.1 million. 

The National Audit Office (NAO) said that while the private provider has made improvements in clinical areas a number of financial challenges remain. 

Circle began it's 10-year management franchise at the struggling Huntingdon-based hospital in February in what is seen as a potential model for other hospitals across the country. 

But the NAO said that before any more NHS hospitals are run by private providers, the Department of Health must do a 'lessons learned' exercise to make sure there are no weaknesses in the procurement process. 

David Moon, director of health value for money studies at the NAO said: 'There are potential other franchises, currently George Eliot in Nuneaton is under review by the Department as to how their management arrangements are going and this is one potential option. 

'But we believe that before any other franchises are entered into, the Department should do a lessons learned exercise to make sure that any weaknesses in the process are ironed out for any future tenders.' 

In a report about the franchising of Hinchingbrooke, the NAO said that during the procurement process, the East of England Strategic Health Authority assessed the reasonableness of the bidders' savings proposals but it did not fully consider the relative risks of the saving proposals. 

'This is a first for the NHS - the NHS hasn't done this before - so to an extent they were covering new ground,' said Mr Moon. 

'Moving forward, if they are to have to do this again they need to assess the risk of the bids in a more defined way.

'Both bidders, Circle and Serco, were asked to come up with a whole range of saving schemes to deliver a minimum of £228 million of savings over a 10-year period which they duly did. 

'While the schemes were evaluated for: 'Does this look a sensible scheme? And is it clinically safe? etc' they weren't evaluated to a financial level so they didn't check whether the level of savings that were going to materialise from those proposals were actually going to happen.

'Circle plans to achieve £311 million in savings over the 10-year contract. That is an unprecedented level of savings,' Mr Moon continued. 

'That's more than 5% a year which probably has not been done in the NHS to date.' 

In the past decade, the hospital has not made an annual surplus of more the £600,000, he added.

If Circle does not deliver a surplus, they get no franchise fee. But the first £2 million of any in-year surplus is retained by the private provider and any surplus above £2 million is split - some to pay off the Trust's historic deficit of £38 million and the rest to Circle. 

Margaret Hodge, chair of the Committee of Public Accounts, said she was 'astonished' that Circle takes profit ahead of addressing the hospital's deficit. 

She said: 'The purpose of franchising Hinchingbrooke hospital to a private company was to turn around the financial fortunes of a failing NHS Trust, yet after just eight months under Circle's stewardship, the Trust has drifted a further £4.1 million into the red. 

'Circle struck a 10-year deal under which it can earn £31 million if it can deliver unprecedented annual savings of more than 5%. 

'While there have been welcome clinical improvements since Circle took over, it is essential that pressure to make savings does not simply lead to cuts in services in the future. Safety and quality of care must always come first. 

'Before handing Circle the contract, the Strategic Health Authority failed to test properly whether the required savings are even achievable. 

'There is no clear and common view as to what would constitute a successful outcome or how that would be measured. 

'Above all, I am astonished that the contract allows Circle to pocket any profit ahead of addressing the Trust's deficit. Worse still, Circle suffers no penalty if at the end of the 10 years the deficit is not paid off in full. 

'Getting this deal right has huge implications for this hospital's sustainability and for the 160,000 members of the public it serves.' 

Amyas Morse, head of the NAO, added: 'While Circle has made early improvements in some clinical areas, the company will have to generate savings at an unprecedented level. 

'The final judgment on the value for money of the franchise will depend on how successfully Circle makes the projected savings and repays the cumulative deficit, while maintaining clinical quality. 

'This franchise agreement is the first of its kind in the NHS and it is important that lessons from this procurement process and early operational experience are used to improve future contracts.'