Private firm under fire for running up £4m deficit at hospital trust

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The UK’s first privately-run NHS hospital generated a deficit more than twice as high than planned, it emerged yesterday.

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

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 its 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...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.

Circle plans to achieve £311m in savings over the 10-year contract.If it does not deliver a surplus, it gets no franchise fee. But the first £2m of any in-year surplus is retained by the private provider and any surplus above £2m is split – some to pay off the Trust’s historic deficit of £38m and the rest to Circle.

Margaret Hodge, chair of the Committee of Public Accounts, said: “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.”