HINCHINGBROOKE Hospital will be breaking even consistently by next spring in spite of losing £10million a year in NHS cutbacks to its £107m budget, its new managers said this week.

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Ali Parsa, chief executive of Circle Health, which took over running of the hospital in February under a 10-year franchise deal, said the hospital was also on track to achieve its ambition of becoming consistently one of the top 10 hospitals in the country by February 2014.

Last week, the Midlands and East of England strategic health authority was criticised by the National Audit Office and the chairman of the House of Commons Public Accounts Committee for the process that resulted in Circle’s winning the franchise.

The NAO found that, although the SHA assessed the reasonableness of bidders’ savings proposals, it did not fully consider their relative risks.

“Assessing schemes in this way has the potential to encourage over-optimistic bids. However the agreement transfers all demand and financial risk up to £5million to Circle,” the NAO said.

The report also found that the authority rejected a guaranteed payment towards the hospital’s cumulative deficit in favour of an ambitious bid that aimed to repay the debt in full. The cumulative debt stood at £38m (at the end of March 2012).

Amyas Morse, head of the National Audit Office, said: “While Circle has made early improvements in some clinical areas, the company will have to generate savings at an unprecedented level. The final judgement 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.”

PAC chairman Margaret Hodge added: “Before handing Circle the contract, the SHA 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.”

Circle has for some time acknowledged that cost-savings were taking longer to achieve than was originally hoped, but insists that the imperative was to deliver improvements in clinical quality before dealing with the finances.

“When we took over the hospital, it was losing £1m a month,” Mr Parsa told The Hunts Post. “We broke even in October, and we expect to be breaking even month by month from the end of the [financial] year – and we, not the NHS, take the hit if we don’t. Nobody makes an investment that breaks even in the first year.

“We needed to ensure that pressure to break even too soon did not affect quality,” he added. “Hinchingbrooke will do just fine. By April or May no-one will be defining Hinchingbrooke as a basket case clinically or financially.

“We have consistently been among the top-performing hospitals in the SHA area and particularly among the top ‘full-service’ hospitals [with A&E departments] among the 46 in the region, though we shall miss some of our targets this month because we are treating so many more patients.”

He hoped the NHS would not suspend the process of injecting outside management expertise into other hospitals just because the NAO had got cold feet about the process in this first instance.

“How many other patients would benefit if other hospitals did what we have already achieved here by putting doctors in charge?” he asked.

The SHA was unapologetic. Dr Stephen Dunn, director of policy and strategy at NHS Midlands and East, saidthe contract offered good value for money for the NHS and taxpayers.

“The NAO report makes it clear that this is achievable over the lifetime of the contract. Circle will have to deliver improvements to quality, safety and sustainability. Financial risk has been transferred to Circle, which will cover deficits of £5m a year.

“The SHA sought the best possible deal to ensure that the hospital remains open and does not require a subsidy. As the NAO report makes clear, without this deal the hospital [might] have had to close departments or would have required a large subsidy.

“Circle’s management has started to bring about improvements to services. The accident and emergency performance is now among the best in the region. The SHA has robust systems in place to monitor the performance of the partnership and ensure that Circle delivers its business plan.

“We look forward to the hospital building on its improvements to provide a safe, efficient and sustainable service to its patients.”

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