HEALTH Secretary, Andrew Lansley, has been criticised after he claimed 22 NHS trusts in England faced financial collapse because of crippling PFI debts.
Blaming the former Labour government for championing PFI, Lansley predicted that around 60 hospitals would be forced to close or their governing trusts would have to merge with other providers as they buckle under a cash crisis created by high-cost PFI deals.
As an example, Cumberland Infirmary, which opened in 2000 and was the first major hospital in the country to be funded by PFI, cost £67m to build, but the trust had to pay £18m in PFI repayments last year alone. Most PFI contract agreements run for between 15-40 years, meaning trusts pay back much more than the price of the original development.
Lansley said: “The truth is that some hospitals have been landed with PFI deals they simply cannot afford. Tough solutions may be needed for these problems, but we will help the NHS overcome them.”
While in most cases it may be an exaggeration for the Secretary of State to say that PFI obligations will bring the named trusts to the brink of financial collapse, it is certainly true that it will be increasingly difficult for many of these trusts to maintain financial stability
He spoke after recently approving the closure of A and E and maternity units at Chase Farm Hospital in north London. The hospital has been forced to merge with another trust, largely because it had an unsustainable PFI debt. Lansley added: “There are consequences for other hospitals and we are going to have to manage those.”
While his comments were welcomed by PFI critics, he has also been accused of whipping up a storm for political gain, with many of the 22 trusts he singled out revealed to be performing well financially in the Department of Health’s own quarterly assessment. This rated 17 of those 22 trusts mentioned as ‘performing’ financially between January and March 2011. Only four were deemed ‘underperforming’, while the performance of one, South London Healthcare NHS Trust, is ‘under review’.
Professor John Appleby, chief economist at The King’s Fund health think tank, said it was ‘misleading at best’ to blame all the NHS’s financial difficulties on PFI, and Mike Farrar, chief executive of the NHS Confederation, added: “We are pleased the Government has been upfront with the fact that PFI is a problem for many hospitals, but PFI is not the principal cause of the NHS’s financial problems.”
The truth is that some hospitals have been landed with PFI deals they simply cannot afford. Tough solutions may be needed for these problems
Those trusts among the 22 highlighted are also questioning Lansley’s comments. Alistair Mulvey, finance director and deputy chief executive at North Cumbria University Hospitals NHS Trust, said: “The trust is fully engaged with the Department of Health over discussions in relation to PFI schemes across the NHS, of which The Cumberland Infirmary was one. Carlisle’s hospital development supported the consolidation of old hospitals into new clinical facilities, bringing staff together and ensuring patients accessed all services under one roof.
“The last decade has seen the hospital go from strength to strength, with regular maintenance of facilities and the introduction of new equipment through the PFI to ensure everything remains as up to date as possible. The trust benefits from a great relationship with its PFI partner and continues to work closely to keep the facilities in the best condition possible and also to make sure the health service receives the best value for money.
“As well as keeping the facilities up to date, the trust has also balanced its books over the past few years and continues to do this alongside developing services.”
The Government will be keen to find a solution now as the current costs of these schemes will only increase in the coming years
A spokesman at Barts and the London NHS Trust, which runs the Royal London Hospital, added: “Our PFI repayments require the trust to become one of the most efficient in the NHS and an improvement programme is already well underway. This has focused on achieving higher quality care at lower cost while protecting vital frontline services. It is also crucial to recognise that over the 42-year lifetime of our PFI contract, almost half of the costs are associated with vital hospital support services, such as catering, cleaning, maintenance, clinical equipment and sterile services.”
But others have welcomed the Government’s realisation that while PFI may have provided the state-of-the-art hospitals England needed; the knock-on effect will be felt for decades to come. Jeremy Roper, a partner at law firm, Beachcroft, said: “While in most cases it may be an exaggeration for the Secretary of State to say that PFI obligations will bring the named trusts to the brink of financial collapse, it is certainly true that with increasing costs of PFI schemes, combined with reductions in many trusts’ traditional sources of income, it will be increasingly difficult for many of these trusts to maintain financial stability. Persuading Monitor they can pass the relevant financial tests to achieve foundation trust status may not be easy.
“There may be scope for renegotiation of some payment mechanisms, but funders are not going to be keen to support that. In some cases it may involve the challenged trusts being acquired by one or more foundation trusts with robust finances, but only if they can persuade Monitor that acquiring additional PFI debt will not seriously affect their risk rating. The Government will be keen to find a solution now as the current costs of these schemes will only increase in the coming years.”
PFI contracts are a cosmic rip-off by almost every measure. Any financial adviser worth their salt would propose to end the contracts immediately and stop this mass haemorrhaging of public cash once and for all
Farrar added: “Repayments on PFI debt are likely to be £1.5billion this year, yet by 2014/15 the NHS needs to find savings of £20billion.To address this we need to start looking at the NHS’s big ticket costs, such as how we deliver care and where. We need pragmatism and leadership to do this as it will involve some extremely difficult decisions. A political blame game is a waste of time.”
And John Lister, director of campaign group, Health Emergency, said: “PFI contracts are a cosmic rip-off by almost every measure. Any financial adviser worth their salt would propose to end the contracts immediately and stop this mass haemorrhaging of public cash once and for all.”
The trusts mentioned in Lansley’s speech are: North Cumbria University Hospitals NHS Trust, South London Healthcare NHS Trust, University Hospitals Coventry & Warwickshire NHS Trust, Wye Valley NHS Trust, Barking, Havering and Redbridge Hospitals NHS Trust, Worcestershire Acute Hospitals NHS Trust, Oxford Radcliffe Hospitals NHS Trust, Nuffield Orthopaedic Centre NHS Trust, University Hospital of North Staffordshire NHS Trust, Dartford and Gravesham NHS Trust, Royal National Orthopaedic Hospital NHS Trust, Portsmouth Hospitals NHS Trust, Buckinghamshire Healthcare NHS Trust, West Middlesex University Hospital NHS Trust, Mid Yorkshire Hospitals NHS Trust, Walsall Hospitals NHS Trust, North Middlesex University Hospital NHS Trust, North Bristol NHS Trust, Mid Essex Hospital Services NHS Trust, Maidstone and Tunbridge Wells NHS Trust, and Sandwell and West Birmingham Hospitals NHS Trust.