Hinchingbrooke – Profit versus loss of a hospital

So, the moral of the story depends on who tells it. Circle saves local hospital and thousands of jobs from almost certain closure versus Circle circles like vultures waiting to grab the rich pickings of any operating surplus generated. What this dilemma raises is that we have a very uncomfortable relationship with the prospect of profit in a public sector services.

The facts of the matter are these; Circle has a deal that means it must repay debt out of surplus and as part of that deal there is the provision for profit-taking too. If Circle manages to turn around the downwards spiral at Hinchingbrooke and return it to surplus, then the first £2m of any yearly surplus goes to Circle themselves. It will then keep a quarter of any surplus between £2m and £6m, and of third between £6m and £10m. Any further surplus in any year will go towards repaying the hospital’s significant debts, currently standing at around £40m.

So, what is the deal that the taxpayer, especially local taxpayers, really got from this arrangement. It is difficult to ignore that the hospital would have closed without a rescue. Rescue at the hands of soon-defunct SHA would have been a tax payer rescue i.e. a tax payer funded bail out. Not only would that mean finding funds that are better devoted to other patient care in the region but it is also based on the assumption that the Trust could turn itself around going forward, something it had failed spectacularly to do over many years. Clearly something different was required and Circle are certainly that.

In a nutshell, the tax payer got a rescued local hospital, thousands of saved jobs in the area, protection against continued losses and the high possibility that a substantial debt would be repaid. Forgive me for being naive – what’s not to like?

Enter the prospect of profit. It is the potential for profit-taking from a public service that has everyone so hot under the collar. Christina McAnea, from the big healthcare union Unison, said Circle could “cream off nearly 50% of the hospital’s surpluses” which would make it “virtually impossible to balance the books”. Again, forgive me for pointing out the obvious but there is a carefully delineated formula that determines that the books must balancebefore profit-taking in any one year, otherwise it isn’t profit. And, we’d like to know, what is Christina’s alternative to the Circle deal? Closure? Taxpayer-funded bailout?

In an era of huge global financial challenge, growing demand and significant local austerity measures, an idealistic viewpoint is unlikely to solve the day. In fact, it makes you wonder whether it is more likely to cause harm, rather than the good it purports to preserve.

Circle assumes a huge degree of financial risk, in taking on a failing Trust and protects the taxpayer from further risks at a time when we really don’t need any more. Is it morally wrong for Circle to take profit if it turns Hinchingbrooke around and makes profit? It could be argued that it is morally unacceptable to expect Circle to take on these risks and not have any chance of profit taking until the very end. Circle needs support from the City to continue its development and the City doesn’t often work in 10 year payback cycles. By allowing Circle to take a proportion of profit during the course of its tenure, we allow the formation of a business model, a partnership between the City and the people, that provides a mechanism to save viable local services, preserve jobs and hopefully deliver a far improved NHS service clinically too. However, surely it has to be a win-win for all parties, not just the tax payer?


Post a Comment