NHS to become a landlord for private treatment centres

Posted on July 30, 2009. Filed under: ISTC, Journals |

Health Service Journal | BY SALLY GAINSBURY | 30 July 2009

The buildings and facilities of up to 16 independent sector treatment centres will need to be bought by the NHS over the next two years at a capital cost estimated at £200m, the Department of Health has confirmed. 1205215_hospital_patient_safety

The £200m cost relates to the so-called “residual value guarantees” that were built into the first wave of the ISTC programme contracts in order to minimise the risk to the private sector of taking on five year contracts to treat and diagnose elective patients.

The guarantees – which were made in addition to guarantees around the volume of work the centres would receive – require the NHS to buy back the remaining capital assets of the centres at their capital value at the point at which the contracts expire. The latest estimate given by the DH is £200m.

The first contracts are due to expire at the end of the current financial year. The most expensive buy-backs are likely to be for the schemes in Nottingham – which the DH last year estimated would cost £41.4m – and the scheme in Cheshire and Merseyside, which the DH valued at £33.3m.

The DH has said the question of who pays that cost – the department or the local primary care trust – differs between contracts.

In a statement issued today, the DH said contracts would be renewed on a case-by-case basis. If they are renewed, ISTCs will be paid “under the same pricing arrangements as NHS providers”.

Health minister Mike O’Brien said there should “be consistency in pricing and contracts”, adding: “In the past the independent sector have sometimes been guaranteed payments. In the future it is intended that contracts will operate at NHS tariff prices using the standard NHS contract for hospital services.”

Where contracts are renewed, the NHS is now expected to act like a landlord to the private sector, which will lease the facilities.

Director of the NHS Partners Network David Worskett told HSJ that got around the expected problem the private sector would have in refinancing their investments in the current banking crisis.

“If they had to refinance the buildings that might have been a problem in the current climate,” he said. “But now they won’t have to because they will move onto a leasehold basis. The NHS will become the landlord.”

He added that the private sector supported the move to standard contracts but objected to the implication the wave one guarantees were “unfair”. “That view shows pretty short term institutional memory,” he said. Volume and capital guarantees were necessary to compensate for “a whole list of pensions and other overheads which in the rest of the NHS is picked up by the Treasury and Richmond House”.

He acknowledged the NHS had its own additional costs – doctor training and more complicated patients are the most frequently cited – but he said it “should not be beyond the wit of man in the DH to sort this out” so that transparent and fair prices could be established between the NHS and private sector.

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