First private company to run an NHS hospital will keep 2m a year from profits – despite centre being 40m in debtCompany would need to generate 70m surplus over 10 years to clear hospital's debtSurplus should go into improving patient care, says Unison
14:42 GMT, 3 May 2012
The first private firm to run an NHS hospital is set to make millions of pounds while the centre is still in debt, it has emerged.
Under the deal, the private sector company Circle holds on to the first 2m of any annual surplus it achieves at Hinchingbrooke hospital in Cambridgeshire.
They will also get a proportion of any income surplus above that level with the rest going towards paying off the hospital's 40m debt.
Health care assistants at Hinchingbrooke Hospital: Circle say they have already made improvements to waiting times since taking over and will only take profits out of any surplus
This means that Circle would need to generate a 70m surplus from the hospital – which has a 100m turnover – over a decade to bring it out of the red.
Over the past 10 years, the failing hospital – which was facing closure before the deal was made – has never recorded a surplus above 600,000.
The details, which were revealed by the Health Service Journal, has provoked outrage from the public sector trade union Unison, who branded it a 'disgrace.'
Christina McAnea, head of health at Unison, said: 'Circle and the government promised that a profit would not be made until
Hinchingbrooke’s debts had been paid off.
'Circle clearly had no intention of
keeping this promise, having laid down plans to cream off nearly 50 per cent of the
hospital’s surpluses – making it virtually impossible to balance the books.
'This is a disgrace. Any surpluses should be going directly into improving
patient care or paying off the hospital’s debt, securing its future for local
people – not ploughed into making company profits.'
Critics say Circle will siphon off million from the debt-ridden Hinchingbrooke hospital that could otherwise have been spent on patient care
Andy Burnham, the Shadow Health Secretary, said: 'The Prime Minister has put profit-making before patients; it's a bad deal for the NHS and people will struggle to understand it.'
However, Dr Stephen Dunn from NHS Midlands and East told the BBC: 'Circle will
only take out a fee if the trust is in surplus. That is a major
protection for the taxpayer, and we are confident there will be no
compromise on quality and safety. We have mechanisms in place to ensure
that Circle deliver on their plans and they will have to cover any
Circle will keep a quarter of any profits between 2m and 6m and a third of those between 6m and 10m.
The Circle Partnership, which is co-owned like John Lewis, signed the NHS deal in November 2011 after beating off competition from 19 initial bidders.
It began running the Hinchingbrooke hospital on February 1 this year. However, until now the details of the deal were kept secret.
The HSJ discovered how any surplus would be split between paying Circle a profit and paying off NHS debt after finding a letter from Lord Howe, the Health Minister, to Lord Haskel, a Labour peer, in the House of Commons library.
Chief Executive, Ali Parsa, said the company aimed to turn the hospital once labelled as 'a
basket case', into one of the top ten in the country.
He said the hospital was already improving and now had the shorted accident and emergency waiting times in Cambrdigeshire when before it had the longest.
He told the BBC: 'We have been tasked to stop taxpayers losing this money. Our plan is not only to do this and make the hospital sustainable, but to turn it into one of the best district general hospitals in the country.'
If Hinchingbrooke makes a financial loss, Circle must pick up the tab for the first 5 million, according to the Department of Health.