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Contract Failures in Hospital Services

The Covid-19 pandemic has given the private hospital sector major opportunities to work for the NHS. In March 2020 the government agreed a contract to block-book the entire capacity of all 7,956 beds in England’s 187 private hospitals along with their almost 20,000 staff. It is reported to have cost around £400m a month. The plan was for the private hospitals to treat covid-19 patients as well as providing Covid-19 free hospitals to carry out NHS elective surgery and cancer treatment, as the NHS hospitals began filling with Covid-19 patients.

However, in October 2021 the Centre for Health and the Public Interest reported that on 39% of days between March 2020 and March 2021, private hospitals treated no Covid patients at all and on a further 20% of days they cared for only one person. Overall, they provided only 3,000 of the 3.6m Covid bed days in those 13 months – just 0.08% of the total.

Prior to the pandemic, private hospitals undertook 3.6m NHS-funded planned procedures in 2019, that dropped to only 2m during the first year of the pandemic – a fall of 43%. The House of Commons public accounts committee, was shown two letters to the wider NHS explaining why the deal had been struck and what it would cover, which make it clear that it would include care for Covid patients with serious breathing problems as well as routine operations, such as hip and knee replacements. However, The Independent Healthcare Providers Network, which negotiated the deal on behalf of private hospitals, insisted that it was never intended to cover people with Covid.

Chair of the Public Accounts Committee, Labour MP Meg Hillier, said the findings showed the government and NHS had got poor value for money from the very expensive deal.

“Taxpayers have covered an entire year of private hospitals’ costs in return for less treatment and care than before, and many of them now feel forced to pay those same private hospitals over again in the face of an NHS beset with lengthy backlogs.”

The most well-known contract failure in hospital services is that of Hinchingbrooke Hospital and the contract for its management with Circle. The ten year contract was awarded to Circle in 2013, but just two years later in January 2015, Circle pulled out of the contract. The company announcement came just before the publication of a damning report on the hospital from the Care Quality Commission (CQC): the CQC raised serious concerns about care quality, management and culture at the hospital.

The CQC found a catalogue of serious failings at the hospital that put patients in danger and delayed pain relief. The hospital was put in to special measures, the first time the CQC had had to do this. Circle cited financial reasons for pulling out: under the contract the company was allowed to withdraw if it had to invest more than £5 million of its own money in the hospital and it looked extremely likely that it was going to have to invest much more than £5 million.

In another example, in December 2013 Serco announced that it would be pulling out of its contract for running Braintree hospital in Essex before the end of the contract. In March 2014 the contract was handed back to the Mid Essex Hospital Trust nearly a year early. The company’s other major contract with the NHS for community care in Suffolk has not reaped the profits the company was hoping for and by August 2014, the company announced that it was withdrawing from the NHS clinical services market altogether. In September 2015, when Serco handed over the community care contract in Suffolk to new providers, the company noted that the £140 million the company was paid for the contract was “not adequate” for the work. Serco estimates that it had made an £18 million loss on its three NHS contracts.

See below for further reading on contract failures.

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