Further to Hinchingbrooke:
www.strategicprojectseoe.co.uk/uplo...MOI%20Final.pdfThe link is to the Memorandum of Information issued by the Trust for the information of potential bidders for the privatisation of the Hospital. It is largely self explanatory, and it dispels any doubt that there is a problem with the hospital which needs any action at all. Not in the real world anyway. In the crazy world of accountancy things are quite different....
As I suspected the hospital's debts are very largely unreal. They are an artefact of the way the accounts are kept, and the way charges and payments are made within the virtual world it has been necessary to create in order to confuse people into thinking that a public service is a business. In the neocon world everything is a business: and they are incapable of understanding what an analogy or a model or a metaphor is. Or they are liars. You decide.
As you will see from the MOI, Hinchingbrooke was within budget till 2004/5. Then two things happened:
1. A new treatment centre was built under the PFI arrangments, which leaves them with an obligation to pay a private company for the use of the building for 30 years. The cost was £22 million, and the centre opened in 2005. The cost of this each year is shown in the accounts available for the three years prior to the MOI. in 2007 it paid £3,180, 000: in 2008: £3,267,000: in 2009: £3,563,000. There are no details about how those figures are calculated, though there appears to be some element of inflation proofing ( an insane arrangement for capital expenditure since any benefit of inflation in terms of reduced relative cost to the purchaser is lost). However you work it out it seems that the value received was £22 million and the repayments will amount to over £100 million over the term of the contract: course the provider is liable for repairs and maintenance etc: but this is a gift to a private company from the public purse with absolutely no rational justification that I can see. Typical PFI contract, in fact.
2. The excess costs were expected to be offset by increased use of the facility and associated income from that.(Note that most such income is pure fantasy: the health service pays itself to use its facilities and no money at all is involved, except in the fevered brains of accountants and finance directors and besotted politicians. There is some real money where the facility is used to provide private care: it is a drop in the ocean. All this does is create jobs for accountants and finance directors to keep track of non existent money. But I digress). The increase did not materialise, not because of any mistake in the forecast, but because of a change in policy consequent on yet another initiative designed to save money. As the MOI says
QUOTE
the PCT changed its commissioning intentions and moved activity away from hospitals and into the community, in line with DH guidance. This contributed in part to the £7.8m deficit incurred in 2005/06.
(My emphasis)
I do not argue that is not a good policy: I do not know. But it is obvious that there is nothing wrong with a management which based its decisions on the situation which obtained at the time, and which was presumably not advised of the intended change in advance of signing the contract. Would we decide that the management of a private company which planned on the basis of an existing tax regime was incompetent if the government then changed that regime later? I don't think we would: I think we would expect them to adapt to the change: but not instantly.
That part of the deficit is not the biggest part however: the biggest part is even more insane. Once again it arises from the fantasy world these idiots inhabit.
There is no real cost or price for services the NHS provides to itself: they are made up. What that means is that they can be changed any time, to produce any financial outcome the powers that be want. And this is what happened to Hinchingbrooke. From 2004/5 the government launched yet another shiny policy called "payment by results". Sounds good? Well sorry to disappoint you, but it ain't. Prior to that initiative the hospital got a low "payment" for the work it did and so the "income" was also low. That had to change (er...why is not clear but if you are cynical like me it is possible to suspect that it has to change or privatisation won't work). So it did change. From that year a new arrangement came in to force so that all the services were to be charged at real cost (commercial rate, presumably). But it was not introduced in one go: as the cost is notional and the increase substantial there was a transition phase: the previous low rates were increased year on year. So the actual imaginary income was lower than the notional imaginary income during the transition phase. This accounts for £21 million of the total reported accumulated deficit of £38.9 million. By 2008/9 full payment was being received and the management had made necessary adjustments so that it was generating service within budget ( with a small suplus actually) by that year.
Of the total reported deficit of £38.9 million £21 million is wholly notional: and a further £7.8 million is a direct consequence of DH directives. The rest comes from PFI, mainly, I would argue.
Despite this it was decided that the hospital would have to be closed or put under private sector management, and so this MOI was produced to attract "partners" who would run the hospital on behalf of the NHS.
Circle, which has no track record, became the "preferred bidder" shortly afterwards. I have not been able to discover how that happened as yet: they have no demonstrated ability to run a hospital, and they have not been in existence long enough to show they can run anything at all. They have yet to make a profit, and all they can show in terms of competence is "patient satisfaction": not clinical outcomes nor any other measure appropriate to a health care facility. They do, however, have donations to the tory party to wave about: big donations.
The upshot of all this is that those who hope that Circle will fail are bound to be disappointed: they cannot fail. They are to get £1billion to run the hospital for 10 years. The hospital already has a private element which generated £886,000 in 2008/9. While the assets and staff will remain with the NHS this income will not. It seems that this is in addition to the £100 million Circle will get directly from the taxpayer, though I am open to correction on that. It looks like the truth is that Circle will get nearly twice the headline figure, to me. In that connection it is important to note that the hospital's total income in 2008/9 was £91,630,000,
including the private income The imaginary price paid for services is now set at a "commercial rate" and, as shown in the accounts, that means the hospital was already in slight surplus by 2008/9: that imaginary money will now become real money, of course.
In 2007 the hospital was characterised as failing to operate within budget, and the solution to this "problem" was supposed to be a reduction in the hospital's activity: but that failed thankfully: those pesky ill people just refused to stop being referred to hospital when they were sick: and of course because of the imaginary pricing of service every treatment resulted in a greater notional loss. But with the new funding arrangements that is not true any more. Treatment now generates a notional ( soon to be real for Circle) profit: and it so happens that the the population is forecast to increase because of decisions elsewhere with regard to housing and new town development. It is true that the elderly population is expected to increase: but luckily for Circle we are committed to keeping old people in the community or in social care: NOT hospitals: so their call on hospital services will not grow with their numbers. A new town, on the other hand, will produce babies: and maternity services are quite profitable. Most young families primarily make demands on primary care: and where they don't they tend to have short term hospital needs because of accidents etc. So that should produce growth potential for a private hospital, I imagine.
All I can see is no problem requiring a solution: yet I predict that Circle will be able to pay down the really rather small accumulated deficit just as the hospital, if left alone, would. That is not how the outcome will be reported, though: you can tell that from the manufacture of the "crisis" which justifies this cynical nonsense in the first place
