Keep Our NHS Public Updates 03/08/2012 HSJ Loss-making Hinchingbrooke may require loan.

Hinchingbrooke Healthcare Trust made a 2.3m loss in the three months to the end of June and may need a cash injection later this financial year if it does not deliver on cost improvement plans. The trust - the first in the UK to be franchised to a private operator - is now imposing strict controls on vacancies and nonpay expenditure as it tries to get back on track to make cost improvements of 9.9m this year. A finance report to its board has revealed that it now only expects to deliver 6.5m of the savings originally targeted and has identified an additional 3.4m of new savings schemes to fill the gap. All recruitment will be scrutinised by the senior management group. The trust is now run by Circle, in a controversial 10-year franchise deal. HSJ calculated in May that the trust would need to make a surplus of at least 70m over that time before Circle was obliged to pay back the full 40m of the trusts debts. Circle will also have to fund the first 5m of any deficit. The trust finished the quarter with a deficit 0.65m greater than planned and warned that its cash balance could fall to under 1m by the end of September. Delivery of cost improvements should push this balance up again in the second part of the year but the trust warns that any further slippage could mean it may need to consider what access it has to loans and other cash injections to bridge the period. Overall, the report reveals an organisation struggling with the same issues which affect many NHS organisations. While income for the first three months of the financial year was above plan by 0.2m, this was swallowed up by overspends in other areas including the cost of locum consultants, subject matter experts and procurement expertise. The trust is 26 per cent behind target on referrals and admissions from outside Cambridgeshire. Its income from A&E is also being restricted by the number of patients it is seeing - as it goes above the agreed cap, the trust is only being paid 30 per cent of tariff. http://www.hsj.co.uk/hsj-local/acute-trusts/hinchingbrooke-health-care-nhs-trust/loss-makinghinchingbrooke-may-require-loan/5047838.article?blocktitle=Latest-News&contentID=7827 BMJ PFI hospitals bear the cost of Libor manipulation. The fraudulent manipulation by Barclays Capital of the interbank lending rate (Libor) has real consequences for cash strapped NHS hospitals facing merger and service closure as a result of private finance initiative (PFI) debt repayments. Libor, which is used by banks to set interest rates,1 is linked to financial products known as derivatives that are widely used in PFI deals. By manipulating the Libor rate up or down banks can, at the expense of their clients, protect the profits they make from the trading of derivatives and mislead the market about the true cost of bank borrowing. South London Healthcare NHS Trust is in special administration, effectively bankrupt, because trust income is falling but PFI costs are rising, partly because of reliance on derivative arrangements of the type marketed by Barclays Capital. The government has yet to examine PFI deals for fraud, although in the United States hospitals and local councils are considering suing banks for compensation, according to a BBC report. The derivatives industry, in which Barclays Capital is a major player, is fundamental to PFI. Derivatives are tradeable financial instruments used to protect lenders of long term debt from the risk of credit default (the risk that a loan is not repaid). According to the US regulator, the Commodity Futures Trading Commission, Barclays Capital traders manipulated the Libor rate by making false, misleading or knowingly inaccurate [interest rate] submissions to benefit Barclays derivatives trading positions. Several other banks are being investigated by the European Union, including the Royal Bank of Scotland (RBS), which also has extensive PFI interests. Derivatives are central to PFI because of the peculiar nature of this type of lending. In PFI deals, loans are secured not against assets but against hospitals future revenue streams. Investment banks such as Barclays Capital that lend to PFI projects on this basis use derivatives known as swaps to protect the future revenue from which their

loan is repaid. A swap is a derivative instrument used to insure (or hedge) against payment default in the event of adverse movements in interest or inflation rates. The Princess Royal University Hospital PFI in Bromley, which is a major contributor to the South London Healthcare NHS Trust deficit, was drawn up to include interest rate and inflation rate swaps. Interest rate swaps allow the PFI company to fix interest rates that would otherwise fluctuate in the money markets, locking the public sector into high interest rates when the cost of government borrowing is at a historic low. Inflation rate swaps involve passing the risks of inflation back to the public sector by indexing PFI payments to inflation even where PFI industry costs are not affected by inflation and interest rates already include a premium for anticipated inflation. Treasury guidance acknowledges that inflation swaps are unlikely to offer value for money and advises against their use.5 Nonetheless, swaps have been adopted in a succession of NHS hospital schemes and signed off by government because banks have consented to hospitals making lower PFI payments at the beginning of a contract secure in the knowledge that index linked payments will rise in the future. The arrangement has helped NHS trusts overcome initial affordability problems but created problems for the future. http://www.bmj.com/content/345/bmj.e5095.full?rss=1 Its simplethe NHS is free at the point of delivery. Or is it? Prescriptions, eye tests, and dental treatments have long been removed from the guarantee of NHS funding, but it is now becoming apparent that other areas of healthcare are being added with the advent of the self funding NHS patient. A recent investigation found that several trusts are offering patients the choice of paying for treatment or services themselves if these are either not approved for NHS funding by primary care trusts (PCTs) or have long waiting times. In vitro fertilisation (IVF), bone scans, cancer surgery, and screening for hereditary diseases are all areas where patients may be given the opportunity to self fund. How patients are classified varies between trusts, with some describing them as NHS patients merely taking the opportunity to pay for something themselves and others as private patients being seen on NHS premises. The main concern is what effect this has on the founding principle of the NHS. Shadow health minister Jamie Reed wrote in a recent letter to health minister Simon Burns: The Health and Social Care Act established an unprecedented change within NHS hospitals, with an increased private patient cap now allowing hospitals to devote 49% of their beds, procedures and services to private patients. The governments PPI [private patient income] cap and successive NHS budget cuts have simultaneously given hospitals the freedom and incentive to open up a private market within the NHS. The BMJ spoke to some of the trusts identified in the investigation and found a range of attitudes and approaches to this practice, but all believe they are not doing anything inappropriate. Questions have arisen over situations when a trust seems to be offering a service or treatment that is not recommended by national bodies such as NICE or the UK National Screening Committee. Since May of this year, University College London Hospitals NHS Foundation Trust has been offering a self funded interim ovarian cancer screening service,6 which offers ultrasound scans and serum CA125 tests for 330 a year to women who are considered to be at high risk of developing this form of cancer. Until June 2011 patients could opt to join the UK Familial Ovarian Cancer Study, which has now closed. The self funded screening service since then, says a trust spokesman, is an interim arrangement until the situation is reassessed after the study reports back, possibly next year. The trust says the UK National Screening Committee will not support ovarian cancer screening being carried out on the NHS until the study results are available. Observers from the United States say there is a legitimate concern here. Lisa Schwartz, professor of medicine at The Dartmouth Institute for Health Policy and Clinical Practice in New Hampshire , says self funding patients are, in her opinion, private patients. It seems to contradict a basic tenet of [the] NHSthat care is free at the point of service, says Schwartz. If self funding is to be allowed, it should be carefully regulated to ensure that it is not abused (that is, promoting useless or harmful services). Self funding seems like it would open the door to the worst of the for-profit side of American healthcare. This should be an explicit national policynot one developed on an individual

basis driven by the financial needs of individual trusts or hospitals. She adds: I worry that this will lead to more marketing of potentially unnecessary services to patients. Unfortunately, financial incentives all too often encourage doing more to patients regardless of whether it is in their best interest. The NHS should do what it can to prevent increased marketing of medicine to drive patient demandnot encourage it. http://www.bmj.com/content/345/bmj.e5128 False Economy BBC Radio 4 Today programme gives a huge PR boost to Circle. BBC Radio 4 Today programme gave a huge PR boost to Circle on 1st August. The Circle CEO, Ali Parsa, was interviewed on the reported improved care at Hinchingbrooke hospital since Circle took over the franchise. The problem is that much of what Parsa said was either speculative or aspiration and none of it was supported by evidence. Circle have no experience of running a large hospital with an A&E department and have not yet steered Hinchingbrooke through a winter, so it is too early to make any assessments on whether they have improved the hospital or not. Yet the BBC blithely repeat what is clearly a Press Release from the private healthcare company. The BBC online report says Regional NHS officials monitoring Circle say the company has made a good start, while warning that improvements at the hospital must be sustainable but it does not link to the statement and searches of the Strategic Health Authority (SHA) website return no results. Unattributed statements are not evidence, they are hearsay. The BBC go on to say Before the takeover, ministers had described the hospital as a clinical and financial basket case, it is true that Hinchingbrooke has and had poor finances (a historical debt of 40 million), but there is no evidence that it is a clinical basket case. The latest Annual Report (which covers ten months of the NHS administration and two months of Circles franchise) says that HSMR (the standardised mortality rate) is 77.8 compared to the national expected value of 100 (this is very good); C-diff cases are consistently below the SHA target and MRSA cases meet the national target. Other quality figures like reducing falls and medical errors are within the trusts target or reducing. These are not exceptional values for Hinchingbrooke because earlier annual reports show that the trust consistently does well on all of these clinical quality figures. You have to question why a minister made out that Hinchingbrooke has clinical problems when it hasnt, and you have to question why the BBC are reporting this without checking its veracity. Then we come to the finance situation. On the Today programme, Justin Webb, the interviewer, asks: you have got more people coming through the hospital, is that the key to be able to turn it around, or begin to? Parsa avoids the question by replying: partly it is that and then continued to talk about improving procurement. He had reason to avoid talking about patient numbers, because they are not going to plan. One point of Parsas 16 point improvement plan is to increase the number of patients treated each year by 5,000. This means increasing the number of elective (non-emergency) patients because it is much more difficult to make a financial surplus on treating an emergency patient. However, the finance report from June (remember, these are early figures) show that the trust is treating more emergency patients, and fewer elective patients than they had planned. Consequently the income from electives is almost 19% less than they hoped for. The finance report also says that for the first quarter of the financial year the trust generated a deficit of 2.3 million and this was 652,000 more than their financial plan. Clearly, their finances are not going to plan. Yet on the Today programme we were given the impression that Hinchingbrooke was doing well, and Parsa even said: the hospital should finish this [financial] year on a balanced book. You cannot deduce this on their first quarter results. There is no evidence that Circle will turn around the finances of Hinchingbrooke, yet the BBC allowed Ali Parsa to give the impression that they had changed the financial position. This is incredible PR for Circle delivered unchallenged by the BBC. http://falseeconomy.org.uk/blog/bbc-radio-4-today-programme-gives-a-huge-pr-boost-tocircle

Wendy Savage MBBCh, FRCOG, MSc(Public Health) Hon DSc 19,Vincent Terrace, London N1 8HN 020-7837-7635