Circle in deal to run Hinchingbrooke NHS hospital
A groundbreaking £1bn, 10-year deal for a private firm to run a struggling NHS hospital has been confirmed.
Circle is to take over Cambridgeshire's Hinchingbrooke Hospital in February - although it will stay in the NHS.
The deal will see Circle assume the financial risks of making the hospital more efficient and paying off its £40m of debts.
But fears have been raised it could pave the way for "wholesale transfers" of hospitals to the private sector.
There are a group of about 20 hospitals which have run into financial difficulties and Labour accused the government of wanting to see more of these deals under its shake-up of the health service.
The accusation was denied by ministers.
Nonetheless, the Circle deal is being seen as a significant step in the evolution of the health service.
Although private sector firms already operate units that treat NHS patients - such as hip replacement centres - the firm will become the first non-state provider to manage a full range of NHS district general hospital services.
The franchise deal with Circle was developed after concerns that the hospital had become unviable, and a local campaign to maintain services.
The company has to maintain services, including A&E and maternity, if they are wanted, although it is free to reduce staff numbers.
But any significant changes in services at the hospital will have to be agreed with the local NHS and the public will have to be consulted.John Lewis model
Dr Stephen Dunn, from the NHS in the East of England, said the hospital will continue to be paid at NHS rates for its work while it is being run by Circle.
"It's a hugely original deal - we've managed to avoid the possibility of closing the hospital. We've got a solution to the debt - and have plans that allow us to meet the efficiency challenges the NHS faces."
For the moment this deal is a one-off, but other hospitals are struggling financially. About 20 in England have been named by ministers as being unviable in their current form.
It follows a review which all NHS organisations in England have had to undertake of whether they can meet the financial standards required to be given the status of a foundation trust.
Some may try to merge with more successful nearby NHS hospital trusts. Others will watch what happens in Hinchingbrooke with interest.
If Circle manages to maintain the range and standards of care at Hinchingbrooke, but cut costs, that in itself could put pressure on NHS managers at other hospitals to do the same.
And, as this deal has been subjected to very detailed scrutiny by the Treasury, it could also mean that other similar contracts could be agreed more quickly.
Circle chief executive Ali Parsa accepted the company was taking on a challenge. He said the strength of its approach was in increasing the involvement of doctors and nurses.
"We want to create a John Lewis-style model with everyone who works there in charge of the hospital, letting them own the problems and solve them. We will try everything we can to make this small hospital viable - if we can how fantastic would that be?"
The deal has taken almost a year from the plans being sent to the government for approval, to the contract being given the go ahead. The approval for the tendering process began under the last Labour government.
Circle, like other independent health providers, has experience of providing planned care but not of running a full range of services including emergency and maternity care.
The deal is controversial and not all are convinced this is the only solution to keeping Hinchingbrooke open.
Public sector union Unison's head of health, Christina McAnea, said a new management team could have been found without putting a contract out to tender.
"We just don't accept there is no expertise within an organisation the size of the NHS, and to turn to the private sector which has a very patchy record in delivering these kind of services is an accident waiting to happen."
Shadow health minister Liz Kendall added: "Patients and the public will be deeply worried that they have seen this government's true vision for the future of our NHS with the wholesale transfer of entire hospitals to the private sector."
She added that the government's health bill "actively encourages" such moves.
But health minister Simon Burns said the move did not provide a "blueprint" and denied it represented a privatisation, pointing out that the staff would remain in the NHS as would the buildings.