Bart’s: a flagship hits the rocks of PFI

The biggest health trust in England - the PFI-indebted Barts - has been put into 'special measures' after inspectors found it was running dangerously short-staffed and overcrowded hospitals. What does this mean for the future of East London's hopsitals?

John Lister
18 March 2015
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Bart’s Health - the biggest health trust in England - has been placed in ‘special measures’, it was announced yesterday.

After a damning Care Quality Commission report highlighting short-staffing and bullying at its Whipps Cross Hospital site the giant Trust has been labelled as faiilng and handed over to - no doubt - yet more hordes of costly management consultants who know nothing and care less about the NHS, but merely seek ways of slashing spending to put the books in balance.

The internationally known trust has a turnover of £1.2 billion a year. But since the beginning of January it has lost its Finance Director, its chief nurse, its chief executive and its Chair. 

The Trust is deep in debt, sinking deeper, with projected deficits for 2014-15 rocketing upwards from £43m at the end of December to £93m, according to its February board papers – or even as much as £100 million, according to the Health Service Journal. It’s struggling to recruit and retain nursing and other staff – and in the meantime is spending more than any other English trust on agency staff.

The financial problem has been a ticking time-bomb beneath the surface ever since the then Bart’s and the London Hospital Trust was given the go-ahead in 2006 to sign up for the costly £1.1 billion scheme to redevelop both Bart’s and the Royal London, financed under the ruinously expensive Private Finance Initiative (PFI). Believe it or not, the £1.1 billion scheme was in fact a scaled down version of the original plan, which had mushroomed in size to a staggering £1.9 billion.

Patricia Hewitt - who had rejected the £1.9 billion plan - gave the nod to a plan which would mothball 250 beds – 20 percent of the planned capacity. Three floors of the new buildings were to be built, only to be “shelled” (left empty) to reduce the cost.

Like other, smaller PFI schemes, the actual cost to the Trust would not be £1.1 billion, but much more, with a legally-binding contract stipulating inflation-linked instalments, rising every year, for the next 35 years. The “unitary charge” payments for both the building and for non-clinical support services started high at £109m per year – and keep on rising, regardless of how much revenue is flowing into the Trust.

Treasury figures show that the PFI development eventually cost £1.15 billion: so far £675m has been paid back, but another 33 years of payments to come will cost at the very least £6.5 billion more to 2048.

Of course the contract was signed back in the midst of Labour’s year on year increases in NHS funding, when it seemed that the good times might go on for ever. But in the aftermath of the banking crash and the abrupt turn to public sector austerity to pay for the bank bail-out, the unitary charges that would have to be paid began to seem much less manageable. So as the new buildings came into service in 2012, the Trust which included two major hospitals in London’s East End – the historic St Bartholomews (Barts) Hospital itself in Smithfield, and the newly rebuilt Royal London Hospital in Whitechapel. And it took over two busy general hospitals further out in Newham and Whipps Cross.

The inclusion of the combined turnover of £413m from these two hospitals effectively expanded the enlarged Barts Health’s  total revenue by over 50%, and brought in the prospect of more income to the Trust from Waltham Forest and Newham. Immediately, therefore, the PFI payments appeared to reduce as a proportion of trust turnover, from 16% of Bart’s and the London, to a less scary but still unaffordable 11% of the Barts Health budget.

But under the pressure of the longest-ever freeze on NHS spending, which could continue at least until 2021, and plans by Clinical Commissioning Groups for even more massive savings in the next few years, Barts financial plight has steadily worsened.

The Trust has been left with no leeway to deal with future financial pressures. The tariff price paid for each treatment delivered to patients is being cut by up to 4% each year. The local Commissioning Groups attempt crude ways of limiting the numbers seeking hospital treatment , including imposing hefty fines on Trusts – like Barts Health – which ended up treating more than the planned numbers of A&E patients, or where patients wait beyond the target time in A&E

Since 2010, the start of the longest-ever freeze in real terms spending on the NHS, the plight of Barts Health has worsened. The quest for cost savings has driven managers into short-sighted moves, such as downbanding experienced nursing staff, cutting services and quality of care. And impatient managers, trying to dragoon staff into working harder for less, and fearful that they might face angry local reaction if their cash-saving plans were publicly known, cracked down on any sign of dissent.

The bulk of the cuts could be expected to fall on Whipps Cross and Newham, since these sites are predominantly NHS owned, allowing buildings to be closed or land to be sold off, whereas any cuts in service in the new hospitals would still leave the steadily rising unitary PFI charge to be paid.

In the summer of 2013 UNISON Whipps Cross branch chair Charlotte Monro, with 26 years of unblemished service to the NHS, told the council’s scrutiny committee of her fears for older people’s services. She was suspended and then sacked on trumped-up allegations: the tribunal case over her sacking is still dragging on.

But more stories of bullying and intimidation of staff at Whipps Cross and elsewhere in the Trust have continued. Last year Barts Health commissioned a review by Professor Duncan Lewis. His highly critical report, presented to the Board last November, identified bullying and race discrimination as key issues, and no apparent action against guilty managers.

But not enough has changed on the ground. Staff fears of speaking out were a factor in the critical CQC reports. At the February 2015 board meeting, the (now resigned) Chief Executive Peter Morris, who has clearly not recognised the impact of his Trust’s dismissal of Ms Monro, said:

“It was […] very concerning to hear from the CQC that some staff were afraid to speak to them for fear of 'repercussions'. This echoes from earlier inspections where some staff had reported fears about raising concerns. “

There always was a supreme irony in building one of the world’s most extravagant and costly hospitals in one of the most deprived boroughs in England. Now as the need for healthcare continues to increase, the Trust’s future is increasingly bleak.

The East London Clinical Commissioning Groups have drawn up a strategy “Transforming Services, Changing Lives”. It starts from the need for the CCGs to make savings of £128m over five years – but notes that local NHS trusts are facing much bigger proportional savings targets totalling £434m, of which £324m has to come from Barts Health.

The plan envisages this requiring more “productivity” increases, alongside cuts, closures and sale of hospital sites – and this inevitably means cuts and closures in Whipps Cross, Newham and the London Chest Hospital:

“Of the £324m of savings required, it is estimated that approximately £200m could be achieved through productivity improvements, and a further £38m through better recovery of income. […] Better productivity will not achieve all the savings required, so there will be a need to make savings from other initiatives such as reconfiguration of services and rationalisation of estates.” (p54)

In desperation the Barts Health board has been splashing out £500,000 per month on management consultants – £7m in the 14 months to December, including £4.85m to PwC, the accountants who gave the nod to the equally disastrous Peterborough Hospital PFI scheme (they were then invited back to mop up the mess there, too).

As Barts’ deficits keep mounting up and the pressures on the Trust keep growing, many will feel that this is throwing good money after bad.

Coming after this sorry record of failure, it’s not at all clear what “special measures” could achieve to allow the trust to escape from the bottomless pit of PFI. The proposals to strengthen management at Whipps Cross suggests one way forward might be unpicking the merger.

At the end of the day the only way out for Barts is for government to step in and force a renegotiation of the PFI contract to reduce payments to a fair and affordable level, or a debt-laden flagship hospital project could soon drag down health services for over a million Londoners.

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