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Serco and pathology: the cost of profit in England's NHS

Serco was pleased to announce last week that GSTS Pathology – its joint venture with two London hospitals - was back in profit. But newly-released accounts show that, even after lab closures and accusations of cutting corners, GSTS is not yet the success story its owners like to suggest.

GSTS Pathology, the joint venture between outsourcing giant Serco and King’s, Guy’s and St Thomas' hospitals, made the somewhat underwhelming announcement last week that it hadn't lost money in 2012. A profit of £300,000 may not be much to shout about but it's a lot better than the £6 million loss the venture had booked the previous year.

It comes after what GSTS calls a “rigorous cost improvement programme designed to drive permanent and sustainable operational efficiencies” in the previously-publicly-run services, which conduct more than 14 million pathology tests a year and are a crucial part of modern medicine. CEO Richard Jones described the previous two years as a “painful but necessary stage in our journey” in an email to staff, many of whom have complained about the toll the hunt for profit is taking on the quality of service provided.

In Bedford hospital – where GSTS has also taken over the pathology labs – minutes of clinical governance meetings, obtained through Freedom of Information disclosures earlier this year, show several senior pathologists raising a range of issues. One lead consultant worried that there had been an “unacceptable” increase in the number of errors and incidents. He complained that GSTS was “cutting corners” and that “with the decrease in the number of qualified senior staff there is a limit to the safe provision of a quality service”.[1]

In another example, the clinical director of the whole Bedford service also “expressed concerns” in 2011 that there was “little cross cover” for infection control after GSTS management had rejected requests to hire a suitably qualified consultant because there was no “business case” for it. When I asked Serco about this, a spokesperson told me the company's priority is “to deliver a high quality of service and to make investments into ongoing service developments. Since the Joint Venture was established four years ago, the quality of service to our NHS customers has improved across the organisation”.

Another of the “efficiencies” was last year's closure of St Thomas' 45-year old toxicology laboratory. The six senior scientists made redundant warned at the time that this would leave the south of England without a comprehensive clinical toxicology provision service. The lab took referrals for the treatment of severe brain injuries from hospitals including Great Ormond Street and was one of the few labs in the UK capable of specialist tests for substances such as ethylene glycol, a component of anti-freeze that causes severe problems if ingested.

The Association for Clinical Biochemistry has since reported that samples now have to be sent “by taxi and courier” to Birmingham and Cardiff, the closest labs with equivalent expertise. I asked Serco how many samples are being sent by taxi each month but was simply told there are “appropriate transportation arrangements to deliver the required results to agreed timescales and standards”.

Previous FOI disclosures from other labs in St Thomas' showed that GSTS missed agreed performance targets 46 times in 2011, with “critical risk levels” breached 14 times. Clinical “incidents” recorded in 2012 included one patient being given “inappropriate blood” and kidney damage results that were calculated incorrectly.

But if the GSTS journey has been painful for patients and staff, the venture's latest accounts suggest Serco has felt the pinch more than the outsourcing giant would have liked.

While GSTS did declare a small profit in 2012, this was only after a “revenue contribution” from Serco of £1.3 million. Without this, even with all the lab cuts, GSTS would have posted another year of loss.

Serco confirmed to me that it does not expect GSTS to repay this contribution and that all GSTS' members had agreed “appropriate investments” to support the organisation’s transformation plan in 2011. But Serco could have loaned money – as it and the hospitals have done in the past - and it seems an unusual move for a company not known for giving something for nothing (Serco does not appear to have received any services from GSTS in return for the contribution). Serco had also given £2.7 million in the same way in 2011. The suspicion is that its hospital partners are fighting their corners and demanding Serco put more money in than had been agreed in the original deal, which seemed very generous to the outsourcer.

But whatever the reason, the revenue contribution means GSTS can say it is back in the black and a sustainable business that can be trusted to run more pathology services across the UK.

This is important as GSTS needs to expand quickly. The long term business plan rests on the implementation of the reforms to pathology services in England proposed by healthcare investor Lord Patrick Carter in 2008. The Carter Review, which GSTS never misses an opportunity to name-check, envisages the bulk of tests being processed in big, centralised labs (or 'hubs', in the jargon), with many individual hospitals' labs closed down.

All seemed on track earlier this year when the Bedford labs were part of a consortium chosen to handle blood tests across Essex and Hertfordshire but the plans were suspended after a campaign by doctors and local residents. A petition launched by Essex newspaper The Echo gained signatures from almost 20,000 readers, while more than 100 hospital consultants wrote to Health Secretary Jeremy Hunt warning of the dangers caused by the delay in transporting patients' blood and tissue samples up to 90 miles for testing (which must make toxicology patients feel even better about the 100+ mile journey their cells will take).

Further consolidation of GSTS’ London labs remains delayed for over six months by the inability of its supposedly cutting-edge IT team to get the necessary computer system up and running. Many of St Thomas' services will be transferred over to King's, where the labs had a £8 million makeover before GSTS took over. There will be more redundancies and King's staff worry the labs “simply won't cope” with the increased workload.

But more opportunities will arise as the reforms continue. More services are being tendered and there is increasing interest from other companies, including Integrated Pathology Partnerships (co-owned by rival outsourcer Sodexo), The Doctors Laboratory and European firm Synlab.

The presence of these rivals will no doubt encourage GSTS to become more competitive and there will be further “efficiency savings” of £4 million by the end of 2013. The GSTS journey may be about to get even more painful.



[1] See Private Eye, 22/3/13

About the author

Richard Whittell works for Corporate Watch. He is the co-author of Resisting Reform: Water Profits and Democracy (Sage, 2010) and Dodgy Development: Films and Interviews Challenging British Aid in India (Corporate Watch, 2011)


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