PFI to bankrupt the NHS? Can anything be done?

[meditrina]

The costs are rocketing - and really stressing hospital budgets.

Not all PFI hospitals equally affected, but some sound in trouble. Paying more for this, when savings have to be found, is a nasty double whammy.

Some NHS Trusts have been badly managed financially for years. I suspect that the rent they pay on the PFI buildings is only part of the reason.

I thought it might not be the whole story!

But it does seem that this was another form of racking up debts that we won't be clear of until 2049.

The bigger picture that is emerging is that the civil servants appointed by the Labour govt to negotiate the terms of the PFI deals included too many guarantees of payment and tried to retain too much control rather than let the companies providing the buildings take the financial risk (which is the advantage of this kind of scheme). In short, they negotiated a bad deal - rather like the ones that negotiated the bank bail-outs without setting any conditions on bonuses & remuneration etc.

The story is a bit suss in places. I'm no fan of PFI but they mentioned the one in North Bristol which won't even be built until 2014 so how that can be causing them financial problems now I don't understand. The PFI charges don't start until the new building is handed over.

I understood that of the many PFI projects in place, about 42 were in difficulty and most others were expensive. I saw a minister on the lunchtime news yesterday challenged about a Bristol example, as Trust saying there was no problem with it: the Minister said the list was based on information submitted to DoH by Trusts and he was delighted to hear that that particular hospital was not in difficulty.

As this angle dropped off the news agenda by the evening news, it must a mean a non-story ie the Minister's version was correct and the Trust will need to take action to make sure it does not include such inaccuracies ever again when reporting to DoH. If Trusts cannot be relied on to produce accurate information, there is no hope whatsoever of getting proper governance and cost control.

CES: I don't think it's a case of whether they "let" the companies take the financial risk. There is no way a company would take that risk.

Of course companies would take the risk. If a developer builds a block of flats they're taking a risk that they will sell the flats or fill them with tenants. If a developer builds a hospital for a Trust, they're taking a far lower risk to start with because it's being built to order. There shouldn't have to be payment guarantees on top, which is what was written into the contract.

I was involved in some PFI negotiations, though not hospitals.
Back when they first came on the scene, economics meant they weren't such a bad idea - authorities didn't have up-front money to build vital buildings, but could predict roughly their income for the next 30 years, so negotiating a PFI deal like you would a mortgage was the only sensible option - the government would provide some funding if you took the PFI option for the rest.

Then certain costs went up and private funders simply didn't bid for the work (like developers deciding to stop building flats). Or there was only one bidder who would impose stringent conditions on what they were prepared to build and the amount they would get back over the 30-year maintenance contract for what services. I've heard in some cases the authority has had to start paying the contractor on a set date even when the facility isn't finished, which got clamped down on sharpish, but without a guarantee of a minimum level of payment, no private contractor would ever have got involved at all!

Thing is, however much recent governments have raved about 'competition', it's not there and it's impossible to create legal documents specific enough to cover every single aspect of what say a hospital does. There's a few new PFI hospitals where the delivery bay is too small for the standard NHS supply and catering trucks to get in, so the hospital have to pay more for everything to be delivered - but the size of doors was a level of detail not on the contract.

The 10-20% of turnover being to PFI providers sounds scary, but if a whole hospital is provided on a PFI basis, including all catering, cleaning, and maintencance staff including maintenance of all equipment, that could well represent 10-20% of the trust's budget. Hard to say if that's reasonable without more data.

See the Independent today for some new info on this; Article on Government's lies on PFI

The crux of the article is that the NHS trusts DIDN'T contact Andrew Lansley, they say it ISN'T the PFI that is causing them problems, it's the budget cuts they are being forced to make by Lansley.

I suspect this story is a preliminary story - so that when hospitals DO start going bankrupt and closing, the Government can say "Ah, it's all the fault of Labour", when the real reason is their cuts.

Some quotes from the article;

Hospitals across the country turned on the Health Secretary Andrew Lansley last night, accusing him of making misleading claims that parts of the NHS were "on the brink of financial collapse" for party political gain.

But when contacted by The Independent a number of NHS trusts on the list expressed bemusement and anger that they had been included, and said the first they knew of the supposed financial difficulties over PFI (private finance initiatives) was when they read about Mr Lansley's comments.

Privately some accused the Health Secretary of attempting to blame PFI for the wider problem of cuts to hospital budgets, which will require the NHS to save £20bn over the next four years. They also expressed concern that Mr Lansley was unnecessarily worrying patients that their local hospital was in danger of going bankrupt. "To suggest that our financial problems are about PFI is nonsense," said one trust executive. "And we certainly never contacted the Department to say that. The problems that we face are about having to cut our budgets by 4 per cent every year for the next four years."

Very interesting. Where's Edam?

So there were 22 trusts named, an unspecified few have denied they are in trouble (and does anyone know on what info Lansley/DoH based the comment in the first place?)

But this still leaves a large number of trusts in trouble.