Takeover: tackling failing NHS hospitals


This report is embargoed until 0001 hours Friday 28 September 2012

This report, written by Paul Corrigan, John Higton and Simon Morioka finds that the Government should drive the takeover of up to 30 NHS hospitals in this Parliament. Instead of encouraging mergers between failing NHS hospitals, private companies and the best NHS hospitals, should take over troubled hospitals because that is the surest way to turn them around.

The report authors argue “It is possible to develop a better hospital from the core of a failing one, but this will only be achieved by a profound and systemic change to the structure of the hospital. And the surest way of achieving this, learning from recent NHS history, is not a merger of equals, but the process whereby a very successful hospital takes over a failing one.”

This year Circle became the first private company to take over the management of Hinchingbrooke, a failing NHS hospital in Cambridgeshire. South London Healthcare NHS Trust has been put into administration and next month the administrator’s report will be published. One obvious conclusion would be for the hospital to be disaggregated and its constituent parts taken over.

Takeovers only work when the acquiring organisation changes the business model and the working practices of the staff. The report draws up a four-point plan for Government to create the conditions for successful takeovers:

• Admit that there are a significant number of failing hospitals. Politicians routinely make political capital by campaigning to save hospitals. Instead they should spend their time criticising the same hospitals for not providing much better services.

• Stop the policy of merging failing hospitals with other failing hospitals. “Supporting mergers between unsuccessful NHS hospitals because you cannot find anything else to do with them is not going to suddenly make mergers a successful method of improving failing hospitals.”

• Incentivise organisations to take over failing NHS hospitals. Success will depend on the ability to attract strong NHS Foundation Trusts and the private sector, in England and abroad. Reforms have already been introduced that should encourage takeovers. Provisions in the Health and Social Care Act now mean that Foundation Trusts no longer have to disestablish themselves to acquire another organisation. They would still have to should they merge.

• Make it easier for the organisation that takes over a failing hospital to do the restructuring that will improve services. The Government should signal its support for radical change. This will pave the way for hospitals to sell the idea to their clinicians and local populations.

Chains of hospitals run by the best NHS Foundation Trusts and private companies would develop centres of clinical excellence with strong brands. They would cut costs and improve the quality of the care delivered to patients, spreading best practice and achieving economies of scale.

Professor Corrigan said: “Sooner or later, the Government is going to have to acknowledge both the clinical and economic case for radical change amongst NHS hospitals. The sooner it does so, the easier for local change to be pursued with a prospect of success.”

Reaction

In response to the report Lord Howe, Parliamentary Under-Secretary of State at the Department of Health said: “We need to focus on the most important issue of all: patients getting the sustainable, high-quality services they need. There isn’t a one-size-fits-all answer to this problem. Each NHS trust will need a tailored solution and different levels of support. In some cases that could involve private-sector expertise, but in others the NHS itself will be the best solution.”

A Labour Party spokesperson argued: “Suggesting that mass private-sector takeovers are the answer is wrong-headed – the Government needs to get a grip NHS finances. The Government’s NHS budget cuts and costly re-organisation have plunged hospitals into financial chaos. Patient care should not suffer as the Government inflicts this chaos on the health service and ministers should work with struggling trusts, not against them.”

Mike Farrar CBE, the Chief Executive of the NHS Confederation, claimed that “Addressing the problems some trusts are facing will require more than mergers and takeovers. The whole system has to work, not just its individual parts. The reality is that many of these trusts face significant financial problems because of the way local services are designed, not simply because of poor management. To really tackle the problem we need a fundamental redesign of the way services are provided.”

Media coverage

• Appearing on the Today programme this morning, Professor Corrigan said: “21 hospitals are clinically and financially unsustainable and the Government needs a policy for dealing with them”. He argued that “it would be profoundly ideological and wrong to say no to the private sector…for a crisis of this size rejecting the possibility of the private sector being involved is a mistake.”

• In an blog for The Daily Telegraph Professor Corrigan writes “Yesterday’s BBC poll showed that the public is pragmatic: over half of respondents said it did not matter whether private firms provided care as long as it was free of charge. In time, chains of hospitals could be run by the best NHS Foundation Trusts and private companies which would develop centres of clinical excellence with strong brands.”

• The Financial Times reports that “Forcing underperforming hospitals to merge with others in the same category simply creates larger underperforming hospitals, Paul Corrigan, says in a pamphlet entitled Takeover, published by Reform, the pro-market think tank.”

• An article for The Daily Telegraph quotes Professor Corrigan who said “It is possible to develop a better hospital from the core of a failing one, but this will only be achieved by a profound and systemic change to the structure of the hospital. And the surest way of achieving this, learning from recent NHS history, is not a merger of equals, but the process whereby a very successful hospital takes over a failing one.”

• The Guardian reports that “Private companies should be allowed to bid to run up to 30 NHS hospitals – and begin by taking over those the Department of Health acknowledges are “clinically and financially unsustainable”. The article quotes Professor Corrigan who said: “I think that when Labour come to power they will be faced with a very large problem [of hospitals failing] and no extra resources to deal with it. They will recognise they need all the help they can get.”

• In its coverage of the report The Times reports that “merging hospitals will not work and only ‘profound and systematic change’ imposed from the outside can improve them.”

• City A.M. also comments on the report and quotes Professor Corrigan: “We’re trying to learn from the City so a successful takeover needs to be tough, using expertise to bring about the amount of change required to turn a hospital around.”

• Takeover was also covered in Public Finance.

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