Saturday, November 12, 2011

Why We Should Celebrate Circle Healthcare's Takeover of Hinchinbrooke

BBCs news this week was full of the story of 'private company' Circle Healthcare Ltd taking over NHS services. It's CEO Ali Parsa was challenged by Justin Webb on why it requires an outside organisation to make changes which could surey just be introduced by NHS without the need for a new provider.

Webb's question actually cuts to the heart of the matter here. The NHS can't do this. There is abundant evidence to show that it cannot deliver simple economies and is endemically incapable of dealing with lower growth in resource. The NHS could not, for years, balance the books at Hinchinbrooke. This is why, in desperation, it was tendered out. Without this, it is pretty clear that Hinchinbrooke was going to be downscaled or worse.

I say this because I have a bit of an interest. Hinchinbrooke isn't my local hospital but I know it quite well. It serves a series of small towns between Peterborough and Cambridge, both of which are important regional hospitals. It fits into that category of 'district general hospital (DGH)', which most of us rely upon.

The challenge is that the 'business model' for DGHs is under pressure from the double-whammy of regional specialist centres and the need for more primary, community and preventative services. Put simply, if I get cancer, I go to my regional centre (Addenbrookes). For most other things I go to my new-fangled GP surgery where they even perform minor ops. My local DGH gets caught in the pincer.

So, politics aside, this is a difficult business to be in. Which is why poor providers like Hinchinbrooke NHS Trust get found out very quickly. Hence, if we want DGHs to exist, we need for new providers with fresh approaches. The reason I am glad that Circle won it was that the delivery side of the business is half employee owned. The BBC, in its usual binary way, refused to focus on this, instead stressing the fact that it is 50% privately owned and backed by hedge funds.

And how else, I ask, is Circle to find the necessary funding to get Hinchinbrooke off its arse and working properly I wonder? The government is bust, in case nobody noticed. Circle have been able to bring new money to table. In addition, through its co-ownership model it is also bringing employees own energy to the equation, as co-owners of the company. Study after study attests to the benefits even of part-ownership like this.

Surely it's a time to set aside our ancient anxieties about risks and try new providers like Circle? Remember, there is nothing 'safe' in a failing NHS hospital which is losing money, probably causing more harm than it should and on the brink of closure. And there are savings to make, there always are. People who don't deal much with the NHS don't realise how god-awful much of the management practice is, how 1970s it all is internally and just how much scope there is for savings.

I have seen it all first hand and much of it is quite repellent: brutal, authoritarian, super-bureaucratic and self-interested. If Circle can raise standards, balance the books and raise productivity then their staff and investors are welcome to a profit.


Anonymous said...


@Count_Stuff said...

If Hinchinbrooke is caught in the pincer between increased community 'closer to home' provision and specialist provision, surely the best solution would be to close it or reduce it's services instead of throwing good money after bad, wherever it comes from? But that is political suicide and almost impossible to achieve as the local population and media strenuously defend the right to have a local hospital even if they don't use it.

richard.blogger said...


"The NHS could not, for years, balance the books at Hinchinbrooke."

Indeed, and I recommend that you ask why, and address that issue first.

The reason is that the hospital (and the local PCT) have been chronically underfunded through the East of England's (the local SHA) policy of channelling NHS money to private providers. Hinchingbrooke has had to serve an ever decreasing market. That market is decreasing at a rapid pace with the recent decision from EoE to outsource £300m of whole care pathways out to the private sector. The solution to this problem is to stop the privatisation of services by the SHA and allow Hinchingbrooke to do what it was set up to do: provide NHS services for NHS patients.

Your adolation of Circle is bizarre. Look at the facts. Circle have no experience of running a hospital this large; they have no experience of running a hospital with a maternity unit or a paediatric unit; they have no experience of running a hospital with an A&E. Simply put: Circle do not have the experience. So why hand a contract like this to amateurs? It is a bit like taking the manager of a Conference league club and asking them to run Manchester United. They would love to have a try, but would you really want to take the risk? We have been here before. In 2003 the same experiment (of replacing the management with private sector managers) was tried at Good Hope Hospital in Birmingham. It failed. All of this means that the chances of Circle being able to run Hinchingbrooke are close to zero.

"My local DGH gets caught in the pincer."

Sorry, no. Let me explain why. First you say "if I get cancer, I go to my regional centre (Addenbrookes)". This is true if you have a rare cancer or a cancer that requires major surgery. For most other cancers your DGH can (and should) treat you. Then you say "for most other things I go to my new-fangled GP surgery where they even perform minor ops", again you are partially right. However, you have missed out everything in between, and there is a lot in between. The most widely performed operation is cataract removal. I will be rather surprised if your "new fangled GP surgery" has the equipment or expertise to perform this operation. You will not go to a regional centre for the operation either (they are not designed for that). This is the bread-and-butter work of DGHs.

Cataracts, hips and knees. If you have a problem with any of these, you will go to a DGH. Or a private hospital. Let me repeat that: *or a private hospital*. See the problem? Circle are such a private provider. They provide hips and knees at their Nottingham treatment centre for NHS patients, at a price that exceeds the money paid to NHS hospitals like Hinchingbrooke. Nottingham patients go to the Circle treatment centre rather than the local NHS hospital, taking the work from that NHS hospital. The income of the NHS hospital falls. Do you see the problem?

"The reason I am glad that Circle won it was that the delivery side of the business is half employee owned."

Naive. The "half-owned" is a minority and Circle are very clear that the majority owner (the profit making Circle Holdings) will always make the business decisions. The "employee ownership" is the emperor's new clothes. If Circle truely wanted to be "employee owned" then it would do exactly that: make itself 100% employee owned. Or if they wanted a socially minded private sector partner, then they could have put together a package where the employees determine the business direction and the private partner simply takes a share of the profits based on their investment. This is not the case in Circle: the private sector owners run the company. It is naive to think of Circle as being a mutual. It is very much *not* a mutual. [cont...]

richard.blogger said...


"And how else, I ask, is Circle to find the necessary funding to get Hinchinbrooke off its arse and working properly I wonder?"

Simple. Tell EoE that NHS patients should go to NHS hospitals. Ali Parsa has actually pointed out that this is the main problem: when he was handed the contract he said that there are 5000 patients living within 5 miles of Hinchingbrooke that do not use the hospital and he wanted to change this. Why is this the case? It is because they have been sent to private hospitals. Stop that and Hinchingbrooke can do the work it was built to do: treat the NHS patients in that community. The problem is that there is not the political will to reverse the privatisation of the NHS that started under Blair and has accelerated under Cameron. Parsa will find that those 5000 patients will continue to go to the NHS funded private hospitals. As I said above, Circle will fail in Hinchingbrooke.

"The government is bust, in case nobody noticed."

No it is not. I don't want to go down the route of pointing out the loans we have made to Ireland and the recent increases in contributions to the IMF to bail out the Eurozone means that when we want to we *can* find the money (I won't because basically because I recognise the need for these bailouts) but it does show that the UK isn't, and never has been, bust. The UK spends under 10% of its GDP on healthcare. Germany spends 14% of a very much larger GDP on healthcare. Germany is not bankrupt because of its higher spending on healthcare. Until we get to the German level no one can ever say that we cannot spend more on healthcare. We can.

"Circle have been able to bring new money to table."

What money? Have they said they will wipe out the £40m debt with the money they recently got from their share offering? (Clue: they need that money for their private hospitals they are planning: Reading, Edinburgh, Warwick some of which have been on hold for a long while due to Circle's incompetence.) No. Circle will invest very little in Hinchingbrooke and whatever they do invest will be on the balance sheet and hence will have to come from future surpluses. Remember that all hospitals are businesses and have been since the Internal Market was introduced. It is naive to think that Circle will put any more in than they can take out.

"I have seen it all first hand and much of it is quite repellent: brutal, authoritarian, super-bureaucratic and self-interested."

And I have seen the other side. I have seen the social enterprise side, NHS managers trying to provide a complex, comprehensive service with inadequate resources. Managers that are daily faced with an attitude from patients and the government that they have an entitlement to a gold-plated service that costs a peppercorn to provide. Your comments show quite clearly that you do not have much experience in the supply side of the NHS.

Paul said...


Geof Cox said...

I find myself a bit 'on the fence' in this exchange, which is odd because I have both worked on many public service transformations to social enterprise over the last 20 years, including a number of NHS services, and recently spent a lot of time in Hinchingbrooke Hospital. It's my Dad's local – he's 85 and has 17 on-going health conditions. I was there with him this week again precisely for a cataract operation.

Much of the writing here feels to me like marshaling arguments around already-politically-decided positions, rather than a genuine search for improved service delivery. In my own work I try to approach things in a rather different way: starting with the question 'how do we transform this service for the better' and following through the answers to this question wherever they lead.

Social enterprise, understood not as a kind of structure, but as the use of business models and methods to achieve a social benefit, is often part of the answer. Sometimes, introducing social enterprise into the existing structure can work – for example by enabling staff to be, precisely, more enterprising. But in my experience in many public sector organisations poor management and organisational culture is so entrenched that in fact a new organisation is needed to enable the depth of change required. And it's also my experience that staff actually engaged in solving the problem of how to transform their service for the better usually come to this view themselves – while distant managers and trade union officials remain equally entrenched in their already-politically-decided positions.

So what of Hinchingbrooke? Well this much I know:
There are some really good people there, but oh so obviously struggling with poor management and inadequate systems – and believe me I could give many examples of this that are not explicable in terms of too-few-patients or too-little-cash. Craig is probably right that the problems with management and organisational culture are too profound to be solved within the existing organisational framework, and it's notable that it is precisely this point that Richard fails to address adequately. On the other hand many of Richard's points are substantial, and I share his concern about the Circle solution – first of course because it has not come from the staff themselves, as the social enterprise developments I've worked with have – boy do they have a lot of hearts and minds stuff to do – and I suspect they don't really understand the culture change issues themselves - but also because of the sustainability question: what will we be left with 10 years down the line when the current contract runs out, or sooner, if Circle does indeed fail?

Anonymous said...

Its strange that Craig Dearden-Philips is such an authority on health care considering the failing of the organisation(speaking up!!) he holds up an an example of hows things to should be done.