Page last updated at 08:15 GMT, Thursday, 23 February 2006

Is the NHS PFI empire crumbling?

By Nick Triggle
BBC News health reporter

Doubts are being raised about the future of hospitals which are being built using private money.

Billions of pounds have been spent on PFI projects to date, but many more are still in the pipeline. Is the rug set to be pulled from beneath their feet?

Patricia Hewitt
Patricia Hewitt is set to make a decision on the Barts PFI scheme soon

Sitting somewhere in Health Secretary Patricia Hewitt's in-tray are documents on the future of England's oldest hospital.

The 1.15bn plan to refurbish St Bartholomew's Hospital and its near neighbour in east London, the Royal London, was supposed to have been signed off last year.

But the doctors and officials at the hospitals are not the only ones on tenterhooks waiting for a decision.

If the health secretary puts the brakes on the PFI scheme, under which private companies build hospitals with NHS trusts repaying them over 25 to 40 years, it would raise serious doubts about the future of the other 47 in the pipeline.

Already a handful of other schemes are reaching critical points and are set to undergo reviews.

Ms Hewitt and her officials are looking at whether the Barts and the London scheme is affordable - an independent review has already established there is a need for the services.


Officials at the NHS trust believe they may be a victim of the wider problems gripping the NHS - one in four trusts failed to balance the books last year.

A spokeswoman said: "Our scheme has been costed and is affordable. We do not understand why there is a delay."

However, concerns have been raised that under payment by results - a new system of funding being rolled out whereby hospitals are paid per patient treated rather than given a lump sum based on past activity - NHS trusts may struggle to meet the costs of PFI.

Coupled with that, is the historic shift in care from hospitals to community services, such as super GP surgeries and outreach clinics, set out by a white paper last month, which will mean there is less work for hospitals to do.

St Bart's Hospital in Smithfield
Bart's Hospital is the oldest in the country

Chris Ham, a former Department of Health adviser and professor of health policy at Birmingham University, believes the projects nearing closure may be unsustainable in the current environment.

"Payment by results does not reflect capital outlay and we also have this movement away from hospitals. Things have to change.

"Either we will have less new hospitals, the same number but on a smaller scale or a new system of funding needs to be designed to cover PFI costs but that could be unfair on other hospitals."

And despite no decision on the Barts and the London scheme, the signs are that some of the predictions are coming true.

In December, the Queen Elizabeth Hospital in Woolwich declared itself technically bankrupt, citing PFI.

The Plymouth Hospitals Vanguard PFI Project, a 600m scheme to build a care centre for non-emergency patients and redevelop the Derriford Hospital, has already announced it will review the extension plans for the Derriford.


And the building of a 500m hospital in Birmingham has stalled as NHS managers await the government go-ahead despite 6m having already being invested in new roads and other infrastructure.

But there are also a host of other schemes waiting to sign deals with private sector partners that are being caught up in the logjam.

Regional health bosses are due to carry out reviews in the coming months into the value for money, affordability and need for about a half a dozen projects.

The Department for Health insists there is no problem, pointing out there was between 7bn and 9bn being invested in forthcoming hospital PFIs.

A spokesman said "The government's commitment to investment in health has not changed.

It is extremely important that those schemes that are close to completion are not jeopardised by a panic reaction
Nigel Edwards, of the NHS Confederation

"Schemes have not been left in limbo, we are currently applying the checks and balances announced in the operating manual to the business cases for projects approaching financial close."

But the industry remains unconvinced. Jonathan Hills, manager of the PPP Forum, the private sector lobby group, said there seemed to have been a change in tact as the projects in the pipeline amounted to about 12bn - at least 3bn more than the government was now saying.

"Something has to give," he added.

One director of a PFI project, which is at a much earlier stage to the trusts facing reviews, told the BBC that the major problem was the goalposts had changed.

"Many of these scheme were conceived before we had heard of payment by results and the white paper.

"Whereas we have had to factor these in all along and have had scrutiny of our plans that reflect that, some of the schemes that are further advanced have not. This could cause a problem."

But Nigel Edwards, director of policy at the NHS Confederation, which represents health service managers, said while there was a problem with the new funding system and services were being directed more towards the community, there was still a need for the hospitals.

He warned: "It is extremely important that those schemes that are close to completion are not jeopardised by a panic reaction to the review of a few high profile projects or the recently announced wider assessment of all PFI schemes."


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