Memorandum by South Manchester University
Hospitals NHS Trust (PS 52)
BRIEFING NOTE: WYTHENSHAWE HOSPITAL PFI
Wythenshawe hospital has recently
acquired a large new hospital wing and mental health unit through
a PFI involving £66 million private and £40 million
The NHS pays the private sector for
the use of the buildings and for provision of non-clinical support
services under a 35-year contract.
PFI has given us a much-needed new
hospital, delivering safer clinical care, within a timescale Treasury
funding would not have delivered.
The buildings are a success, being
delivered on time, to budget and to a high standard.
Some support services have improved
following private sector investment but others are not delivering
agreed quality standards.
We expect the building to remain
in good condition throughout the 35 years of the contract, when
it become NHS property.
Overall, the NHS is better off in
revenue terms as a result of the South Manchester restructuring.
Until September of 2001, South Manchester University
Hospitals services were split fairly evenly between two sites:
Wythenshawe and Withington. Our PFI allowed the development of
Wythenshawe as our A&E and inpatient centre, with all specialities
transferring to this site and able to cover any trauma demands,
24 hours a day 365 days of the year. A new Mental Health Unit
was also built through the PFI scheme. I have not commented on
the future development of the Withington hospital in this paper.
The main PFI scheme provided a new building
of some 396 beds and was linked to the existing hospital. The
arrangement included £40 million treasury funding for enabling
schemes and equipment, as well as £66 million private capital.
Our partners are McAlpine (builders), WS Atkins (maintenance),
Sodexho (hotel services) and Innisfree (equity). Funding came
primarily from the Bank of Scotland and Royal Bank of Scotland.
Our staff in maintenance and hotel services
transferred to our PFI partners employ up to 2.5 years ahead of
the new hospital being commissioned.
After literally years of negotiating, the deal
was signed in August '98 and we moved in between July and August
1.2 Structure of the PFI deal
Integral to our PFI was the "concession
agreement" covering the 35 years of our contract with our
PFI partners South Manchester Healthcare Ltd (SMH). Key points
the Trust pays SMH a monthly tariff
based on a formula adjusted for services being available and of
the new hospital passes to the ownership
of the trust, in good order, after 35 years;
during this period, SMH will maintain
both the old and new buildings at Wythenshawe, with ongoing replacement
and upgrade costs in the new building being SMH's responsibility;
SMH provide domestic, portering catering
and switchboard services;
specification and monitoring of services
is based largely on outcomes, not detailed tasks.
PFI DEAL AT
It is very early days to be assessing a 35 year
deal! Initial observations are:
2.1 The New Buildings
These are, so far, a big success:
delivered ahead of time;
accessed less than one per cent of
contingency capital, due to a rigorous process to agree specifications
both before and during the building process;
functionally very good, partly due
to full involvement of clinical users in the specification process;
handsome exterior, if not of significant
very good build quality, specified
and monitored not just by the Trust's advisors, but by those in
SMH who would need to clean, repair and upgrade it for 35 years;
replacement/refurbishment costs are
covered by the tariff, which should keep the new hospital looking
The quality of those services we've contracted
out to our PFI partners has been mixed:
laundry and linen services and catering
have improved following capital investment from SMH;
domestic services leave a lot to
be desired and agreed standards are repeatedly not met. The teeth
we thought the concession agreement gave us to address this are,
in practice, not easy to apply. Nevertheless, we are now in the
formal stages of dispute/rectification;
contrary to expectation, the Trust
is still spending significant management time on these matters;
we need to refine our ideas as to
how we manage a 35 year partnership and design contracts to support
2.3 Patient care
The hospital has delivered a number of benefits,
safer clinical services;
elimination of patient transfers
between hospitals; and
easier infection control.
Some of our constituents however, are unhappy
about the increased travelling time from Withington to Wythenshawe,
not withstanding a large number of clinics, screening and other
outpatient services remaining at Withington. The Manchester Metro
will arrive in this area fairly soon, but meanwhile, public transport
has not matched expectations.
We planned for a significant move of patients
from the Withington area to other nearby hospitals and, as a result,
designed the new hospital with fewer beds. This transfer is slow
to happen and we are therefore under significant pressure.
The negotiations and discussion with those staff
who transferred from the NHS to SMH were, quite rightly, extensive.
The biggest issue was over pension entitlements but we did finally
bring this to a successful conclusion. Staff transfers eventually
went smoothly, reflecting credit on all involved.
2.5 Financial issues
The revenue implications of the new hospital,
amounting to some £18 million pa have been covered by redeployment
of previous charges for capital, depreciation, and service, plus
savings. We have also released savings for investment elsewhere
in the system: some funds follow patients who will attend other
hospitals for treatment. Overall, the NHS is better off in revenue
terms as a result of the South Manchester restructuring.
Our business case demonstrated value for money
in a PFI scheme over an entirely Treasury funded option. Ultimately,
this was justified through the benefits of an earlier delivery
of the PFI solution.
We have also released a large and potentially
valuable land site for sale.
was very protracted, eight years
from the start of the consultation process to signing the deal;
was expensive in legal fees;
involved the NHS in areas beyond
required specialist advisors;
needed a lot of NHS time from a wide
range of staff;
despite very robust negotiations,
we have maintained a positive interaction with SMH and this pays
dividends: the relationship must be a partnership as we're almost
certainly stuck with each other for 35 years!
management of services provided by
SMH continues to occupy a great deal of NHS staff time at all
levels within the organisation.
It is too early to be definitive about the strengths
and weaknesses of a 35-year contract but many clinicians, managers
and staff feel relieved and very pleased that we have our new
hospital and that the move has taken place without major mishap!
This has taken some of the risk and stress out of clinical care
that had been caused by delivering services across two sites.
Initial observations are that a PFI can deliver
quickly, to budget, a very attractive and functional new hospital,
particularly if supported by staff input into the design and specification
at every step of the way. We expect the new hospital to stay in
good condition for three reasons: the duty of rectifying building
defects rests with SMH. Further, the specification of the building
was watched over not only by the Trust but by those members of
the partnership who would be cleaning and maintaining it for 35
years. Finally responsibility for "life cycle replacement
costs" (upgrades and refurbishment) is with SMH and is covered
by the tariff. This is in contract to NHS ownership, where lack
of capital frequently led to lack of routine refurbishment of
The revenue to allow our PFI to deliver savings
was expected to come from several sources, particularly:
reconfiguration of existing services;
savings from duplication of staff
functions across two sites;
savings on capital and estates charges
generated by moving onto a single site;
fewer beds, due to an expectation
of a move of patients elsewhere plus a reduced length of stay.
Most of these plans have been delivered. We
are, however, under pressure at the moment because the demand
for acute beds exceeds that available. There was an underlying
problem here pre PFI, but it's been exacerbated because patients
have not (yet) moved to other Trusts in the numbers planned.
NHS staff from maintenance, portering, switchboard
and domestic services have transferred to the employ of SMH. Some
services have had capital investment that was not forthcoming
from the NHS and are providing a generally higher quality product.
Others are failing to deliver to specified service standards,
due to poor management, difficulties in recruiting, inheriting
a mediocre service, and an expansion in NHS requirements. An assumption
that we would be able to safely leave all these services to the
care of the private sector has proved erroneous! The contract
arrangements that looked fine on paper are proving somewhat inflexible.
We are still finding our way, with our partners, through the implications
of a 35 year public/private partnership and finding different
ways of managing the relationship: we believe, however, that this
must be based on goodwill and co-operation.