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Hexham General Hospital

Category: Hospitals

"The hard facts of life are that PFI has delivered a good quality facility here which the NHS tried to do for 40 years and never succeeded. I think it is true to say that PFI broke that cycle of continued deferment of capital schemes. So I think the simple answer is come and see what PFI can do."

Paul Brayson, Head of PFI, Northumbria Healthcare NHS Trust

January, 2007

Officially opened by Prime Minister Tony Blair in January 2004, the state of the art £28 million new Hexham General Hospital replaces the original war-time emergency medical hospital which was made up of huts built during the second world war.

The Hospital is an acute general hospital serving around 70,000 people in the Tyne Valley, providing them with a stunning new environment in which improved services and facilities can be provided.

The PPP Forum interviewed Paul Brayson, Head of PFI at the Northumbria Healthcare NHS Trust.

Why was there a need for a new hospital?

Hexham General Hospital was initiated as a temporary military hospital during the second world war, which due to local lobbying was kept on as an NHS hospital when the NHS was created.

There was some limited investment over the next 40 years but it was still true to say that the original wartime huts still formed the bulk of the accommodation then. It was all single storey and all on quite a significant slope – it was really quite a challenge just for some people to negotiate the hospital. So by the time we got to 2001, it was a much loved institution but hopelessly inadequate for its purposes.

Ever since 1955 there had been plans afoot to rebuild the hospital as the wartime huts were still in use even though they had an original design life of 10/15 years. We needed to do something about it.”

Why was the new hospital not given the go-ahead for so many years?

Capital. Successive regimes from 1955 onwards undertook a series of reviews that always concluded that yes, a new hospital needed to be built at Hexham, but we can’t get the capital. Then every five years the story would be the same at the reviews – we still need a new hospital but we can’t get the capital, and so on…that was a nationwide problem and in some respects PFI as an initiative emerged as a response to that dilemma which was being repeated up and down the country. Hexham is not the only place in the country regrettably that has wartime huts – I’ve been to half a dozen sites up and down the country where the NHS has this dilemma of replacing clapped out Victorian accommodation. I think the private finance initiative has been key in breaking the cycle of: ‘yes we need it, but we just haven’t got the capital’.

Northumbria Healthcare Trust was created in 1999 (the largest Trust by geographical area in the country) and quickly concluded that the hospital should be redeveloped as an existing general hospital, formulated a formal business case and explored whether the scheme could be taken forward as a private finance initiative. All stakeholders and the Department of Health (DoH) agreed that they accepted the strategic case, accepted the clinical case and accepted that we can afford it – so we proceeded to the market.”

Was there a lot of interest in bidding for the project?

We had what we felt was a good response – we had about 12 or 13 bona fide consortia respond to the tender notice, we interviewed about 7 and we selected 3 to formally bid the scheme. Catalyst Healthcare was selected as the preferred partner, and we worked with them for about a further year to get to financial close.

All three bids were good – we genuinely got three robust bids. We were in the fortunate position that any of those three bids could have potentially been taken through to fruition – they were from bonafide contenders with a track record in delivering PFI projects. So we really picked what we thought was the best scheme for us. And for us that worked really very well. So in a period of two years we broke the cycle of forty years of prevarication. So you do have to say that PFI brought to Hexham a project which forty years of trying hadn’t delivered previously.”

How did the deal progress?

We successfully closed the deal, very much against the parameters that had been established early on. So that represented to us it was a good deal and a fair deal. The consortia did work with us well actually. There’s obviously a lot of work to be done in developing detailed clinical proposals. We had a highly iterative process whereby it was actually the nurses and clinicians on the ground who designed the facilities right down to locating coat hooks. So I think it’s true to say that most people ended up with facilities they were happy with. Most people genuinely felt they had got a fair deal and I think the facilities have stood the test of time. We’ve been living in them now for nearly three years – and most people most of the time are happy with what they’ve got. It has proved to be a successful project.”

How did you find the construction phase?

It’s not without its pressures. Any major undertaking like this does have its pinch points but I think it’s true to say we never fell out. We had some robust discussions but they were always satisfactorily resolved.

Soft services were excluded from this project, but the existing service providers still had to move from war-time huts to 21st century accommodation so it wasn’t without its pressures for them. But you’d have to say it was bedded down pretty quickly and we didn’t really have any problems.”

Did you feel that the project company and the Trust shared a common objective on this project?

Genuinely I think we did. It was delivered on time which I accept was no mean achievement with such a large undertaking - the NHS’s track record of delivering projects before PFI was patchy. That was regarded as a very successful result.”

How do you measure the project company’s performance on this project?

There is a formal performance monitoring regime which was established in line with national protocols. The project company is required to account for its performance on a month by month basis. So we have a formal structure that underpins that and that’s obviously supplemented by day to day relationships on the ground.

And I think it’s true to say those processes are working in a satisfactory manner. They’re not without the odd challenge and the odd pressure – we do make deductions for unavailability and where services dip below the necessary standards we do impose financial penalties. That does work and things do get fixed, but it’s not really about the money. We don’t really want the money we just want the service. The level of deductions is not significant – it’s the odd issue that tends to be picked up – and generally speaking we resolve things without it ever becoming a matter that precipitates the deduction mechanism.

Most things are attended to in the relevant contract periods. There is a well trained, well resourced team on site, so not surprisingly most of the time they do exactly what they’re supposed to do, and that’s the way the contract should work. So I think it’s fair to describe that sort of ongoing relationship as good – it’s working in a satisfactory manner, the parties speak to each other in an appropriate manner – and it is an appropriately robust commercial relationship. We’re in this for the long term.

Does the Trust benefit from the long-term nature of the contract?

I think we do. It gives us an element of security with respect to the property costs. The whole point of PFI is that we have successfully transferred a huge range of property risks that previously used to lie with the Trust. So if the roof leaks in ten years it’s not our problem, if the main boiler plant goes ‘pop’ tomorrow it’s not our problem. So that gets rid of all of those risk items associated with the property base that on other sites would have to be managed internally. And you have to say that this does make the task of managing clinical services on this site easier.

There is an issue, much talked about in the press, that we are locked into the deal for 30 years – and that can be both a good thing and a bad thing against a rapidly changing healthcare agenda. But to be honest, personally I always think it is a little unfair to run that argument because in the scenario where the Trust gets capital and builds something it’s equally as locked into those facilities – if you sink £30 million into the ground it’s there for 60 years. You can always demolish it if you want to and you can always leave a PFI deal if you want to. I think the concept of flexibility is much misunderstood in capital terms – I think in reality we’ve actually got as much flexibility within the PFI contract that in reality we do in any other building that we build.”

You have already undertaken some major variations. Have they gone well?

As you can see there is a fairly major variation going on out there at the moment! It is quite surprising really that only halfway through phase one we decided that the world had changed generally in the NHS sufficiently to warrant us reviewing quite severely the content of the second phase of the development – and we have managed to find a way through that process. The variation process has worked in the sense that there is a new building out there being delivered. You have to say that it isn’t easy – it isn’t easy to do a PFI variation, and I think the industry and the DoH acknowledges this as well. It is a very difficult process but when you think about what you’re trying to do I guess it’s always going to be difficult: we’ve effectively raised another £20 million of investment, so not surprisingly there is a great deal of discussion that needs to take place to secure development. I think there’s a risk in saying too easily that it’s too difficult – it’s always going to be difficult whichever way you do it. It is just a difficult subject.”

How are you responding to the changing healthcare environment?

It affects us and I think it’s true to say that phase three is partially a response to that changing agenda. It is as difficult as it’s always been to second guess what the future holds. The presence of a PFI contractor on-site I don’t think makes it any less easy or less difficult – we can respond to whatever the future holds. If we need to raise another £20 million in five years time then I guess having a PFI contractor on site will probably make that easier.”

Has the new hospital helped with recruitment?

I think it has helped but Hexham is a nice place to live. The fact that we have a brand new hospital in Hexham does make it an easier sell when we bring new senior medical staff around. When we take them up to the new theatres they are genuinely impressed. I think it’s fair to say that new facilities do make it easier to recruit people.

Are you happy with the design?

I think the fact that it does exactly what it’s supposed to do should not be overlooked. The design was led by clinicians and first and foremost the hospital does deliver a clinical solution. It’s also true to say that many people find the building surprisingly attractive. And credit to the architect and the construction team – they have delivered something which not only delivers exactly what it says on the tin, what it is supposed to do, but also is genuinely a pleasant environment to go into. I think when most people walk through the door of the hospital they’re surprised at the quality of the facilities that they’re faced with. It’s proved to be quite an achievement by all concerned.”

What would you say to the critics of PFI?

Come and see! I think we’d be happy to talk through our experience of dealing with it to any critics. The hard facts of life are that PFI has delivered a good quality facility here which the NHS tried to do for 40 years and never succeeded. I think it is true to say that PFI broke that cycle of continued deferment of capital schemes. So I think the simple answer is come and see what PFI can do.

I’ve done major schemes like this in the old days through capital funding – it wasn’t easy then, it was always a very hard process. People say PFI is difficult – well it is , but it always was difficult. They obviously don’t have a living memory of just how difficult it was to get capital schemes off the ground. And the simple fact is that PFI is delivering, and the old system didn’t.”