Editorial Friday 9 January 2015: Circling the plughole ends, as the Hinchingbrooke contract goes down the drain

To the enormous surprise of absolutely no-one with a hint of knowledge of what's happening in the NHS, Circle today anounced that they are handing back the management of Hinchingbrooke to the NHS Trust Development Authority.

Circle - first touted as a workers' co-operative, and latterly an 87.6% hedge-fund-cum-private-equity-owned hospital property feast-in-waiting - has lost almost £5 million on their Hinchingbrooke contract, allowing it to trigger the 'break clause' in the management contract. Health Policy Insight wrote about the original deal here.

The Circle website carries the company's slogan 'we believe hospitals can be better'. Clearly, they've been losing their religion in Hinchingbrooke. In the words of health policy expert Father Jack Hackett, "that would be an ecumenical matter".

Privates on parade
This creates a problem for right-wing ideologues, who saw Hinchingbrooke as their proof of concept that the private sector is indefinably yet ineffably better.

Market propagandists were quick to seize on Circle's initial decent showing in the not-wholly-ungameable Friends And Family Test results at Hinchingbrooke, conveniently ignoring later deterioration in this, and also poor staff survey results.

Latterly, Health Service Journal reported on Circle's bid to close down the A&E service at Hinchingbrooke.

Circle's statement blames the same, predictable-if-not-visible-from-space financial and demand pressures facing every other NHS provider. It also gets its retaliation in first on its CQC report: "We understand the CQC report will be published soon, and expect it to be both unbalanced and to disagree with many of its conclusions".

Surely this embodies their tagline 'we believe hospitals can be better'?

In fact, as Chief Inspector Of Chief Inspectors, I am herewith issuing an edict for all NHS providers. Adopt private sector best practice: issue a flounce-y prebuttal of any forthcoming critical Care Quality Commission reports. Tell 'em the Chief Inspector Of Chief Inspectors gave you permission. If we can't learn from this kind of entrepreneurial dynamism, truly there is no hope for us.

It's interesting to consider what ministers, commissioners, media, patients and the public would say about an NHS provider who issued such a statement.

Perhaps Circle's prebuttal is unsurprising, given this late afternoon's HSJ news report that the CQC report recommends Hinchingbrooke be put in special measures, branding it 'inadequate' in the caring domain.

You can read the CQC report here, but please be advised that some of it is quite distressing.

Under the terms of their contract with the TDA, Circle - or perhps we should say the hedge funds and private equity investors - have ploughed almost £5 million into Hinchingbrooke, and are now on the hook for a £2 million 'break clause' payment. It will be instructive to see whether this is enforced.

Whether it's £5 million or £7 million, the reputational kicking for Circle will probably not be recoverable. Their share price is down almost 25%.

What have we learned from the Hinchingbrooke experience? Not a great deal, I suggest. Mainly a compendium of Things That Are Not Surprising.

1. Running a district general hospital, in a choice-based system with big local competition in Peterborough and Cambridge University Hospitals, is not straightforward. When tariff is relentlessly cut and yet the post-Mid-Staffs furore rightly doesn't allow management to save money using the one club available (that of understaffing with nurses), then frankly you're Donald. (One of my New Year's resolutions is to invent more cockney rhyming slang: Donald = Donald Ducked.)

2. If the public sector tries to transfer risk to the private sector in an environment where the latter can leave after a certain amount of losses, we should not be even remotely surprised when they do so.

3. Much of the national media remains staffed by people incapable of analysing Circle's unviable inital business model, which looks remarkably akin to pyramid-selling. The clinician partners have lost their Jermyn Street shirts. The value of your investment can go down as well as up.

4. The private sector has no more magical abilities to turn troubled public services around than the public sector or third sector do. Hinchingbrooke has set this intellectual proposition back what should be a decade. It probably won't, though, because so much of the national media is staffed by idiots with short memories and scant curiosity.

5. Circle's business model was, as I previously wrote, incomprehensible even to experts in private sector financing.

6. Given the available alternative local acute provision mentioned above, Hinchingbrooke should probably never have been built. But of course, it serves one of the safest Conservative seats in the country. And 'if you build it, they will come' ...

Let's conclude for the moment with observing An Interesting Thing.

Circle's share price, whose general long-term trajectory has been pretty dire (click the 5-year tab above the graph), took a significant upswing recently (click the 1-month tab).

I wonder what prospective change in the comany's fortunes could possibly have triggered that.