Magazine article Public Finance

NHS Faces £229M Loss in New ISTC Fiasco

Magazine article Public Finance

NHS Faces £229M Loss in New ISTC Fiasco

Article excerpt

The NHS will have to pay private health care firms £229m if contracts for the controversial independent sector treatment centres are not renewed, the government has admitted.

Health minister Ben Bradshaw said that up to £176m would have to be paid out if contracts for the first phase of the ISTC programme alone were allowed to expire.

A contract clause makes the NHS liable for the 'residual value' of ISTC buildings if the contracts are not renewed, ensuring that the public sector underwrites the risk taken in establishing the centres.

The programme - originally aimed at providing extra capacity to get waiting lists down - has been dogged by controversy, prompting Health Secretary Alan Johnson to scrap plans for a third wave of centres in 2007.

MPs heavily criticised the contracts for phase one of the scheme, which gave private providers a premium on top of the NHS tariff rate for routine procedures such as hip operations.

They also guaranteed payment for a set volume of operations, regardless of how many were actually carried out. In some areas, NHS trust finance was hit as patients were diverted to ISTCs to use the paid-for capacity.

But in December, the Commons health select committee heard that most ISTCs were still performing well below the contracted number of operations, with the volume sinking as low as 9% of the paid-for level in one case.

Shadow health minister Mike Penning, whose parliamentary questions prompted Bradshaw s admission, told Public Finance he had been unhappy with the 'naive' way the Department of Health had negotiated the contracts, which left the NHS 'paying through the nose . …

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