A combination of continued NHS underfunding, poorly maintained infrastructure and increasing numbers of patients risks creating a two-tier hospital system in England, a leading financial expert has warned.
In an article published by Policy@Manchester, Anne Stafford - Professor of Accounting and Finance at the Alliance Manchester Business School, The University of Manchester – examines the consequences of using privately financed but publicly funded schemes (known as the Private Finance Initiative, or PFI) for hospital buildings.
“Governments in power from 1979 put little investment into hospital infrastructure,” she writes. “From 1997 to 2010, the government addressed the problem by using PFI to deliver 109 hospital projects (around 20% of English NHS hospitals).”
This involves paying the private provider an annual rental charge to cover the cost of building the hospital, and a service charge which covers operating and maintenance costs.
“PFI hospitals are more expensive to operate than non-PFI hospitals, but as there is an enforceable contract in place, the private partners must ensure that PFI hospitals are properly maintained,” Professor Stafford explains. “In contrast, austerity policies since 2010 mean backlog maintenance on non-PFI hospitals, which is not planned maintenance work, but rather the work which should have already taken place, has increased from £4bn in 2012 to £11.6bn in 2023, an increase of 290% and greater than the £8bn allocated by the government in 2022 for capital investment to 2030.”
Her own research at The University of Manchester involved analysing the financial position of NHS trusts with the five largest PFI schemes - all of which also contain non-PFI hospitals - and their related private partners over the period 2017-2022.
“The five trusts show a continuing pattern of recorded deficits and/or rising backlog maintenance, whilst in contrast their PFI private partners were delivering good, low risk returns for their financiers,” she writes. “Moreover, the outflow of high finance costs plus any profits means less money remains within the NHS for tackling healthcare problems.”
“A two-tier hospital system may develop in England” (Photo credit: whitemay)
Professor Stafford describes the NHS as “in a crisis position, with continued underfunding and a growing pool of poorly maintained infrastructure, yet increasing numbers of patients.”
Looking to the future, she continues: “One likely outcome is that a two-tier hospital system may develop in England, as patients who can, will choose to attend modern, well-maintained buildings for elective care, over older, more inefficient structures. Patient choice could ultimately lead to destabilisation and intra and inter-trust tension across the system, dependent on how combinations of PFI and non-PFI hospitals, bed numbers and PFI charges play out in a complex scenario.”
In her article, which appears in the newly released Policy@Manchester publication On Infrastructure, Professor Stafford advances a series of policy recommendations “for a robust and reliable NHS infrastructure.”
These include advising the government to seek out examples of “best practice in hospital buildings construction and utilisation and share them centrally, so that new fit-for-purpose buildings can be delivered efficiently and at affordable cost.”
She calls for greater oversight of the interface between the NHS, the Department of Health and Social Care and the Treasury with the aim of delivering more joined-up provision of care.
And The University of Manchester academic urges Ministers to “set out a policy commitment on a rolling programme of capital investment using public finance, prioritising the replacement of worn-out buildings and addressing the shortage of hospital beds in under-resourced trusts.”
On Infrastructure is free to read on the Policy@Manchester website.