Social enterprise's plans for NHS hospital

Image caption Hinchingbrooke hospital staff will remain employed by the NHS

In his first major speech on the NHS on Thursday, Nick Clegg made the case for competition where it could improve services for patients.

One NHS hospital is due to have its management taken over by a social enterprise after a competetive tendering process, an approach that could be tried with other struggling hospitals, as health correspondent Branwen Jeffreys reports.

Hinchingbrooke hospital, near Huntingdon, in Cambridgeshire, will be run by Circle on a 10-year contract expected to be finalised soon.

Health unions say such takeovers open up the NHS to another form of competition.

It will be the first time a "social enterprise" has taken over the management of an NHS trust in this kind of deal. NHS managers say Circle will have to meet health service standards and pay off the hospital's debt.

The contract awarded to Circle is a fresh approach for NHS hospitals struggling to make their finances work. Under the deal, the hospital buildings will remain in public ownership and the staff will continue to be employed by the NHS.

Hinchingbrooke has a debt of around £40m on an annual turnover of £90m. Circle will have the power to make changes, including hiring and firing staff. It will be paid NHS prices to meet NHS standards.

The social enterprise will have to repay the hospital's debts through finding cost savings. Only then can it make any profit, leaving some to privately describe the challenge as a tall order.

'Future model'

Dr Stephen Dunn, from the East of England Strategic Health Authority, says the choice of Circle was not ideological. NHS trusts were also invited to bid to take over the hospital in the efforts to avoid it closing.

He said the final decision was pragmatic: "We wanted the best deal for patients, the public and the taxpayer. I think it will be a model for the future; the NHS faces major challenges in terms of efficiency. "

Image caption Circle's flagship hospital in Bath

The process of putting the managment of Hinchingbrooke out to tender was mainly conducted under the last government. Under the coalition's plans for the NHS in England, all hospital trusts will have to meet strict financial standards by 2014 or find another solution. That could involve being taken over by another NHS Foundation Trust, or the approach being tried in Hinchingbrooke.

Circle describes itself as a social enterprise which is co-owned by its clinicians. Ali Parsa, the chief executive, is a former Goldman Sachs banker turned healthcare entrepreneur. Already Circle is treating more than 100,000 NHS patients a year at a treatment centre in Nottingham.

Its flagship hospital is just outside Bath, where it competes with local NHS trusts for routine surgery. Designed by award-winning architects, its lobby feels more like a smart hotel than a hospital. Unlike an NHS hospital there are no emergency services, but Mr Parsa insists they are up to the challenge of running a full district hospital.

It is likely they will cut management costs substantially at the NHS trust in Huntingdon, as Circle plans to divide the hospital into units led by senior doctors and nurses. Mr Parsa described their core philosophy.

"We believe that it should be doctors and nurses - healthcare professionals - that run hospitals. We don't think they should be slaves of the state. We think they should run services for the benefit of their patients."

Every patient treated by Circle is asked what needs to be improved. The company says it aims to make changes within three months of a problem being identified. Acheiving that in a bigger hospital could be harder.

Karen Jennings, assistant general secretary of Unison, told me the union was prepared to work with Circle at Hinchingbrooke, but was wary of this approach being tried elsewhere in the NHS.

"The long-term consequences are another matter. Circle will learn everything it can about running a district general hospital and it will then move in to compete with the NHS."

It is not clear how many in the local community share those concerns. In 2006, when Hinchingbrooke hospital's future looked much less certain, many people joined a campaign to safeguard its future, turning out for marches and rallies. The campaign was supported by David Cameron, as then Opposition leader.

Now that campaign has dwindled. Local patients, and many in the NHS, will be watching Hinchingbrooke carefully to see if this is a model which can work.