Feature / Introduction to…public-private partnerships (1)

As well as partnerships with local authorities (see last issue), NHS organisations have partnered with the commercial sector, principally via public-private partnerships such as the private finance initiative (PFI) and NHS LIFT (local improvement finance trust). PFI has been controversial and was slow to take off in the NHS. Despite being launched in 1992, the first PFI hospital did not open until 1998 (in Scotland).

Under the scheme, private sector consortia, made up of constructors, financiers and facilities management firms, usually design, build, finance and operate new hospitals or parts of hospitals.

These DBFO contracts are typically 25 to 35 years long, with an option for a further period of a similar length. While the private sector partner in PFI deals will provide services such as cleaning and estates maintenance, they do not provide frontline clinical services.

The host trust makes a unitary payment made up of payment for services, lease of the property and maintenance (lifecyclereplacement).

The financing of the schemes are the sole responsibility of the private partners and usually involve loans, equity or bonds – raising concern that PFI is inherently more expensive as the government can borrow money more cheaply than private companies to fund capital builds.

Critics of PFI also point out that by tying trusts into contracts that last at least 25 years the NHS risks building white elephant hospitals – no longer needed as more care is moved into the community. Longterm sustainability is an issue for some trusts with PFIs aiming for foundation status.

However, supporters of PFI insist the schemes are more efficient because the partners have a financial incentive to perform well, while there is better risk allocation (the construction firm accepts and manages the risk of the building being handed over to deadline, for example).

Before a scheme can go ahead, local commissioners, strategic health authority, the Department of Health and the Treasury must approve it. In addition to this, foundation trust schemes will be assessed by Monitor, focusing on whether it would affect the trust’s financial risk rating, but in doing so it does not approve or accept the proposal – it leaves that decision to the trust’s board.