First private operator of ‘NHS hospital’ pulls out amid cuts

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Circle, the private heathcare provider, will pull out of its contract to run Hinchingbrooke NHS hospital after telling investors it was “no longer sustainable under current terms” because of rising demand and falling funding.

The company took over the running of the Cambridgeshire site in 2012 in a controversial deal that made it the first private operator of an NHS hospital.

But on Friday it said it could no longer afford to run Hinchingbrooke because of heavy demand for accident and emergency services and lack of care places for patients awaiting discharge in recent weeks. The company also cited funding levels “that have not kept pace with demand”.

Hinchingbrooke’s funding has been cut 10.1pc this financial year, it said.

In a statement to investors, Steve Melton, the chief executive of AIM-listed Circle, said: “Like most hospitals, over the past year Hinchingbrooke saw unprecedented A&E attendances and not enough care places for healthy patients awaiting discharge.

“At the same time, our funding has been cut. We also believe that inconsistent and conflicting regulatory regimes compound the challenge for acute hospitals in this environment.”

Circle also criticised a forthcoming Care Quality Commission assessment of Hinchingbrooke, saying it expects it to be “unbalanced and to disagree with many of its conclusions”.

“We are not the only hospital to find their process problematic, and believe that inconsistent and conflicting regulatory regimes compound the challenges for acute hospitals in the current environment,” the company said.

Under the terms of its contract, Circle has the right to pull out if it is forced to make payments of more than £5m to support Hinchingbrooke. The company said it had already provided £4.84m with more required, so it had opened discussions with the local NHS Trust Development Authority to ensure an orderly handover of the hospital. Circle will face additional termination costs of up to £2m.

The company’s shares opened down more than 30pc following in the announcement.

Circle said it had saved taxpayers £23m since it took over Hinchingbrooke and “transformed” the “basket case” hospital, which was facing closure. The decision to bring in a private operator sparked political controversy, with Labour claiming it was evidence of Government plans to privatise the NHS.

The competitive tender to run Hinchingbrooke was published in 2009, however, before the last election. A shortlist of three private bidders was drawn up under the Labour Government before Circle won the contract under the Coalition.

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