Health Secretary approves first private sector management model for whole NHS hospital

Private healthcare provider Circle will take over the management of Hinchingbrooke Hospital, Huntingdon, from 1 February 2012.

The company said it would become the "first ever non-state provider" to deliver a full range of NHS district general hospital services.

The 10-year deal, worth £10 million, is being managed by the Strategic Projects Team (SPT) at NHS Midlands and East. The deal will see Circle assume the financial risks of making the hospital more efficient and for paying off an estimated £39m debt.

Dr Stephen Dunn, Director of Policy and Strategy with the SPT, insisted that the arrangement was "not privatisation".

"This is a momentous day. Without this partnership, the future for Hinchingbrooke could have been uncertain," he said. "Now we have a solution which aims to repay the hospital's taxpayer debt of almost £40m, as well as giving it the best chance of a sustainable future. Patients will continue to receive high quality NHS services from NHS staff in the NHS hospital they know."

Private sector firms already operate standalone units that treat NHS patients in some hospitals, offering services such as hip replacements.

Under the terms of this agreement, clinical and non-clinical services at Hinchingbrooke will be provided by Hinchingbrooke Heath Care NHS Trust under Circle's management. The franchise arrangement gives Circle the right to provide all of the services currently being provided by the hospital. However, staff and assets will remain with the NHS.

Circle was named as the preferred franchisee last November, but the contract delegating the hospital's functions to the company could only be lawfully entered into by the Health Secretary under an Intervention Order.

The Government had previously said that 22 hospitals were facing financial difficulties, in many cases because of payments under private finance initiative (PFI) schemes. The combined value of NHS PFI projects is £12.6 billion, according to Department of Health figures.

Shadow Health Secretary Andy Burnham said that the decision had "worrying implications" for the future of the NHS, although he admitted that the process to appoint new management was initiated under the previous Labour government. The decision to appoint a private provider was taken under the NHS Preferred Provider policy, in which the NHS was given the first chance to bid, he said.

The coalition Government replaced this policy with an Any Qualified Provider (AQP) principle, resulting in an open tender process.

[The Government's] controversial Health and Social Care Bill is firmly based on the open tender, AQP principle. It envisages a very different world in the NHS, where hospitals operate as autonomous business units in a competitive market," he said.

The Labour Party has stated its opposition to the Health and Social Care Bill, which aims to modernise the NHS. The Bill is currently being debated in the House of Lords.