healthcare update - issue 15
Estates rationalisation - are you ready for Transforming Community Services?
Prior to the election, the Department of Health (DH) was
pressing ahead at a significant pace with Transforming Community
Services (TCS). With the election of the new coalition Government,
TCS was put “on the backburner” whilst the new Government made
decisions on the future of the NHS and the spending of the public
purse.
It is now clear, since the release of the revision to the NHS
Operating Framework, that TCS is firmly back on the agenda and NHS
Trusts will have to be ready to tackle estates issues following the
legal split of Commissioner and Provider Arms. This will no doubt
generate a significant amount of work for PCT estates teams and
service providers alike in order to properly document and record
property occupancy across the NHS estate.
What does the Operating Framework say?
It is clear from the revision to the NHS Operating Framework
that the separation of PCT Commissioner and Provider Arms remains a
priority. The timetable set is still April 2011 and the DH has made
it clear that this will be the case even if it means transferring
services to other organisations whilst sustainable medium to long
term arrangements are identified and secured.
It seems that the DH may also be reverting back to previous
options for the legal formation of Provider Arms which were
originally considered but then discounted, including Community
Foundation Trusts and Social Enterprises.
Our understanding is that a number of smaller provider arms are
being encouraged to “merge” over defined localities on a virtual
Community Foundation Trusts basis whilst remaining as a provider
arm of their own PCT. In that circumstance the PCT will remain
statutorily accountable for the estate of its Provider Arm, but
there is a risk with this approach that the virtual organisation
will seek to deal with the estate without having the legal
authority to do so. This creates the additional concern that the
Provider Arm may permit other service providers to occupy PCT
premises without the PCT’s authority, creating a risk that the
service provider gains secure rights.
What can estates teams do?
Questions are being asked, particularly by estates teams, with
regard to how financial savings can be made and how PCTs “across
the board” can rationalise their estate and drive home
efficiency.
An early review of estates portfolios by NHS estates teams will
enable the PCT to identify the extent of their freehold and
leasehold properties, and liaise closely with their Strategic
Health Authorities (“SHAs”) to formulate an effective and cost
efficient plan to rationalise the estate in readiness for
compliance with TCS.
Some other ways in which estates teams could rationalise their
estate and make costs savings could include the following:
Formalise occupancy - it will be essential to
formalise and properly document the occupancy of Commissioners’
estates by service providers, either by way of leases or licences.
This will be necessary not only for the purposes of a good audit
trail, but in order to clarify the obligations of the parties and
the payments which may be due from for example the service provider
to the Commissioner (as a landlord).
Secure written documentation - without
written lease agreements, the Commissioner may be at risk of
finding itself in a position whereby service providers gain secure
rights over their property under the Landlord and Tenant Act 1954.
This could pose a real difficulty for the Commissioner when faced
with the scenario of trying to remove a service provider (or
appoint a new service provider in its place) at a property, and
finding it cannot secure the essential service environment, because
it is unable to easily remove the current occupier.
Consider developing standard documentation
- It would be sensible (and more cost effective) to draft
standardised leases, for example for GP health centres, leases of
wards or rooms within community or other hospital sites and
licences for sharing arrangements. These standardised documents
could then be prepared very easily and cost effectively, but still
allowing:
- certainty of the terms of occupancy for the parties
- continuity and fairness with regard to competition law i.e. the
concept of all service providers being presented with the same
property documents
- realisation of costs for utilities outgoings for premises
- the estate to be managed in accordance with current DH guidance
under TCS
Avoid delays of disposals - The inability
to remove any service providers from premises as set out above may
prove problematic if the PCT in question decides that a property is
surplus to its requirements. Whilst a PCT with a predominantly
empty building may be able to place the property on the Register of
Surplus Public Sector Land, and realise some of the financial value
in that property, this will be increasingly difficult where the PCT
has an undocumented tenant in the premises. Delays in selling the
surplus property could ultimately delay the release of much needed
capital and slow down the securing of for example new cost
effective NHS facilities for the community.
Avoid Breaches of PCT Leases - where the PCT
itself has a lease (i.e. it does not own the freehold but leases
the property from a third party landlord), it may be directly
breaching its own lease covenants by sub-letting to an independent
service provider without its own landlord’s consent, thereby
putting its own lease at risk (of being terminated), or having its
landlord sue for damages for breach of covenant.
Make the most of your existing legal provider
- the secondment of a trusted health lawyer may provide an
excellent opportunity to reduce legal spend in the current climate
by securing a competitive fixed fee for that individual. A short
period of secondment would allow a dedicated health law specialist
to carry out work cost effectively from within the organisation.
The secondee would be working exclusively for the NHS organisation,
adding value and continuity to their advice and allowing them to
work alongside the organisation’s estates team on, for example, an
Estates Rationalisation Project, readying the PCT for TCS without
any of the distractions of other work or projects.
If you would like to discuss how your organisation is preparing
for TCS we would be delighted to hear from you.
talk to us
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The content of this update is provided for the purposes of
general interest and information. It contains only brief summaries
of aspects of the subject matter and does not provide comprehensive
statements of the law. It does not constitute legal advice and does
not provide a substitute for it.