healthcare update - issue 16
The NHS White Paper - what about the estate?
It is widely accepted, although it seems rarely to be
acknowledged, that the land and buildings which form the estate are
one of the biggest capital assets of any Primary Care Trust.
However, it is interesting to note that at no point in the White
Paper[1] is the estate specifically mentioned. Nor is there any
plan of action suggesting how to deal with the considerable task of
transferring healthcare buildings from the “soon to be abolished”
PCTs to their premises' successors (whoever they may be).
David Nicholson’s letter[2] makes it clear that the Department
of Health (DH) still feel that there is a need to take immediate
steps to start to split commissioner and provider functions at both
national and regional level, and to chart a path for the whole of
the transition. The continuation of Transforming Community Services
(TCS) will no doubt raise again the same questions and issues that
have been debated many times over the last year or so, regarding
where exactly the NHS estate will sit following restructuring and
the split of commissioner and provider functions.
Questions will no doubt be raised as to whether the DH’s
previous stance regarding rationalisation of the NHS estate will
continue and follow the previous TCS model, or whether a new
approach will be taken in light of the likelihood of GP Consortia
succeeding Primary Care Trusts in the commissioning role.
Whilst it is impossible to second guess all the issues, we have
set out below as some “food for thought”, the questions we would
suggest estates teams and PCT boards should be considering in
anticipation of the forthcoming split of commissioner and provider
and the eventual abolition of PCTs. Clearly it would be hoped that
the DH provides guidance very soon so that PCTs can review their
current estates strategies to take account of the need to plan for
significant property activity.
Food for thought
Following the split of commissioner and provider functions and
the abolition of Primary Care Trusts, where exactly will the estate
sit? Will some or all of the premises transfer to provider arms,
and if so what will be the deciding factor as to whether a property
is or is not transferred? For example, is it a question of
whether the premises are used for administration of the provider
arm or as a HQ building? Whether the services delivered from that
property are seen as core services? Will there be some other
deciding factor?. Alternatively will the whole or part of the
estate transfer over to the GP Consortia? Will some of the estate
be transferred to local authorities, foundation trusts or social
enterprises?
The broad rule of thumb is that it is services and the
associated pathways of care that dictates what estate goes where.
However, as the imperative for care changes to one of
personalisation and care at home, it is inevitable that the service
models for care will change faster than the estate leaving
providers with immoveable, inflexible and costly assets to own,
maintain, and regulate. Commissioners and their provider arms are
placed in the invidious position of trying to model the transfer of
estate at a time when news of costly PFIs and the inflexibility of
the NHS estate to meet the challenges of different models of care
have hit the headlines.
Equally, if the estate is to be parcelled up and transferred as
part and parcel of the TCS agenda, will the provider arm have the
funds and resource, particularly the soft intelligence gleaned by
estates teams working for many years in managing the PCT estate to
manage it, maintain it and dispose of it if it is no longer
required.
This then leads on to a whole subset of related issues not least
of which there may be an incentive for PCT provider arms to prefer
an NHS trust organisational model so as to receive the estate free
of charge rather than having to fund the value of the transferred
estate – to buy out the PCT so to speak - if a social enterprise
model is preferred. A transfer to a social enterprise at less than
book value is going to lead to accusations of State Aid and
anti-competitive behaviour.
Some PCTs have pursued a competitive tender for community
services bundling the same together by reference to service
pathways which may or may not be aligned with the estate. Will
private providers want to bid for services which are embedded in
estate where the ultimate owner and more importantly manager of the
same are unknown? This will lead to private providers factoring
into their bid costs “estates risks” not least of which required
capital to make it fit for purpose at a time when the regulatory
landscape for the estate is changing, led by the roll out of PAMs
and the policy imperative that quality of the service environment
should be as good as the quality of services.
Presumably, the rationalisation of the estate will be dealt with
in accordance with TCS under the timetable currently set out by the
DH, and then followed on with the transfer of any residual premises
by April 2013? If so, what support, technical and financial, is
being offered or made available to PCTs to achieve these
timetables? Estates teams will surely be overrun with property
issues to resolve if early decisions are not made and even then
professional advice will no doubt be needed.
What level of due diligence and investigation will be required
in the transfer of healthcare premises? Legal enquiries, searches
and due diligence (as well as commercial property surveys) can be
expensive, and in a time where the NHS is being tasked with saving
vast amounts of money from its budget, it would seem to be a fair
question to ask whether it would be considered a cost effective use
of NHS finances to carry out full due diligence on all property
transfers where those properties are being transferred from one
healthcare organisation to another only due to governmental
restructuring of the NHS. Of course, the riposte to this would be
that any organisation which accepts ownership for these properties
will be assuming responsibility for a large estate previously
managed by a Primary Care Trust, and would be taking on
responsibilities and liabilities for premises which they may have
little or no actual knowledge of whatsoever. Ultimately, if there
are liabilities, disputes or other property issues to resolve, the
successor organisation will inherit not only the land and buildings
but also the responsibility to resolve or pay for (as the case may
be) those disputes or liabilities. What is certain is that private
providers will have an expectation of robust due diligence and will
seek to mitigate any “estates risks” through appropriate warranties
and indemnities.
Who will effectively project manage the transfer of the PCT
estates to the recipient organisation? Is this to be done at a
local level “in house” by PCT estates teams, or will it be expected
that SHAs will oversee the transfers of the NHS estate and provide
guidance on the procedural steps to be taken?
Have PCTs and, indeed, the DH factored in the potentially
significant professional fees and expenses which will no doubt be
incurred by PCTs and other healthcare organisations in taking
proper advice on the transfer of properties to a successor
organisation? If not, where will these funds come from?
Clearly, there are many questions which are unanswered at this
stage and we await further clarity from the DH and SHAs in the
coming months as to the direction the PCT estate is to take.
In the meantime however, we would be delighted to speak to you
about any questions you have in relation to either TCS or the White
Paper.
[1] Equity & Excellence: Liberating the NHS, Department of
Health, July 2010
[2] Equity & Excellence: Liberating the NHS - Managing the
Transition, Dear Colleague letter, Department of Health, 13 July
2010
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