Revealed: private firm's slice of NHS hospital savings:
Circle, put in charge of indebted Hinchingbrooke trust, could earn tens of millions by imposing spending cuts
A row has broken out over a debt-ridden NHS hospital being handed over to a private company that will keep a large chunk of the millions of pounds in savings it will seek to make.
Bosses at Circle, which is running the Hinchingbrooke Health Care Trust in Cambridgeshire, have insisted they will improve standards despite claims that they will need to make what have been described as "eye-watering" cuts.
The Health Service Journal (HSJ) has published a report saying the hospital will need to make surpluses of at least £70m over the next decade if it is to clear its debts and meet Circle's contracted share.
A letter deposited in the House of Commons library by Earl Howe, a junior health minister, and uncovered by the HSJ, details for the first time the terms of the deal to hand running of the hospital to Circle.
A statement from the HSJ said: "The first £2m of any year's surplus goes to Circle; the company then takes a quarter of surpluses between £2m and £6m and a third of surpluses between £6m and £10m.
"The terms mean the trust, which has an annual income of around £100m, will need to make a surplus of at least £70m to clear its debts. 44% of that money would go to Circle."
In the past decade the hospital has never made an annual surplus of more than £600,000, suggesting widescale cuts would be needed to meet targets, the report said.
Circle began its 10-year management franchise at the struggling Huntingdon-based hospital in February in what is seen as a potential model for other hospitals across the country.
Ali Parsa, chief executive of Circle, did not comment on the scale of possible cuts but said the management team was committed to improving service and would not "share the rewards" until this goal had been achieved.
Parsa said: "Projections in the bid process showed the potential losses facing Hinchingbrooke in the coming years could reach many tens of millions. We have been tasked to stop taxpayers losing this money.
"Our plan is not only to do this and make the hospital sustainable but to turn it into one of the best district general hospitals in the country.
"Only when we succeed in our ambitious goal will there be rewards to share fairly between our partnership, which includes Hinchingbrooke staff, our start-up backers and the local health economy.
"Circle has always reinvested profits back into building our partnership and services and will continue to do so."
Christina McAnea, head of health at Unison, called on the company to stick to assurances that it would not take a profit until debts are paid off. "Any surpluses should be going directly into improving patient care or paying off the hospital's debt, securing its future for local people – not ploughed into making company profits.
"Instead patients and staff are facing drastic cuts.
"The hospital was already struggling, but the creep in of the profit motive means cuts will now be even deeper.
"Whilst this hospital was the first to be transferred into private hands, it may not be the last."
A spokeswoman for the Department of Health said that had the deal with Circle not been agreed Hinchingbrooke hospital may have had to close.
"Far from simply making a profit, Circle have already set out that they plan to repay the trust's past deficit of £39m.
"Not only are they heavily incentivised to do this by receiving a share of any surplus over £2 million, but they must also fund the first £5 million of any losses while they are managing the trust.
"Any fee that Circle receives isn't all profit – Circle must meet the ongoing cost of delivering the deal and indeed any costs they incurred in bidding for the contract.
"This process, which was started under the previous government, will deliver improved patient care and will put the hospital on a sustainable financial footing for the future."
A row has broken out over a debt-ridden NHS hospital being handed over to a private company that will keep a large chunk of the millions of pounds in savings it will seek to make.
Bosses at Circle, which is running the Hinchingbrooke Health Care Trust in Cambridgeshire, have insisted they will improve standards despite claims that they will need to make what have been described as "eye-watering" cuts.
The Health Service Journal (HSJ) has published a report saying the hospital will need to make surpluses of at least £70m over the next decade if it is to clear its debts and meet Circle's contracted share.
A letter deposited in the House of Commons library by Earl Howe, a junior health minister, and uncovered by the HSJ, details for the first time the terms of the deal to hand running of the hospital to Circle.
A statement from the HSJ said: "The first £2m of any year's surplus goes to Circle; the company then takes a quarter of surpluses between £2m and £6m and a third of surpluses between £6m and £10m.
"The terms mean the trust, which has an annual income of around £100m, will need to make a surplus of at least £70m to clear its debts. 44% of that money would go to Circle."
In the past decade the hospital has never made an annual surplus of more than £600,000, suggesting widescale cuts would be needed to meet targets, the report said.
Circle began its 10-year management franchise at the struggling Huntingdon-based hospital in February in what is seen as a potential model for other hospitals across the country.
Ali Parsa, chief executive of Circle, did not comment on the scale of possible cuts but said the management team was committed to improving service and would not "share the rewards" until this goal had been achieved.
Parsa said: "Projections in the bid process showed the potential losses facing Hinchingbrooke in the coming years could reach many tens of millions. We have been tasked to stop taxpayers losing this money.
"Our plan is not only to do this and make the hospital sustainable but to turn it into one of the best district general hospitals in the country.
"Only when we succeed in our ambitious goal will there be rewards to share fairly between our partnership, which includes Hinchingbrooke staff, our start-up backers and the local health economy.
"Circle has always reinvested profits back into building our partnership and services and will continue to do so."
Christina McAnea, head of health at Unison, called on the company to stick to assurances that it would not take a profit until debts are paid off. "Any surpluses should be going directly into improving patient care or paying off the hospital's debt, securing its future for local people – not ploughed into making company profits.
"Instead patients and staff are facing drastic cuts.
"The hospital was already struggling, but the creep in of the profit motive means cuts will now be even deeper.
"Whilst this hospital was the first to be transferred into private hands, it may not be the last."
A spokeswoman for the Department of Health said that had the deal with Circle not been agreed Hinchingbrooke hospital may have had to close.
"Far from simply making a profit, Circle have already set out that they plan to repay the trust's past deficit of £39m.
"Not only are they heavily incentivised to do this by receiving a share of any surplus over £2 million, but they must also fund the first £5 million of any losses while they are managing the trust.
"Any fee that Circle receives isn't all profit – Circle must meet the ongoing cost of delivering the deal and indeed any costs they incurred in bidding for the contract.
"This process, which was started under the previous government, will deliver improved patient care and will put the hospital on a sustainable financial footing for the future."
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