PFI health sector sparks controversy

Will PFI lead to healthcare privatisation by the back door? Robert Parr reports on the implications for lawyers

The coming of the first wave of PFI hospitals has proved to be something of a damp squib. Dartford and Gravesham (D&G) Infirmary and Cumberland Infirmary have both recently opened, and both have suffered difficulties. Not everything has been as it should with the new infrastructure.

In the case of D&G, where Nabarros advised the public sector and Denton Wilde Sapte and Wragge & Co the private sector, clinical staff have complained that they were not consulted properly when it came to the design of the hospital. Consequently, staff have complained that the facility is difficult to use.

In the case of Cumberland, where Dickinson Dees advised the public sector and Linklaters and Clifford Chance the private sector, there have been serious infrastructure problems – leaking joints damaging a maternity unit’s roof and wards being flooded with sewage.

As these are the first major hospital schemes to open, Cumberland and D&G represent “the shape of things to come”, the first of the grand new healthcare facilities promised by the PFI. From the point of view of any law firm targeting health PFI, the early signs are not that encouraging. The two hospitals have a symbolic importance, representing as they do actual existing examples of the future validity – or otherwise – of large-scale PFI hospitals.

Although it is still early days, and taking into consideration the fact that all buildings suffer with the “bedding down” process, the problems have already led to a chorus of disapproval from critics of the initiative.

The idea of risk transfer does not seem to answer the critics in cases such as these. Of course, in those sections of the hospitals affected by the problems, the availability aspect of the payment mechanism will ensure that the private sector is penalised for the difficulties involved. However, can it truly be said that risk has been transferred when a hospital can not carry out its most basic endeavours? This is a general criticism made of the concept of risk transfer, but is particularly acute in the health sector, as sick people are inevitably at risk.

Sir Stuart Lipton, the Government’s “architectural tsar”, made strong criticisms recently aimed at the architectural standards involved in PFI health deals. He has stated that PFI hospitals are poorly designed and that there is not enough attention being paid to aspects of design that might aid patient recovery.

His comments echo some of the points made by architects involved in the PFI process, who have complained that the initiative is too heavily weighted in favour of the cost-effectiveness of the deal, as opposed to the efficacy of the end product.

Of course, this has implications right across the sectors, although the Treasury’s taskforce attempted to answer some of these charges earlier this year with the publication of “Technical Note 7: How to Achieve Design Quality in PFI Projects” (carried out in conjunction with environmental firm CABE). Design is being taken more seriously in later PFI projects, but this will not influence construction that is already under way. Health PFI is currently being judged on the actual, not the theoretical, and high-profile difficulties with the first schemes to roll out will not engender confidence in a process already mistrusted by a wide range of health practitioners.

In these inauspicious circumstances, the Institute for Public Policy Research (IPPR) Commission on Public Private Partnerships (CPPP) has published an evaluation of the PFI health sector – “A Healthy Partnership: The Future of Public Private Partnerships in the Health Service”. As befits the confusion currently surrounding the subject, something of a contradiction lies at the heart of the publication.

The argumentative thrust of the report’s contributors is clear: health PFI is based on unprovable conceptions of value for money; it stifles innovation; it has had a distorting effect on NHS provision.

However, the report’s overview calls for an expansion of PFI into the health sector and not a retraction or an abandonment, as the thrust of the report seems to indicate: “There is a view that it will be impossible to get any benefits from private sector involvement in the provision of healthcare until more services are provided under the PPP contract.”

So what does this mean? Does it include core services? Though an independent body, it is known that the IPPR has the ear of the Government, and that its conclusions are taken very seriously in Whitehall. If this is what the CPPP is getting at, it would represent a massive turning point. A major rationale for using PFI was that it would provide private money without privatisation. The inclusion of core services would remove this rationale.

It has been a bad month for health PFI: the problems with the new buildings will not encourage belief in the initiative, and a deal might be brought down through strike action. Extending PFI into full privatisation would constitute a denial of years of rhetoric. In this context, it would also represent political suicide.

Health PFI lawyers – you have been warned.

Robert Parr is editor of “The PFI Report”.