Battle with GPs led to Circle’s retreat from Hinchingbrooke hospital

When the coalition government privatised Hinchingbrooke hospital in 2012, there were high hopes. Since 2006 the hospital had been in deep trouble, losing five chief executives in as many years, building up £40m of debt and undergoing two independent external reviews.

The second review, in 2011, led to the colorectal department being moved to another hospital after six serious incidents, two of which had led to patient deaths and another of which had involved a medical instrument being left inside a patient. Things could not get worse.

For a little while they didn’t. Then at the end of 2012 Circle lost its chief executive, not long after it posted higher than expected losses. In 2013 the hospital’s latest boss departed.

Circle claimed small successes in turning around patient confidence, and performance at its accident and emergency department. However, it became clear that things were not going to plan. A low point came this summer when staff were accused of treating patients in an “undignified and emotionally abusive manner”.

At the heart of this was an unseen battle between local GPs and the hospital over who should profit from patients. In the new NHS structure, family doctors, who lead the local commissioning group, were meant to pay Hinchingbrooke for every patient they sent there – and with money tight, GPs saw their commissioning budgets being drained to fund the hospital.

Worse was that Circle aimed to make profits, even if it meant GPs sitting on commissioning losses. Last March when the hospital looked as if it would finally break even, GPs in the area initially slapped a £5m fine on the hospital for “poor performance”. After much wrangling this was lowered to about £1m. But a company aiming to make money from a hospital with a £100m budget could not continue to risk having its profits siphoned off by GP-led commissioners.

None of this should have surprised anybody. Andrew Lansley, the then health secretary, was a local MP and well aware of the perils of pitting doctor against doctor. Unhelpfully, he removed a layer of NHS management that specifically managed these local turf wars.

We have been here before. In 2003 New Labour signed a three-year “franchising” deal allowing a private company, Tribal Secta, to run Birmingham’s Good Hope hospital. The contract was terminated eight months early after the hospital deficit increased from £839,000 to £3.5m.

That debacle left pro-marketeers in every party with nowhere to turn in debates about policy. To improve healthcare, Labour flooded the NHS with taxpayers’ cash. That era ended when the banks went bust.