Board's plans for state-of-the-art development favour unique pension holder funding solution
The proposed new hospital will replace Hartlepool Hospital and the University Hospital of North Tees
The board of North Tees and Hartlepool NHS Foundation Trust looks set to break new ground in healthcare procurement with the use of a unique pension holder solution to fund a much-needed new hospital.
Plans for the multi-million pound development, dubbed the ‘final piece in the momentum jigsaw’ for healthcare in the region, are pushing forward after the board recently considered feedback from an independent review of the outline business case.
The review highlighted a number of ‘risks’ that the trust will have to address, in particular concerning funding, after the board revealed it was considering using the unique funding route.
We do this because the issues facing us in terms of the need to transform healthcare to make it fit for the future will not go away and they would need to be addressed again in the near future
Trust chairman, Paul Garvin, explained: “I know a lot of people have been waiting for the moment when we can take another important step on the way to the new hospital.
“Of course we know the financial environment is very difficult, and we are mindful of that. The review has reminded us that the situation is extremely challenging. However, we have a proven track record of high performance, high quality and financial control and we have every intention of continuing performing in this way in the years to come.
“We do this cautiously, but optimistically. We are acutely aware that the funding route we are pursuing – a pension fund holder solution – is unique and it is the board’s responsibility to ensure the whole project provides value for money and is sustainable over the long term.
“However, we also do this because the issues facing us in terms of the need to transform healthcare to make it fit for the future will not go away and they would need to be addressed again in the near future. The new hospital is the final piece of the momentum jigsaw and it is a pivotal part of the success of the programme.”
A second independent review will be carried out at the end of the procurement period to give the board the final assurance it needs to take the final step to borrow the money, award contracts and begin the build, he added.
We are acutely aware that the funding route we are pursuing – a pension fund holder solution – is unique and it is the board’s responsibility to ensure the whole project provides value for money and is sustainable over the long term
“This will of course depend on the situation the trust finds itself in at the end of the 12 to 18-month procurement period,” he said. “However, we hope to have a just over three-year build and we could open the doors of the new hospital in late 2016 or early 2017.”
The new facility will effectively take over from, and lead to the closures of, Hartlepool Hospital and the University Hospital of North Tees. Garvin said this amalgamation would bring about significant financial savings.
He added: “We know we need to make savings as the two hospitals are brought together on one site and we know we have to continue to make cost improvement savings. While no one has a crystal ball, we are as confident as we can be, backed up by our strong financial track record, of continuing to make the savings and efficiencies we need without compromising our performance or quality.
“We are aware that the two-to-one site savings could be eroded by the cost improvements we have to make. Our finance team working with all our managers is continually looking for efficiency schemes and we are determined to continue the excellent achievement we have already made in this area.
While no one has a crystal ball, we are as confident as we can be, backed up by our strong financial track record, of continuing to make the savings and efficiencies we need without compromising our performance or quality
“In the current financial climate, which at the moment shows no signs of changing, we know we will have to make efficiency savings, but we will have to do this whether we move to a new hospital or not. While this is increasingly challenging, it is less onerous to run one energy efficient hospital than the existing two and staff it accordingly without the need for double running.”
The review supported the hospital’s claims that the amount of work it will be commissioned to undertake over the coming years supported the need for a new facility. Garvin said: “We have looked at a range of possibilities on expected income, from little or no growth in income to increased levels of income. Again, while this is difficult to predict accurately, we believe income levels will be enough to support the new hospital.
“With the changes in the population, we could expect to see demand for services rising and with a new hospital with single rooms we could expect to see people choosing to have their care there for the privacy and dignity it will undoubtedly offer in a world-class facility.”
On the proposed new funding option, he said securing backing from a pension-holding company was currently one of the most favourable procurement routes, adding: “While the option of funding from a pension-holding company is looking like the best option at the moment there may be other solutions or hybrid funding schemes which offer better value for money for the taxpayer.
”We will be running a competitive process to secure funding and this will be running alongside the procurement process. It will be then, and only then, and following further feedback from a review by our external regulator, that the board will make the final decision about going ahead to sign contracts, borrow the money and begin the build.”
While the option of funding from a pension-holding company is looking like the best option at the moment there may be other solutions or hybrid funding schemes which offer better value for money for the taxpayer
Trust chief executive, Alan Foster, told BBH : “It is significant to reach yet another important milestone in the programme. People are living longer, often with a number of chronic health conditions. Transforming services by encouraging people to take up opportunities for screening, intervening early when people are starting to have health problems rather than waiting until people are so ill that they need to come into hospital, and improving pre and post-operative care so that people do not have to stay in hospital for long periods, are all things which will lead to the type of healthcare we will need for future generations.
“It is excellent to get to yet another important milestone so we can continue to transform care and care pathways, make the improvements in quality and safety that our patients need and deserve and look towards the opening of the new hospital which will be a flagship in terms of function and design to last for future generations.”