This document summarizes models for delivering healthcare services in the UK National Health Service (NHS). It outlines the structure of health and social care, the shift from a state-run to a patient-led NHS through increased choice and competition, and some of the challenges experienced through public-private partnerships like the Private Finance Initiative and Independent Sector Treatment Centres. It also provides case studies on outsourcing pathology services and community care, as well as a hospital franchising model.

1. CORPORATE FINANCE
New models for NHS delivery
Driving efficiency and contestability
19 May 2010
HEALTHCARE

2. Outline
 Structure of Health and Social Care in
the UK
 Moving from a state-run NHS to a
patient-led NHS
 A bumpy ride
 Templates for change
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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3. Overview of Provision of Health and Social
Care
Department of
(Public) Health
DH Social Local Authorities
DH - NHS
Care Policy (Social Care)
Strategic Health Public Sector Private Sector
Authorities Providers Providers
Commissioners
Public and Private
Sector Providers
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firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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4. A new market
The NHS has changed…
System Management Oversight
New NHS
Providers Market Commissioners
£100bn pa
380+ NHS trusts, 152 PCTs
GPs, GP fundholders
Private providers, Patient choice
Third sector
… Markets come with a regulatory framework. This framework needs
to be reliable and enforceable. It needs to enhance competition and
help deliver integrated, value for money end to end services.
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
3

5. Outline
 Structure of Health and Social Care in
the UK
 Moving from a state-run NHS to a
patient-led NHS
 A bumpy ride
 Templates for change
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
4

6. Moving from a state-run to a patient-led NHS
Key policy drivers
 Efficient procurement introducing real risk transfer
 PFI
 NHS Shared Business Services
 Creating/commissioning a patient-led NHS (March/July 2005)
 developing the idea of choice and contestability
 tasking PCTs as commissioners, not providers
Implications
 The state operates primarily as the champion of the user of public services (the patient,
the pupil, the infirm, the offender, the traveller)
 Where the state is involved in delivery of public services, it is a “means” to achieving
good, stable, value-for-money public services; it is not an end in itself
James Stewart, Infrastructure UK, Nov 2008
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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7. The increasing role of the private sector
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
PFI Hospital Programme
LIFT
ISTC Waves 1-2
NHS shared business services
Pathology
outsourcing
Increasing breadth of service delivery
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
6

8. Outline
 Moving from a state-run NHS to a
patient-led NHS
 A bumpy ride
 Templates for change
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
7

9. The rise and fall of PFI
Number of deals to close by year
20
15
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Capital value of deals to close by year
2,500
2,000
£ million
1,500
1,000
500
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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10. The Private Finance Initiative
Features:
 Private sector design, build, finance and maintain the facility
 Payment mechanism rewards availability of facility
 Transfer of lifecycle cost risk
 Hard FM included
 Soft FM included to varying degrees in some deals
Key issues:
 TUPE
 Constraints on changing use of facilities
 Initial overscoping of many facilities
 Exhaustion of pipeline
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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11. The rise and fall of central clinical contracting
Independent sector treatment centres
800
Five year scheme value (£m)
700 Fairness in Primary Care
600
500
400
300
200
100
0
2003 2004 2005 2006 2007 2008 2009
Year of full service commencement
Source: Department of Health
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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12. Independent sector treatment centres
Features:
 Initially take or pay contracts
 Transfer of all construction (where applicable) and operating risk
 The first major programme of private sector clinical provision in secondary care in the NHS
Key issues:
 Attracting new players
 TUPE
 Demand risk – estimating demand, NHS perception, new entrant issues
 Clinical negligence coverage
 Contract specification
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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13. The rise (?) of NHS-led contracting
Ongoing devolution to local NHS organisations has meant a loss of focus but a broader
range of opportunities with greater local buy-in
 Transactions of note:
 Back office outsourcing
 PCTs
 Acutes
 Pathology outsourcing – acute led
 Radiology/imaging outsourcing – acute led
 Community health provision
 Clinical pathway management
 Hospital management
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
12

14. Outline
 Moving from a state-run NHS to a
patient-led NHS
 A bumpy ride
 Templates for change
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
13

15. Templates for change – case studies
 Guys/Serco Pathology
 Great Yarmouth and Waveney
Community Services
 Hinchingbrooke Hospital Franchising
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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16. GSTS pathology
Guys and St Thomas NHS Foundation Trust
 Improve efficiency of service delivery esp back office
 Improve patient care
 Develop the business
Serco
 Beachhead for a market leading pathology business
 Opportunity to extend into a growing market
 Access to NHS “family”
Features
 Serco control of JV
 Outsourcing arrangement between Guys and JV for delivery of pathology services
 Secondment of Trust Staff
Allowed Serco the opportunity to enhance NHS provider efficiency, rather than to
compete directly with that provider
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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17. Great Yarmouth and Waveney Community
Services
Policy Background
 All PCTs required to have a plan for separating provider arms by Oct 2009
 Deadline then dropped…
 … then changed to 31 March 2010
Great Yarmouth and Waveney (GYW) PCT
 A pathfinder for externalising provision of community health
 Initially planned as a procurement open to the private and third sectors
 October 2009: Andy Burnham states that the NHS is the “preferred provider” of services
and should be given two chances to improve poor performance before contracting out
 GYW therefore switched tack and allowed only NHS organisations to bid
 Challenge by ACEVO
 Procurement cancelled by the DH
Transactions in the NHS are rarely smooth and frequently politically complex
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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18. Hinchingbrooke Next Steps Project
Background
 Hinchingbrooke Healthcare NHS Trust has a £40 million accumulated deficit on annual
revenues of around £100 million
 Strategic Health Authority has agreed to guarantee the future of the hospital – but on the
basis that the status quo is not an option
The Transaction
 Operational Franchise
 The Trust remains an NHS organisation but with management outsourced
 Current bidders: Ramsay Health Care UK, Circle, Serco
 Transfer of all financial and operational risks to the successful franchisee, subject to total
liability caps and profit share arrangements
 7-10 year term
If successful, this transaction provides a genuinely new model for transforming
performance in the NHS
© 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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19. Presenter’s contact details
Matthew Custance
KPMG LLP (UK)
+44 (0)20 7311 8140
matthew.custance@kpmg.co.uk
www.kpmg.co.uk