The new company is expected to take over assets owned by PCTs such as offices and health centres, community hospitals, and clinics. Peter Wearmouth, a former chief executive of NHS Estates, and DH policy director on construction, property, and facilities management, who is now a director of Health Solutions at design, infrastructure, management, real estate, and outsourcing solutions specialist, Capita Symonds, considers the implications.
In a nutshell, the new PropCo property company will cover the former PCT estate that includes everything from GPs’ surgeries to property owned by acute NHS Trusts. According to the ‘NHS Hospital Estates and Facilities Statistics 2008/2009’, this estate has a total floor area of some 5.2 million m2. To put this firmly into perspective, a major supermarket chain reported that its store portfolio across the whole of the UK was 3.05 million m2 in February 2010. The opportunities for optimisation and investment are therefore huge. We are looking at a portfolio that comprises as many as 4,000 sites, with a book value of £4 bn which, with the right commercial advice, could be the answer to regenerating and rationalising NHS property in support of new models of frontline care. The DH has confirmed that the company ‘…would hold property for use by community and primary care services, including for use by social enterprises; deliver value-for-money property services; cut costs of administering the estate by consolidating the management of over 150 estates; deliver and develop costeffective property solutions for community health services, and dispose of property surplus to NHS requirements’. According to Andrew Lansley, the company will be required to deliver ‘value-for-money property services, cut the costs of administering the estate by consolidating its management, and deliver and develop cost-effective property solutions for community health services’.
The ‘productivity’ challenge
In simple terms the NHS, in delivering services to patients, deploys human and infrastructure resources to achieve the required outcomes. A major change is underway to improve productivity or reduce costs, and infrastructure will be an enabler for these radical challenges. However it will require expertise and cash, and the public purse has little left. With public capital in short supply, and the need to have community premises capacity to facilitate change in clinical practice – with care closer to patients’ homes – the Department of Health will be looking for developers and investors to manage the existing portfolio and optimise it in close consultation with clinical commissioning groups. This is where arguably some of the LIFT, and indeed PFI companies, are perceived to have failed to make the critical link between developing buildings and delivering effective health services.
A ‘new vision’ required
Aspirant CFTs, other NHS Trusts, and Foundation Trusts (FTs), are therefore to be given the opportunity to acquire part(s) of the PCT estate deemed ‘service critical clinical infrastructure’. That is, premises integral to the provision of community services commissioned from these NHS bodies. A new vision was required for managing and delivering these community premises, as the challenges facing the NHS with new models of acute care require this estate to be at the forefront of a changing NHS landscape, and to act as an enabler; PropCo could be the answer to regenerating community property to support frontline care in several ways. In particular, the changing NHS landscape demands new thinking, in tandem with the changing roles of the various central, regional, and frontline organisations, while the existing approach – of stripping out the expertise and human capital that is vital in advising, supporting, innovating, and underpinning, the evolving NHS and providers – needs replacing. There are also, to consider, the need to be able to transfer knowledge to ensure safety, to innovate, and to develop and then facilitate change; the blurring of the ‘interface’ between the public and private sectors, and the imperative of being able to source expertise, knowledge, learning, and best practice, from all sectors.
Employment implications
The DH has also confirmed that existing contractual arrangements with service providers that deliver and maintain NHS properties will remain in place, and will ‘support the needs of this property portfolio’. It is expected that the employment contracts of any PCTemployed staff maintaining and managing the buildings to be transferred will be subject to normal TUPE transfer requirements. The Health & Social Care Bill also contains provision for the Secretary of State to make staff transfer schemes, and such schemes may provide for the transfer of such staff alongside property, which would be transferred under the Bill’s powers.
Risk element will be key
The risks to PCT clusters in transferring the estate, and providers accepting ownership, will be a challenge; compliance with statutory and CQC standards will be a key, as will existing liabilities and new risks. Existing risks include legislative compliance (associated with the estate, such as fire, Legionella etc), and environmental/quality standards, while new risks to emerge will include financial risks related to technical issues, including estate valuation and impairment, void unused space, and the management of backlog maintenance. Who is to take responsibility, how will property be transferred, and do PCT clusters and providers understand the inherent risks to ensure compliance? After all, criminal proceedings can be taken for failures resulting in injury or failure to fulfil statutory requirements It remains to be seen how new arrangements will be put in place around support to the four regional offices of the NHS Commissioning Board, but there appears to be an interim proposal emerging around four private sector providers offering a range of services to the property company at this level. At a local level, the development of joint venture companies with a 50:50 ownership model to support the PCT clusters seems to be in the planning stage, with LIFT companies gearing themselves up to meet this new opportunity. The future share ownership within LIFT companies needs to be made clear. Although the NHS Property Company seems the natural home, the latest news is that this may sit with the commissioning board.
Site development issues
The process of site development, and maximising returns on land and property sales, alongside managing complex lease and JV opportunities, will require an expertise base which will need much more than a local company to get the best returns. With the NHS reducing its estate, land sales can be complex, and too often developments are characterised by delays. Consequently, time and resources are wasted by leaving buildings empty while the planning situation remains unresolved. The priority for the PropCo is to optimise the use of the existing estate, and to gear in sales opportunities via the development value of surplus estate. However, in doing so, it is expected to take note of Government guidance. The current emphasis in planning policy on brownfield sites’ is giving a helpful impetus to the re-use of hospital sites. Recent planning policy guidance notes clarify this issue. One key question is whether the skills and expertise to lead the development process required to deliver the needs and wants of all parties, and deliver a value-for-money solution, remain in the NHS? In short the answer must be no; we have seen substantial downsizing of professional expertise within the NHS. This expertise now sits in the private sector – with companies who have a core business of estate management to support NHS providers with innovative commercial solutions.
Seeking new private sector routes
The DH will need to seek new private sector routes to gear in capital investment and achieve efficiencies and radical shifts in care out of acute hospital settings. It will have to balance the need for investment in this community property portfolio with repayment terms likely to be over 30 years, set against new clinical commissioning groups with contracts for clinical services over a 5-7 year period. The property development company would be a major enabler for the CCG to commission clinical services to any qualified provider (AQP), minimising the risk of the property being a barrier to entry, as the AQP would simply take a lease for the period of the service contract (e.g. 5-7 years). Infrastructure remains an attractive asset class, and the current uncertainty in the debt markets will encourage Government backed/supported Investments. There is an opportunity for a new type of private sector partner with a background in maximising value to:
• Focus on reconfiguration and remodelling of hospitals.
• Create new infrastructure, and manage run-down or inappropriate facilities and deliver value from surplus estate.
• Work with partners who will invest in, and deliver, technology as a catalyst for new patterns of delivery.
• Manage infrastructure change.
The expected opportunities that will arise from the launch of NHS Property Services will be an excellent opportunity to test out this plan.