PFI

1
PFI LIFT in Englands National Health
Service Keith Morton Department of Health Capital
Investment Branch PPPs For Health HMA Lisbon 28
September 2005
2
Overview

• Background to Health PFI
• PFI Development
• LIFT investments in Primary Care
• Independent Sector Treatment Centres
• The Future

3
Health PFI background

• Programme started in 1997, with Private Finance
  Act
• Based on output specifications not inputs, with
  payment based on performance.
• Core elements - design, construction,
  maintenance of facilities
• Optional elements - soft fm (cleaning, catering,
  laundry, portering, security), equipment
• Long term service contract typically 30 to 35
  years

4
Health PFI to date

• Since May 1997 127 PFI hospital schemes worth
  over 25bn (17bn) have been approved to proceed.
  
• 46 hospital schemes worth 3.7 bn (2.5bn), are
  already operational
• A further 31 worth 4.6bn (3.1bn) under
  construction.
• The remaining PFI schemes at various stages of
  procurement, including 15 schemes approved in
  July 2004

5
Health PFI to date
University College Hospital - London
6
Health PFI to date

• PFI provides a range of facilities
• Major acute hospitals
• Whole site, partial sites and refurbishment
• Community Treatment Centres
• Mental Health Centres
• Primary care developments
• Largest scheme closed to date 750m (500m)

7
Health PFI Successes

• Major investment in facilities largest ever
  building programme in the NHS
• Avoided previous stop/start nature
• Schemes delivered to cost
• Schemes delivered on time
• Allows Trust to concentrate on delivering
  clinical services
• Buildings maintained in good condition
• Consideration of whole life costs
• Innovations on design
• Value for money confirmed

8
Development of PFI

• Procurement process streamlining
• Standardisation
• Contract
• Payment mechanism
• Output specifications
• ? commodity product
• Employment terms
• Project scope / market interest

9
PFI current issues

• Operational Issues
• Soft service benchmarking
• Payment Mechanism
• Variations
• Capacity / Affordability
• PFI Hybrids

10
PFI Batching

• Mechanism for smaller schemes
• Joint procurement of similar schemes
• Speed up the delivery
• Reduce transaction costs for the NHS and bidders
  alike
• Attracting new entrants
• Uses unit rate approach to cost schemes
• First two schemes have appointed preferred bidder

11
LIFT Local Improvement Finance Trust

• Started in 2000
• Substantial improvements to primary care premises
• Simpler contract than PFI
• General practitioner co-located with other
  community facilities
• dentistry, pharmacy,
• community clinics eg diabetes
• cardiology clinics, diagnostics eg x-rays
• local council services, housing, social services
  etc

12
LIFT Structure

• Partnerships for Health joint venture between
  Department of Health and Partnerships UK (PUK)
• Limited company - LIFTco owns and maintains the
  building and leases the premises
• Stakeholders
• 60 Private Sector
• 20 Primary Care Trust
• 20 Partnerships for Health
• 20 year partnership

13
LIFT to date

• 50 LIFTs, 37 have started building
• Programme total value 1.5bn (1bn)
• 23 buildings opened, 50 expected by year end
• Premises average 7.4m (5m),
• but can be upto 45m (30m)
• Strategic Service Development Plan focuses on
  services outcomes not just premises
• Value for Money demonstrated through competitive
  process and verification of levels of rent
• Procurement 15 months

14
ISTCs Independent Sector Treatment Centres

• Adding capacity, contestability and choice
• Providing elective clinical services and
  diagnostics
• Contract for volumes of activity
• Payment at dual tariff
• NHS tariff paid by PCTs
• Additional tariff by the Department
• Some new facilities provided
• Facilities can revert to NHS at the end of the
  contract.
• Standards monitored by the Healthcare Commission

15
The Future

• PFI successful mature product
• But the only constant in NHS is change
• Plurality agenda new providers
• Hybrid models?