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Archive for the ‘NHS Property Services’ Category

Aug
18

I know the word ‘estates’ can act as a good sedative too many, with its own impenetrable set of terms and acronyms, but we can’t afford to ignore it any longer.

One of the biggest unintended consequences of the reforms is the complete inertia in the development of community and primary care estate. Like it or not, it is down to CCGs to tackle this, because if we don’t it is extremely unlikely anyone else will.

Here’s why. Historic PCT estate strategies primarily focussed on LIFT or other developments whereby the additional revenue costs were to be funded through commissioning savings. By separating out the secondary care commissioning budget from the estates budget, no single organisation can now create this type of business case. So the incentive to develop out of hospital estate has suddenly disappeared from the system.

There are a number of players on the pitch, some more willing than others! And, if you are from a CCG, you are one of them! Let’s look at each of the others.

First, the Area Team. The funding for primary care premises sits within the Area Team budget. It is within their baseline allocation for primary care, meaning that it is not ring-fenced or identifiable. Any new applications for borrowing costs or notional rent for new developments are entirely conditional on the availability of funding within the Area Team baseline.

So any new developments add cost to Area Team budget, without them receiving any additional income in return. Not a surprise then that no drive is forthcoming from Area Teams to develop primary care estate!

What about NHS Property Services? Well their role is confusing. They have taken over the management of previously PCT owned community and primary care estate. Essentially they charge CCGs and Area Teams for managing this estate, so they are estate managers. But they are more than just managers because they also now own this estate. So they have talked about a ‘capital programme’ for estates investment to be rolled out later this year.

But any capital programme will be prioritised on a much bigger footprint than any individual CCG. Contact with CCGs by NHS Property Services remains, at best, minimal. The chances of them driving, or even being able to drive, a local estates strategy that makes sense for the local health economy is zero.

Another key player is the local council. They are responsible for all local developments. If a developer wishes to build new houses, under the Town Planning legislation they have to pay money to offset the costs of the external effects of the development, i.e. the impacts on schools, health, police etc. This is referred to as Section 106 funding.

By effective joint working with the councils, health can ensure that it receives appropriate 106 funding. Conversely, if it does not get involved with new planning applications the opportunities can be lost. Councils have an important support role, but they need the drive to come from health.

There is of course another estates company on the market. Community Health Partnerships (CHP) is a ‘sister’ company to NHS Property Services. It has existed for a number of years and has established 49 LIFT companies, and took over responsibilities for LIFT estate following the abolition of PCTs. To further confuse matters, NHS Property Services supplies estate management and financial services on behalf of CHP (still with me?).

So what of LIFT? Well where one exists, CCGs are better placed than others, not least because LIFTCos are obliged to have a Strategic Service Development Plan (SSDP), which underpins local estate development. Now most commentators believe that it is unlikely there will be any new LIFT developments other than those already in the pipeline.

But maybe the most sensible commentary on the current situation has come from the LIFT Council, which is the trade association for the private equity investors into LIFT schemes. They suggest the development of, ‘Local Estates Forums, modelled perhaps on LIFT’s Strategic Partnering Boards, to enable CCGs, Health and Wellbeing Boards, Local Area Teams, Commissioning Support Units, Local Authorities, LIFTCos and the local outposts of NHS Property Services to map estate needs and plan what is necessary to deliver Joint Strategic Needs Assessments and Local Strategies. These Forums could potentially by formed as a sub-committee of the Health and Wellbeing Boards to ensure that they are locally focussed and led.taken from LIFT Council position paper

I think they are right. They suggest NHS England needs to be the convenor, but I would suggest CCGs get these moving and set them up themselves.

I know many find estates a dry topic, and the complexity of it can feel insurmountable, but the sad truth of the matter is that the CCG voice on estates is currently absent. It is sort of understandable. PCTs had estates people who could drive a PCT view. CCGs, without that expertise, seem to be shying away from the issue, and leaving it in the ‘too difficult’ box.

But CCGs need to be driving this. We are the only ones with the real incentive to do so, and without it, unfortunately, any plans we have to shift activity out of hospital are going to be hit by a lack of brick walls.

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Jan
27

In April 2012 we outlined the risks that the establishment of ‘PropCo’ or NHS Property Services would create for CCGs (http://ccginformation.com/?p=121).  It seems these are now starting to be realised.  The Health Services Journal reported on the 24th January that, ‘the new NHS property company is likely to charge clinical commissioning groups for any assets it takes ownership of whose costs are not fully met by rents or service charges’.  It states, ‘the cost of plugging this gap could be £500M a year’.

Most PCTs charge a ‘service charge’ to providers for use of commissioner estate.  However, the definition of this is generally weak, and it tends to sit as a summary addition to the contract.  Turning this into individual specifications for service lines for each building will be almost impossible because of the variation of buildings, on-costs and maintenance.

Formal rents are generally not in place with providers.  It was not in PCTs’ interests to do so, because the rent would have simply added to the cost of the commissioned service.  CCGs are about to become the unwitting victim of these historic decisions.  NHS Property Services will now be free to determine the rental value of the estate, and the risk is these valuations will end up restrictively high.

So property is given to NHS Property Services for free.  They in turn will charge a full rent back to CCGs to use the property, one that is potentially too high based on their own valuation of the property.  CCGs either pay the rent as an additional cost pressure, or increase the charge to those providing the service for the building.  Either way the CCG loses, because in the latter scenario the provider will simply charge the CCG more to provide the service.

The key issue is statutory compliance.  While PCTs were prepared to manage the estate essentially through capital funding, NHS Property Services without the back up of the rest of the commissioning budget cannot.  The level of backlog maintenance across all of the PCTs is unquantified, but it is certainly hundreds of millions of pounds.  Large parts of the commissioner estate are old community hospitals that will never present a risk free environment for patients.  The Treasury currently provide insurance and indemnity cover, and for NHS Property Services to obtain this independently it would require a massive upfront investment in the estate they inherit.

All this points to the cost of community estate reaching PFI levels.  This will slow down the shift of services out of hospitals to a crawl, just at a time when CCGs need to be stepping on the accelerator.  There is something soporific about estates and estates people, because they talk in an impenetrable language that make most of us glaze over within minutes of a conversation starting.  But CCGs that do not actively engage in the debate out NHS Property Services soon could easily find themselves in serious financial difficulty next year.

So what should CCGs be doing?  Below are four urgent actions every CCG should be taking now:

Sell vacant estate. The problem has been exacerbated because the PCT estates functions are transferring to NHS Property Services.  As such there has been no incentive for them to sell vacant estate.  On the contrary, there are incentives for them to take that with them.  CCGs must not let this happen.  In the transition work with the outgoing PCT they must be adamant that this is sold now without any further delay.

Review the financial returns.  It is critical that CCG Governing Bodies are sighted on the financial returns that are being made by the PCT in relation to the estate and the transfer to NHS Property Services.  This issue has to be on the Governing Body’s radar now.

Signal a rent charge to providers for next year.  CCGs cannot afford to just absorb this as a cost pressure.  They will need to understand the cost implications and identify what that means for the estate they are using and intend to use.  It is important that where rent charges need to be introduced for providers that this is signalled now.

Review planned QIPP schemes.  The changes means that gaps between property costs and income generated from rent and service charges will be revealed.  Many CCG QIPP schemes rely on using community estate to deliver services out of hospital.  These plans need to be critically analysed to ensure that they still make the saving required when the full estate costs are taken into account.

 

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Apr
22

The expectation that Clinical Commissioning Groups (CCGs) will accelerate the shift of workload and resources out of hospitals into primary and community care is high.  Many believe that whether or not CCGs are successful will be determined by their ability to achieve this.  But what the formation of ‘PropCo’ does is severely restrict this ability, and here we explain why.

For those who do not know what PropCo is, it is a new national property company owned by government that will take over the ownership and management of the primary care trust estate.  The formation of NHS Property Services Ltd (PropCo) was announced in January. Clarity as to how the private sector will be involved is awaited, but the possibility of the company being sold by the government has not been ruled out.  It is already clear that it will receive no NHS or government funding, and is expected to become a source of income generation for its owners.

Those in favour point to the fact that it solves the problem of where the estate will go following the abolition of the PCTs and SHAs.  Finance Directors are excited by the removal of buildings from the balance sheet.  The DH see the ability for greater efficiency in the management of the estate, with resources freed up to improve properties and invest in other frontline services.  In fact it is fair to say that there has been very little reaction to the announcement of the creation of PropCo since it was made in January.

But for CCGs this has significant implications.  It makes the shift of resources out of hospital much more difficult.  Below are listed 5 reasons why:

1.       Benefits of Capital Sales will go to PropCo

This may seem obvious, but where capital funding is scarce it is currently increasingly common for NHS organisations to sell land or buildings it owns in order to fund developments on other buildings, or on the same building on a smaller footprint of land.  This opportunity will be gone with the transfer of buildings to PropCo.  The new company will be driving better use of buildings (potentially by increasing running cost charges) so that buildings are vacated and can be sold, and pocketing the benefit.  None of that benefit will be coming directly to CCGs.

2.       Running costs of Community Services will go up

A key argument to justify the creation of PropCo is that the running costs will be reduced.  While this may or may not be true in the round, it is unlikely to be the case for CCGs wanting to increase their usage of the estate.  CCGs will be looking to expand service provision in primary and community care and so will have an increased need for estate.

If PropCo is not funded by government and is expected to survive by maximising its property portfolio, the immediate concern for all tenants must be whether the change in landlord leads to significant hikes in rent payments to help PropCo build up some working capital. The irony of course is that this may impact not only on the community estate but also on GP practices.  Where rents in PCT owned property are below market value (which is common), PropCo may well be expecting them to rise.  If there is no written lease in place with arrangements for future rent reviews, trouble could well be looming.

3.       Reduced ability to develop community estate quickly

As a limited liability company not an NHS organisation, will PropCo be able to use the procurement frameworks that are in place and available to PCTs?  These frameworks significantly reduce the lead time for the development of new capital projects and if PropCo cannot use them, and it seems unlikely that they will be able to, this will mean that new capital projects that CCGs wish to undertake will take considerably longer to complete.

4.       Loss of expertise in developing community estate

Estates staff in PCTs will transfer to PropCo.  The impact of losing the more traditional estate manager may not be so significant, but many PCTs have invested in strategic estate managers to support the shift of services into primary and community care.  These staff, and this expertise, will be lost to CCGs, and it will be very difficult to attract such staff into posts as all the estate will have been transferred!  Pace in the shift of services out of hospital relies on the rapid development of fit for purpose estate in the community, and CCGs may struggle to find the expertise they need to make this happen.

5.       Opportunities for joint working with community partners reduced

We often see informal arrangements entered into between PCTs and other organisations, where social enterprises or councils are allowed to use space owned by the PCT without any clear documentation. Even where some documentation, such as a section 75 joint partnership agreement or a services contract exists, this may not expressly deal with the occupation of property or satisfy the legal requirements to be a formal right to use that property. This means that when the property transfers to PropCo the new owner may have no legal obligation to allow continued use on the same terms.

The most surprising part of all of this is that it has not been picked up by CCGs as an issue.  It is critical that CCGs look beyond authorisation and this year’s QIPP plan, and ensure that the system they are stepping into is set up to enable them to succeed.

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