NHS hospitals play a central role in our healthcare system. They use around three quarters of the £110bn NHS budget and understandably their performance comes under close public scrutiny. Hospital managers are under heavy pressure to meet ­financial targets, as well as those related to the standards of care. Hospitals that are in regular de­ficit are often referred to as ‘failing’, even if they are performing well in terms of the clinical care that they are delivering. On top of the long-term pressure to meet fi­nancial targets, there is now a drive for the NHS to make £20bn of efficiency savings and for all NHS hospitals to become foundation trusts by 2014. Part of the current government’s solution is to give commercial companies the chance to take over the entire operational management of NHS hospitals that have persistent ­financial problems.

The first of these schemes has been signed with Circle; the company will now be managing the debt-ridden Hinchingbrooke Hospital from February 2012. It is very likely that this is just the fi­rst of many agreements that will be signed with private companies to outsource the entire management of NHS hospitals in line with the government’s commitment towards increasing both competition and the role of the private sector within the NHS. The deal with Circle can be viewed as a test run for a business model which might then be applied to run other struggling hospitals in the hope that it will alleviate debt and reduce costs. The major concern of any ‘business model’ applied to an NHS hospital by Circle or any other commercial organisation is that in order to reduce costs th99e fi­rst target will be a reduction in services.

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