The Board of Directors at Chesterfield Royal Hospital NHS Foundation Trust has concluded that a wholly-owned subsidiary company will safeguard valuable and essential services, protect jobs for hundreds of staff – in turn enabling the Trust to focus on sustaining a full range of core clinical services for the 400,000 people in North Derbyshire it serves.
At its public meeting yesterday (July 25 2018) Board members discussed a business case that outlined how the wholly-owned subsidiary would operate as well as what workforce and financial advantages it could bring to services including finance, estates and facilities, IT, procurement and clinical engineering.
The decision was described as one of the most difficult the Board has had to make in its 15 years as an NHS Foundation Trust. The Trust already faces an £8 million financial savings challenge for 2018/19 - trying to meet an increase in demand for care, with no growth in funding. Across Derbyshire, health providers and commissioners have a combined deficit of £80 million to resolve - so every organisation is adapting how it works, finding more innovative ways of working and making some difficult choices to preserve key services.
It was agreed by Executive and Non-Executive Directors that creating a wholly-owned subsidiary is the best way to preserve jobs in-house, prevent potential outsourcing to the private sector or a reduction in staffing numbers. It will also enable support services to operate in a more dynamic way. The new company will benefit from running healthcare facilities and support services on a more commercial footing - to best practice quality standards, in a cost effective way, and giving the public value for the money they put into the NHS.
The business case the Board worked through sets out potential savings of between £2-5 million a year, over the next five years - including savings realised by a different workforce model, efficiencies to revenue and capital costs and opportunities to increase income by providing services to other public sector organisations. The Trust already has a successful track record in this regard within its procurement service, which supports some local authorities with their purchases and contracts.
Yesterday’s decision means the Trust will now consult with more than 700 staff on the protected terms of their transfer into the subsidiary, which will be called Derbyshire Support & Facilities Services (DSFS). The aim is for the company to commence on December 1 2018, with an initial contract with the Trust for 25 years. Under the legal agreement of TUPE (Transfer of Undertaking for Public Employees) all staff will have the right to transfer and keep all their existing terms and conditions, employment rights and liabilities. This protection applies to their NHS pension, pay (including enhancements, overtime, and on-call allowances), sick pay and annual leave.
Since April 2018, when Director of Finance at the Trust, Lee Outhwaite, was given a mandate by the Board to explore the wholly-owned subsidiary idea, there have been opportunities for every member of staff and other interested parties to have their say about the proposals - whether they supported the idea, or not. He comments: “I know the initial announcement created anxieties and that it’s been a worrying time for colleagues. I still believe that being open and honest, to engage staff and others, at the start of the process, was the right thing to do, so they could contribute their views and thoughts. They have helped to shape this business case, with what matters most to them in terms of safeguarding their future employment.
“As a Board we have carefully considered all options and built in protection for the staff transferring over - to prevent any negative impact. We agree that this is the right time to take action by establishing a wholly owned subsidiary, but with the knowledge that staff will be concerned about the prospect of moving into the company and what it will mean for them. The Trust is absolutely committed to working with them over the next few months to ensure that we secure their valuable and essential services and jobs.
“Derbyshire Support & Facilities Services will look after all of those staff that work so hard, often behind the scenes to enable clinical staff to look after our patients. The wholly-owned subsidiary will have a key role in our organisation’s future and in the local economy - helping us to maintain a full portfolio of clinical services, safeguarding a whole range of roles and opening up new opportunities. Above all, in taking this decision, the Board is setting out to work in partnership with staff to create a good place for people to work, where patients are given the best possible care, from within first-class facilities that offer exceptional support services.”
Highly controversial
The wholly-owned subco model continues to be highly controversial. Speaking at the HEFMA Forum in May, Simon Corben, Director and Operational Lead for Estates & Facilities at NHS Improvement warned he and his team would be scrutinising new subco proposals with a fine-toothed comb. NHS Improvement is leading a programme to improve the visibility of newly formed subsidiary companies to ensure they comply with tax law and to consider the effects they may have on the short – and long-term future of the NHS.
Unions have also continued to fight proposals for wholly owned subsidiary companies. Protests were staged yesterday in York and Chesterfield by unions and health workers who are worried about their jobs and the future of services.
Unite National Officer for Health, Colenzo Jarrett-Thorpe says: “The government’s proposal for a consultation on wholly owned subsidiaries is a step in the right direction finally, but it falls far short from what Unite is calling for.
“We want HMRC to close the tax loophole so NHS Trusts are not forced to consider outsourcing NHS services to private limited companies in the form of a private wholly-owned subsidiary of NHS Trusts.
“We want the new Secretary of State for Health and Social Care Matt Hancock to enforce a moratorium on the further creation of other wholly-owned subsidiary companies while this consultation is taking place and for those that are in the process of being created to be paused while the consultation takes place.
“We also think any review should go further so it investigates outsourcing, procurement and commissioning by NHS trusts in England; and seeks the views of patients, employees, local authorities, and health and social care stakeholders.
“The review should aim to establish a fair and transparent ethical outsourcing procurement and commissioning framework which will avoid the mistakes of the past.”
However, NHS Providers has reaffirmed its support for wholly-owned subsidiaries, saying that Trusts must not be prevented from using them and that criticism of this approach could undermine the legitimate use of the subco option.
Chief Executive of NHS Providers, Saffron Cordery, says: “It is understandable that people will want reassurance on important issues such as staff terms and conditions, and it is important that these are addressed through consultation and dialogue.
“However, in an environment where providers are under enormous pressures, Trusts are right to consider ways in which they can provide services safely and more efficiently.
“This is not a device for privatisation. Many front line leaders tell us WOS allow them to keep services within the NHS family, allowing taxpayers’ money to stay in the system, rather than outsourcing to the private sector or cutting staff or services.
“What we need to do is maximise the benefits of setting up a subsidiary and mitigate the risks, rather than undermine or prevent Trusts from using them.”
Earlier this month Wrightington, Wigan and Leigh NHS Foundation Trust (WWL) cwithdrew its plans for a wholly-owned subsidiary – WWL Solutions - following a deal brokered through Wigan Council that was accepted by the Trust and unions.
Robert Armstrong, Chairman of WWL NHS Foundation Trust, says: “I am delighted that Wigan Council has been able to find a funding option that means we can withdraw our plan to create a wholly-owned subsidiary.
“WWL has only ever wanted to protect the financial stability of the Trust in order to preserve jobs and deliver high quality patient care.”
