NHS properties: what we all need to know

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In April 2016, Poltair Hospital near Penzance was sold to a property developer for £500,624. The site’s limitations were widely acknowledged, but there was a strongly expressed local view that the capital receipt should contribute to alternative local provision. The owner, NHS Property Services (NHSPS), would give no such commitment.

In December 2016, NHSPS took over 12 community hospitals and other facilities in Devon. Concerns about potential disposal of sites led the then Totnes MP, Sarah Wollaston, to argue in 2017,

“Where buildings are sold, particularly where they have been funded by communities, there should be an equivalent amount spent to benefit local people”.

Does this argument stand up?

I think that in a national health service, with wide variations in local land and property values, redistribution of capital investment may sometimes be needed. But this needs transparency to gain public confidence. This is certainly not what is happening now.

NHSPS was set up in 2011 as part of the coalition government’s NHS reforms, with the preceding white paper promising to, “give the NHS a coherent, stable, [and] enduring framework for quality and service improvement”.

NHSPS was incorporated as a limited company in December 2011, with a £1 share issue, and the secretary of state for health as sole shareholder. It became landlord for around 3,000 properties previously managed by 151 primary care trusts and ten strategic health authorities, with tenants including general practice, community hospitals and health centres.

Having been granted a start-up loan of £190m from the department of health, Companies House records show that by December 2012 a further £140m had been invested in company shares. In November 2013, a ‘flexible loan facility’ of up to £350m was agreed.

Meanwhile, options for selling to the private sector were being considered. An investigation by the National Audit Office in March 2014 reported that: “The Department’s internal documents … show that it has considered different options. One is to split the service into between 25 and 50 local organisations, which would be joint ventures between the department and the private sector; another is a complete sale to the private sector.” (NAO, 2014: 7).

More money was put into NHSPS a year later, as the department increased its share ownership to £225.3m in March 2015, rising in February 2016 to £253.8m (NHSPS Annual Report & Accounts, Companies House). Yet another share issue, in March 2017, brought the total investment to £256.2m.

During this period, a very significant decision was taken in April 2016. The system of determining rents on the basis of recovering costs was replaced by setting them at ‘market levels’. Accompanied by disputes over billing arrangements, this has generated considerable controversy and challenge. In the summer of 2019, for example, local media reported rent increases for Seaton and Colyton Medical Practice in Devon from £15,422.66 in 2016/17 to £34,657.39 in 2017/18. The practice manager told Devon Live in 2019:

“The maintenance is poor and impacts on staff and patients, while the astronomical rise in maintenance charges means we have to seriously consider the financial viability of continuing to operate from this site, something we definitely wish to do.”

This local experience was repeated around the country. Subsequent disputes led the board of NHSPS to even consider the eviction of tenants. Redacted board minutes of 22 March 2018, released in response to FOI requests, report a discussion about one practice:

“Great care is needed when dealing with GP services . . . Whilst ready to go ahead with the eviction process . . . approval is being sought from ministers first as this is a test case.”

On 24 May 2018, the ‘shareholder representative’ (who represents the secretary of state as sole shareholder) “confirmed that a briefing to ministers on the case had been sent which, if agreed, would allow the company to commence eviction proceedings in this important test case”.

A second investigation into NHSPS by the National Audit Office in 2019 refers to documents from 2015 and 2018 in which NHSPS’ progress and future are considered. I submitted an FOI request to the Department of Health & Social Care (DHSC) for disclosure of these documents. The request was refused, and I was told:

“We are withholding this information from the 2015 assessment because in this case the documents include candid evaluations and risk assessments by officials and Ministers involved in the assessment process and frank consideration of the pros and cons of the different commercial and value for money options and the consequences for the Company and the Department.”

I requested an internal review, which in September 2019 upheld the decision. Two months previously, the DHSC’s annual report and accounts had been published in which the value of its shareholding in NHSPS was estimated to be £906.5m – considerably more than the £256.2m invested.

So I requested disclosure of the independent valuations. Redacted extracts from documents produced by PwC, the professional services’ giant, were disclosed, one describing the accounting approach used. This explains its focus on the earnings opportunity of NHSPS:

“We believe an earnings approach to be more relevant as a market acquirer would focus on the earnings potential of NHS PS (sic).”

Raising rents may make this more attractive to a buyer, but should this be the goal for an organisation wholly owned by the DHSC?

NHSPS’ web site currently lists 216 properties for which it is landlord in Devon (107), Cornwall (46), Somerset (41) and Dorset (22). Many involve multi-property sites, but it is a substantial portfolio nonetheless, including GP surgeries, clinics, health centres and hospitals across the four counties. A very large number of people have an interest in who might become a future landlord for the premises in which these services are located. There may be a case for moving the investment of capital receipts between areas, but the prospect of transferring this control to the private sector is deeply worrying.

My request for disclosure of the DHSC’s documents is now with the information commissioner. The DHSC’s refusal is based on one of many exemptions within the FOI legislation, in this case s35 which relates to the “formulation and development of government policy”. This is what is known as a ‘qualified exemption’, meaning it cannot automatically be applied but its application must be shown to be in the public interest. If serious consideration is being given to using increased shareholder value, stimulated by increased rents, to explore disposal to the private sector, there is surely a public interest in knowing this before it has all been set in stone.

NHSPS is landlord of properties from St Mary’s Hospital on Scilly, to Shepton Mallet Hospital in Somerset and health centres in Poole, Dorset. Greater transparency around decisions is essential. Without this, those making decisions escape accountability and local voices are ignored, with disturbing long-term consequences for the NHS.