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Auditor: NHS must get tougher on private deals

The National Audit Office (NAO) has warned NHS Trusts that they must become tougher and shrewder negotiators in future deals with private firms.

The warning follows Hinchingbrooke Trust’s deal with Circle, in which Circle aims to make over £300m of savings in the 10 years it will run Hinchingbrooke Hospital.

The NAO is concerned that Circle's ability to make the savings has not been properly tested, despite some positive signs.

In its audit report, the NAO said: “The Trust’s performance against standards for cancer and accident and emergency waiting times has improved since the franchise began in February 2012.

“However, the Trust had generated an in-year deficit of £4.1m by September 2012, which was £2.2m higher than planned to that point.

Circle plans to achieve the £311m savings were also “unprecedented as a percentage of annual turnover in the NHS,” it said.

“However, Circle is not committed to delivering the proposed savings initiatives submitted during bidding, such as reducing the lengths of hospital stays.  Most of the savings are expected to be madein the later years of the ten-year franchise.”

The NAO said that although the Trust assessed the reasonableness of bidders’ savings proposals, it did not fully consider the relative risks of these proposals.

“Assessing schemes in this way has the potential to encourage over-optimistic bids,” it said

But the BBC reports that Health Minister Lord Howe says he has been "encouraged" by what has happened so far.

"Hinchingbrooke is showing that operating franchises can be a powerful tool for turning round failing hospitals," Howe said.