The Public Accounts Committee (PAC) has criticised oversight of the failed contract to run Hinchingbrooke Hospital as “poor and inadequate” with “none of those involved in the decisions properly held to account”.
In a report MPs said the taxpayer “has been left exposed” after Circle announced its intention to withdraw from the contract to run the hospital.
Circle was the first private company to run an NHS hospital and took control of Hinchingbrooke Health Care NHS Trust in a 10-year deal in February 2012, but “Circle was not able to make the trust sustainable”, said the PAC.
MPs said the savings projected in Circle’s bid, £311 million over 10 years, were “overly optimistic and unachievable”.
The PAC said under the terms of the contract £7 million of risk was transferred to Circle, with the company agreeing to pay the first £5 million of any deficit and a further £2 million for costs in the event of the contract being terminated. In the first two years of the contract Circle made payments totalling £4.8 million to cover the deficit, while figures show a deficit of £7.5 million just for the first nine months of 2014/15.
Margaret Hodge, Labour MP and PAC chairman, said: “The total deficit incurred during the franchise will be well above the level that Circle is contractually committed to cover, leaving the taxpayer to pick up the rest of the bill.
“We want to know the total cost to the taxpayer due to the failure of the franchise, including the costs of transition arrangements and the total cost of covering the financial deficits incurred during the franchise.”
The PAC said a Care Quality Commission rated the trust “inadequate” following an inspection in September 2014, though this has been challenged by Circle and the trust.
Hodge said: “Public bodies will not achieve value for money from their contracts until they become more commercially skilled, both in letting contracts in the first place but also in ongoing contract management.
“While this was an innovative – but ultimately unsuccessful – experiment, we are concerned that none of those involved in the decisions has been properly held to account.”
A Department of Health spokesperson said: “Hinchingbrooke Hospital had severe problems for over a decade which needed sorting.
“After rigorous competition in a process that began in 2009, Circle had the most comprehensive turnaround plans, which included taking on £5 million of risk to the taxpayer.
“Under close scrutiny, the trust since made some improvements, but patients rightly expect high standards and we make no apology for our rigorous new inspection regime identifying underperformance wherever it is found.
“Because the contract was designed to significantly reduce risk to the taxpayer, Circle has not received a single payment from the trust or any other NHS body.”