HEALTHCARE Hospital Collaboration in the NHS

Exposing the myths

kpmg.com/uk/healthcare © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents 01 Foreword pages 01-03 02 Emerging trends pages 05-27 03 Funding collaboration pages 29-33 04 Conclusion Methodology Acknowledgements References pages 33-38

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Collaboration should be viewed in terms of what’s best for the patient, rather than its impact upon organisational or individual status.” Sir David Dalton, CEO, Salford Royal NHS Foundation Trust

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Collaboration helps providers strengthen their position vis-a-vis commissioners, offers wider services to the local health economy and improve their fnancial status

Foreword Is NHS collaboration working? Given the rise in mergers and acquisitions (M&A) between Acute and Foundation Trusts, and the enormous effort involved, this question is on many lips. Anyone reading the news could be forgiven for believing that the answer is a resounding “no,” based upon the mainly critical reports. This paper sets out to expose some of the myths about healthcare collaboration, by presenting the views of those with on-the-ground experience of mergers and other forms of partnerships, not just in the UK but around the world. Along with a KPMG survey of UK Trust Chief Executive Officers (CEOs), the responses build a compelling picture of why hospitals choose to come together, what they expect from collaboration and the reasons for success – or failure. KPMG in the Netherlands has been carrying out a similar review of collaboration for the past four years, and we augment our findings with some key comparisons from this year’s Dutch publication, which shows that, despite some fundamental systemic differences, many of the issues are international. According to Anna van Poucke, Partner at KPMG in the Netherlands, the Dutch and UK systems face very similar challenges: “Acute providers in both countries face financial Beccy Fenton strain, an ageing population, increasing demand and requirements to improve quality of Partner, KPMG in the UK care. Selective procurement by commissioners further increases volatility of turnover. In the Netherlands, consolidation has reduced the number of Trusts by a quarter in the past six years, without reducing accessibility of care. Collaboration helps providers strengthen their position vis-a-vis commissioners, offers wider services to the local health economy and improve their financial status.” We also pay particular attention to the ongoing challenge of funding, looking at a range of innovative approaches that can help hospitals make better use of their resources. We would like to thank all the senior healthcare figures that took part in this publication. In our view this document is just the start of a dialogue between all the stakeholders in Matthew Custance the system, helping to explore innovative and sustainable models of care in the NHS. Partner, KPMG in the UK

Hospital Collaboration in the NHS | 01

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Executive Summary Our review of collaboration reveals key trends, ongoing concerns, and pointers to future success: 1. Collaboration remains a 4. Many Trusts and Foundation Trusts 6. Alternative forms of high priority fail to realise the benefits of M&A… collaboration are becoming Mergers and other forms of collaboration This is due to a number of factors more popular can enable hospitals to transform care including: unrealistic expectations of Sixty percent of respondents in our delivery, which explains why around two short-term gains; underlying problems study are involved in clinical networks, thirds of the Trusts and Foundation Trusts that existed pre-merger; unwillingness information sharing, joint treatment in our study are, or have been, involved in to invest in the new organisation; a or diagnostic centres, new shared one or more forms of collaboration over ‘winners and losers’ mentality that assets and joint construction of new the last year and a half. Quality of care – undermines mutual trust; and a lack of facilities. Joint ventures, franchises, rather than financial sustainability – is the attention to cultural integration and good and cooperatives are also becoming primary driver. communication during implementation. more common. Both the Dalton Review Nigel Edwards, CEO at the Nuffield and the NHS ‘Five Year Forward View’ 2. Commissioners and regulators Foundation, argues that NHS hospitals suggest that the NHS should actively are an increasing influence on do not have ”codified management pursue a wider range of care delivery collaboration systems” that can be applied to new models, and, consequently, organisational Almost three quarters of the respondents partners. The challenge is not limited forms. In Canada, for example, the state cite some type of involvement from to the UK; 82 percent of respondents of Ontario has several examples of either Monitor or the Trust Development to KPMG’s study of Dutch hospitals joint clinical programme management Authority (TDA) in their collaboration. state that they have yet to realise the between two or more hospitals, covering Involvement of commissioners is intended benefits. specific diseases or clinical interventions. even higher. Forty-two percent of KPMG’s Beccy Fenton stresses that: 5. …but many have got it right hospitals claim to have a mutual “Ultimately, the type of collaboration agreement with commissioning bodies It is easy to forget that many should be closely tailored to the type of regarding any collaboration. A further collaborations, including mergers, have challenge it is addressing”. 37 percent informed the commissioner yielded extremely positive results. about their collaboration. Our review of best practice in the UK 7. Collaboration opens up and around the world reveals common solutions to NHS capital funding 3. M&A is on the rise themes of a strong, experienced constraints Mergers are the most intense form of leadership team; a shared vision between Care transformation requires considerable collaboration and are proving increasingly all parties; clear, regular and consistent change to health infrastructure, not attractive. There were nine deals between communication; and a genuine attempt to least to enable the shift to primary and 2008 and 2013, and ten in 2014 alone, build a culture of equality. KPMG’s Matt community-based care. Capital funding with a further three being explored. Custance argues that: “Change will only is particularly vulnerable, as it does not If all transactions are completed, the succeed if there is some mechanism, receive the same protection as revenue number of independent Acute Trusts and such as a contract, to lock the parties into funding. The good news is that the Foundation Trusts could drop by eight delivering the transformation.” Above all, funding markets in England are loosening. percent from 160 to 147 within just a collaboration needs to be given time, with The gap in public finances provides an few years. longer-term clinical benefits taking priority opportunity for private finance, despite over immediate financial gains. its detractors, to play a major role offering innovative funding solutions provided by a widening range of financial institutions.

02 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Rather than a classic ‘design-and-build’ approach, hospitals are leasing facilities Eight lessons learned to facilitate successful that are funded by a widening range of collaboration financial institutions. Another option is strategic estates partnerships involving Eight key elements of best practice emerge from the experience of the expert specialist estates managers, with commentators contributing to this paper, and the successful case studies: responsibility for planning and managing 1. Design the solution to match 5. Engage and communicate the entire site, including sourcing capital the problem with staff for essential developments. Collaboration The form of collaboration should match Collaboration cannot succeed without also opens up opportunities to reassess the goals and the challenges of the clinical involvement in planning the estate and raise funds to invest in institutions involved and the needs of and redesign of services. And it is new care models. the local health economy. A merger an unsettling time, and all staff will 8. Collaboration across tiers of may be right for some Trusts, whereas want to know the progress of the care is inevitable others may benefit from looser transaction, and, crucially, how it may It is not just Acute and Foundation alliances such as franchises. affect them. Trusts that will be getting together. 2. Prioritise sustainability over 6. Don’t underestimate the Fifty-six percent of respondents are short-term financial aims importance of culture considering collaboration with other Collaboration is complex and difficult, Leaders need to understand cultural organisations in the care system, which and leaders need time to right past similarity differences in order to could herald joint ventures, franchises, wrongs and create successful new address divisive sensitivities and and cooperatives with primary care working structures and relationships. hence ways of working to suit providers, community and social care Ultimate success should be based all parties. providers or private sector organisations. upon care quality and value, which 7. Standardise and codify should be methodically tracked. good practice 3. Ensure that both parties have It is much easier to transfer something to gain… standardised, documented operations Create common goals via binding that are based around people, not contracts and joint performance processes, as these ensure a common targets, to stimulate commitment. approach to care. of respondents 4. Remember, it’s all about 8. Align payment and incentives are considering the patient New care models should encourage Retain a focus on patient care that collaboration across tiers of care, such collaboration with transcends the egos of leaders and as primary and community, which call avoids a culture of ‘winners and losers.’ for payments and incentives focused other organisations in on patient value. the care system...

Hospital Collaboration in the NHS | 03

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Partnerships should be symbiotic relationships based upon trust. In some cases the contract actually gets in the way of doing the right thing.” Mark Hackett, CEO, University Hospitals of North Midlands NHS Trust of the hospitals participating in the study are involved in some type of collaboration.

Emerging trends Emerging trends in collaboration among Acute Trusts and Foundation Trusts in England Our survey responses suggest that collaboration will play a central role in the efforts of Trusts to transform their services, with a rise in M&A and an increasing willingness to embrace new types of partnerships. And, with commissioners and regulators getting more involved with M&A, leaders have to liaise closely with these bodies to ensure a smooth path to implementation. This section examines organisational motives for collaboration, and looks at some of the barriers to success, such as an obsession with short-term gains, a lack of mutual cultural appreciation and a ‘them and us’ mindset. We also summarise the 2014 Dalton Review and present an interview with its author, Sir David Dalton, who argues that consolidation aids efficiency, and urges Trusts to consider the widest possible types of collaboration, in addition to mergers.

Collaboration is high on the Of the Trusts participating in our study, Do you expect to look for a collaboration executive agenda 63 percent are taking part in some type of partner in the next three years? collaboration, and 16 percent are, or have • Seventy six percent of respondents been, involved in a merger or acquisition envisage collaboration within the next since January 2013. three years Looking ahead to the next three years, • Trusts need a compelling reason three quarters expect to work together for collaboration No 24% with other institutions, with the most 80% • A formal, contractual agreement popular choices of collaboration being can increase commitment from clinical networks, joint procurement, Yes 76% both parties. cooperative forms and healthcare 60% logistics such as joint information for the NHS hospitals have been collaborating purpose of planning, and exchange of for a variety of reasons for many years. patient related data. 40% They choose from a range of forms, both formal and informal, including full M&A, In the corresponding survey of hospitals clinical networks, procurement alliances, in the Netherlands, almost half of 20% joint treatment or diagnostic centres, and the respondents are engaged in a information sharing. collaboration, with 13 percent carrying 0% out an acquisition and 30 percent involved in a merger.

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© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Almost three quarters of respondents say that either Monitor or the NHS Trust Development Authority (TDA) were involved in their collaboration, and state that commissioners had some form of input.

Quality of care is the prime driver behind collaboration The chart below shows that the single Only 17 percent of respondents cite In the following two sections, we biggest reason for collaboration between financial sustainability as the key bring together two perspectives on NHS organisations is to improve the rationale. KPMG’s 2015 survey of Dutch collaboration from KPMG partners quality and safety of care. Efficiency and healthcare organisations mirrored in the UK, Roberta Carter and productivity improvements are some way these findings, with quality of care also Matthew Custance. behind in second place. considered the number one factor.

Reasons for collaboration

40% 36% Only

30%

19% 20% 17%

11% 8% of respondents cite 10% 6% 3% fnancial sustainability as the key rationale

Other for collaboration. the region currently offered nancial sustainability f ciency and productivity f Strengthen (joint) position in Improve liquidity or solvency potential (economies of scale) Improve Improve quality of care which is Improve ef Optimising the healthcare portfolio Source: KPMG survey 2014

06 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The why is more important than the how Roberta Carter, Partner, KPMG in the UK

NHS trusts have a much greater In the successful deals I’ve worked on, Mergers offer organisations synergies, chance of collaborating successfully if in both the public and private sector, so duplication and overlap are stripped they remember why they are working the strategic rationale has always out. More importantly, they bring together, and only then worry about been clear. together services that might previously how to structure the new entity. have been provided by a number of The NHS is one of the sacred cows organisations, giving doctors and nurses Too many NHS healthcare mergers of British politics and any change will greater consistency and control across were failures in the 1990s for that inevitably face entrenched positions, patient pathways. very reason. In many cases, hospital such as political opposition and administrators simply grafted together scepticism from clinicians who may not Whatever the form of collaboration, two management structures, and understand the benefits for patients. its success depends on integrating only later brought together back-office We all instinctively oppose change and information and ensuring all clinicians functions. In some cases, the divisions want to protect local services. Even as have complete access to their patients’ between distinct front-line services hundreds suffered poor care or died holistic care plans and records. While remain visible to this day. early in Mid-Staffordshire, people were investing in IT might seem less waving ‘Save Our Hospital’ banners exciting than M&A, it is nonetheless a These were often publicly-mandated outside. Leaders must make sure they fundamental enabler for efficiency and mergers, motivated for political properly articulate why collaboration is patient safety. It also makes it easier to reasons. By contrast, today’s successful in the public interest and ensure they move activity out of hospitals and into collaborations have a compelling clinical have backing from clinicians. the community, the home, a GP surgery rationale at their core, underpinned by or elsewhere. commercial and financial rigour. Once trusts have decided to collaborate, they need to do so whole-heartedly The NHS is already very skilled at I’m glad to say an increasing number and at every level. For that reason I see collaborating across boundaries such as of collaborating trusts are getting the mergers – rather than joint ventures or the Academic Health Science Centres message, perhaps because they have alliances – as the most successful form and cancer networks. But if trusts are to. NHS staff are working under far of collaboration. trying to drive transformational change greater pressure than 20 years ago. then a merger will produce results much Budgets are stretched and the need to Joint ventures might endure for faster. In an environment of ever greater be more efficient and streamlined is decades, but neither party is fully demand and smaller budgets, properly more urgent. The logic of collaboration, committed. The merger model is far thought through collaboration is essential and the need to make it a success, more comprehensive and the best way to deliver higher-quality healthcare. is compelling. to achieve big transformational change.

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© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Going legal enhances the chance of a successful partnership Matthew Custance, Partner, KPMG in the UK

Roberta may be right that the why is So, where it is practical, I think this is It was only with the creation of more important than the how, but getting the form of collaboration that stands Foundation Trusts in the early 2000s the how wrong can still destroy your the best chance of success in an NHS that JVs became possible, but chances of success. It’s my belief that environment. The first responsibility of their effectiveness is already clear. formalising collaboration, when done any stressed NHS executive is to his or The Brompton, Marsden and Chelsea & well, delivers the twin benefit of bringing her own organisation. If a collaboration Westminster Trusts are already sharing clarity and locking in commitment, even is not beneficial to their organisation, back office functions such as Human when times get tough. it will quickly be abandoned. Resources (HR) and Finance. So redefining organisational The beauty of the merger process The next best option is a legally-binding boundaries is an important part of is therefore that, by binding two contract. It may seem cynical, but if you getting people to collaborate. organisations together, you make a have invested scarce time and money, big statement to the old organisations If a merger is not right for the deal, the then you need to be protected by an about removing responsibilities to the next best option is generally to build a agreement that ensures your partners old organisations and tie all levels of shared responsibility via a joint venture. also contribute. Numerous examples management and staff into a shared Such a move creates a corporate or of this type of collaboration exist both responsibility which spans both former contractual arrangement between two within the private sector and in the form organisations. It’s very difficult on the parties, as well as a forum to discuss of service level agreements in place one hand to be employed by Organisation the collaboration, formalises regular throughout the NHS. A – and have a legal responsibility to that discussions that otherwise would NHS managers tend to go into organisation – and yet still promote a struggle to find a place in busy senior collaborations to solve a problem in their programme that perhaps leads to benefits people’s diaries. specific institution, but this can only which may largely flow to staff or patients JVs are a simple way of regulating happen if both parties have a mutual of Organisation B. Imposing a single collaboration, and we have already interest in each other’s prospects. corporate and management structure, seen a number of successful examples Stronger, formal ties can only enhance through a merger, removes these between NHS and private bodies, the prospects of success. barriers and makes it easier for staff and aimed at managing estates better or management to ask “What is best for all reducing costs. our patients, all of our combined system?”.

08 | Hospital Collaboration in the UK

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “A standardised, lean, continuous improvement methodology would enable the NHS to deliver much greater value for money, improved quality and higher staff morale.” Beccy Fenton, Partner, KPMG in the UK

A more pervasive role for commissioners and regulators Working with Monitor, the Trust Trusts and Foundation Trusts must adhere Development Authority, commissioners to these protocols to ensure that any and NHS England should ensure a mergers or other partnerships work in the smoother route to collaboration. best interests of the public. Both Monitor the sector regulator Our study reflects this trend, with for health services in England (which almost three quarters of respondents informed the regulates all Foundation Trusts) citing some type of involvement from and the NHS Trust Development Authority these two bodies. Fifty-three percent commissioner about (TDA, which oversees non-Foundation say they “informed” Monitor or the Trusts that remain directly accountable TDA when considering a collaboration, their collaboration. to the NHS) are taking a greater interest and in 26 percent of cases, approval in collaboration and have set out detailed was required. transaction guidance. When it comes to commissioners, the Type of involvement Monitor or TDA Type of involvement commissioners involvement level is even higher. Forty- two percent of hospitals claim to have a mutual agreement with commissioning bodies regarding any collaboration, 5% Not at all 16% Not at all and a further 37 percent informed the commissioner about their collaboration. 5% Informed A similar trend is apparent in the 42% Informed Netherlands. Banks and health insurers, with the latter acting as commissioners, 53% Mutual agreement are playing a greater role in hospital collaboration. Moreover, the Authority of Consumers and Markets (ACM) is 37% Mutual agreement increasingly intervening to question the viability of certain mergers, on the grounds that they are not in consumers’ 26% Approval required 16% Approval required best interests.

Source: KPMG survey 2014 Source: KPMG survey 2014

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© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The importance of a common vision Anne Gibbs, former Deputy CEO, West Middlesex University Hospital NHS Trust

One of the most important things that It’s also misguided. In the majority of These Boards needs to be well I’ve learned is how crucial it is for the cases, the hospital being acquired will supported to deliver an optimal solution Boards on both sides to set the right have areas of good clinical practice and for the future delivery of healthcare and tone. There needs to be a shared vision, dedicated, hardworking staff. Ignoring to promote the benefits of merger to its a positive mindset and mutual respect. this is not only unhelpful but it can staff and patients. This is fundamental for the joint working close off opportunities to promote the An open management approach to that these transactions need if they are best that each organisation has to offer. a merger or acquisition will improve going to deliver the benefits all parties Success means acknowledging both the chances of success. That means want to see. each other’s strengths and weaknesses. openness and respect for the merger For example, in some cases, the It is often the case in organisations partner, as well as recognition of the acquiring leadership has been very being acquired that they have had role of other players in the system. In critical of the Trust being acquired. several years of uncertainty regarding the better examples of merger, the This approach can be very challenging their future. The leadership of the Board, senior management of the acquirer for staff and clinicians. It sets a to both continue to deliver a complex recognises the importance of really poor foundation for the future business as usual agenda alongside a working with Monitor, the NHS Trust relationship and integration plan. transaction process is key. Development Authority, commissioners and NHS England, to design a successful unified transaction process.

10 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The increasing popularity Declining numbers of independent Trusts/Foundation Trusts in England of M&A (Expected) decrease numbers of independent Acute Trusts / Foundation Trusts • The number of Trusts/Foundation Trusts in England could drop by as much as eight percent in the next 9 10 3 few years 169 160 150 147 • Many sites have changed their nal function post merger f

• Trusts should create a culture of 2009-2013

equals, not winners and losers. 2007/2008 M&A activity is on the rise in particular Acute Trusts in 2014 Acute Trusts are on the rise. From 2008 to 2013 there mergers (2014 until now) in the short-term future shape is not yet determined were nine such transactions, whereas Trusts Trusts/Foundation hospitals as a result of planned Acute Trusts whose precise Acute Trusts as a result of completed mergers Number of independent Acute Current number of independent

ten have been undertaken during 2014 Possible reduction in the number of Possible reduction in the number of Reduction in number of Acute Trusts Reduction in number of Acute Trusts Possible number of independent Trusts after further consolidation Trusts alone, with a further four being explored Number of independent hospitals, by Trusts seeking to address challenges Sources: KPMG desktop research and survey 2014 through formal integration. This surge in M&A activity could (if all transactions are completed) reduce the number of Care of Acute Trusts / Foundation Trusts in England is offered in approximately independent Acute Trusts from 160 in 530 hospital locations 2014 to 147 within a few years – a drop of eight percent. Hospital Community Hospital In the Netherlands, similarly the volume District General Hospital of mergers has been high, with 18 Secondary location completed between 2009 and 2014, and Teaching Hospital Treatment centre an additional 11 in consideration at the University Hospital beginning of 2015 (three of which are uncertain). Consequently, the number of independent Acute Trusts could plummet by as much as a quarter from the 2009 figure of 116, leaving just 87. Although the number of hospital locations in the Netherlands has not reduced dramatically, the function of many of the sites has changed, reflecting the rationale behind many mergers. These trends can be expected to evolve in England as well and will be compared over time in future reports. In the Netherlands, however, attempts to fundamentally reorganise services across sites have been relatively unsuccessful.

Source and notes: NHS Choices and KPMG research in England 2014. The hospitals have been mapped based on post codes. Therefore, there may be some slight variances in map positioning.

Hospital Collaboration in the NHS | 11

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Types of hospital (England)

“Change will only succeed if there is some mechanism to lock the parties into delivering the transformation.” 11 22 36 65 90 309 Community University Teaching Treatment District General Secondary Matthew Custance, Hospital Hospital Hospital Centre Hospital location Sources: KPMG desktop research and survey 2014 Partner, KPMG in the UK

A snapshot of mergers and acquisitions across England

• University Hospital of North Staffordshire NHS Trust • North Cumbria University Hospitals NHS Trust • Stafford Hospital (Mid Staffordshire NHS Foundation • Northumbria Healthcare NHS Foundation Trust Trust will be dissolved) Phase: Appropriate regulator Monitor or TDA Phase: realisation / implementation approval pending

• Aintree University Hospital NHS Foundation Trust • The Royal Wolverhampton NHS Trust • Royal Liverpool and Broadgreen University • Cannock Chase Hospital (Mid Staffordshire NHS Hospitals NHS Trust Foundation Trust will be dissolved) Phase: Research / exploratory conversations Phase: realisation / implementation (possibly with multiple partners)

• Ealing Hospital NHS Trust & • Barnet and Chase Farm Hospitals NHS Trust • North West London Hospitals NHS Trust • Royal Free London NHS Foundation Trust Phase: Regulator approval pending Phase: realisation / implementation

• Royal National Hospital For Rheumatic Diseases NHS • Chelsea and Westminster Hospital NHS Foundation Trust Foundation Trust • Royal United Hospital Bath NHS Trust • West Middlesex University Hospital Phase: Intention / targeted conversations Phase: Regulator approval pending (with selective partners)

• Frimley Park Hospital NHS Foundation Trust • Ashford and St Peter's Hospital NHS Foundation Trust • Heatherwood & Wexham Park Hospitals NHS • The Royal Surrey County Hospital Foundation Trust Phase: Intention / targeted conversations Phase: CMA approval Hospital University Treatment Centre Teaching Community Hospital Source: KPMG Survey and desktop research District General

12 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Understanding the scale and impact of mergers Nigel Edwards, Chief Executive, the Nuffield Foundation. It’s dangerous to think of mergers as an You can’t take over or merge with Some hospitals – notably Moorfields instant solution, as they also represent another organisation if you don’t already Eye Hospital NHS Foundation Trust and a huge pull on resources and create have a clear, documented way of doing Dartford & Gravesham NHS Trust – have considerable cultural and operational things yourself. even established networks to provide displacement. The perceived lack of franchised services in distant locations. Mergers are not the only option. The post-merger benefits is partly due to This works best for relatively simple ‘swap’ between University College the lack of a strong, clinical rationale for services, but for complex treatment London Hospitals NHS Foundation M&A, with leaders preferring to merge such as cardiac surgery, it is harder to Trust (UCLH) and Barts Health NHS now and sort out strategy later, rather assure a consistent quality of support. Trust (with the former’s cardiovascular than vice versa. services moving to a brand new Trust is often a better starting point than Other sectors spend more time and centre at St Barts, and specialist the short, sharp shock of full integration. energy upfront on due diligence and cancer services going in the opposite Over time, organisations with looser pre-integration planning, helping to direction) was an amazing piece of alliances may choose to share functions identify synergies and establish roles strategic change brokered by five such as accounts, procurement and responsibilities. Another obstacle is different organisations, all working and additional clinical services, and a lack of codified management systems together based upon a memorandum of possibly move to single governance. in NHS hospitals, something identified understanding. The advantage of such This is definitely happening within in the Dalton Review. an alliance is that hospitals do not fully primary care, where GPs are asking integrate and only align certain areas, others to take over responsibility for which is far less of a distraction. their practices.

Hospital Collaboration in the NHS | 13

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Location of mergers /and acquisitions in which the partner is undetermined

• George Eliot Hospital NHS Trust • Peterborough & Stamford Hospitals Phase: Research / exploratory conversations NHS Foundation Trust (possibly with multiple partners) Phase: Research / exploratory conversations (possibly with multiple partners)

• Weston Area Health NHS Trust Phase: Research / exploratory conversations (possibly with multiple partners)

Hospital University Teaching District General Treatment Centre Community Hospital

Source: KPMG survey and desktop research

M&A: Barriers to success…and how to overcome them • Many problems and costs attributed to 1. Select new leaders and let them lead Past NHS M&A activities have focused mergers are actually pre-existing 2. Create and communicate a strong, on short-term improvements in operational and financial performance, • The acquiring leadership is often critical clear vision often at the expense of more defined, of the hospital they’re taking over. 3. Place an emphasis on planning integrated strategies that will bring Success should be measured in terms 4. Do the due diligence lasting benefits. Optimistic or even of long-term care quality. In common 5. Win over key stakeholders unrealistic expectations of immediate with many M&A in the corporate world, 6. Develop both the structure and gains can mask the real cost of the planned benefits of mergers in the the people implementation, and it sometimes NHS do not always materialise. KPMG’s seems as if commissioners have neither 7. Have patience to achieve long-term global study of healthcare M&A Taking the will – nor the capacity – to invest in objectives the Pulse1 found seven common factors a sustainable future for newly-merged behind successful transactions: organisations. Consequently, they often overlook opportunities to provide access to capital for investment in ‘spend-to- save’ schemes that are designed to bring efficiencies.

1 Taking the Pulse, a global study of mergers and acquisitions in healthcare, KPMG International, 2011.

14 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. of respondents to KPMG’s study of Dutch hospitals state that they have yet to realise the intended benefts of a merger

Through robust due diligence, an NHS M&A in the Netherlands: main merger will frequently also uncover stumbling blocks major latent problems, such as a poor Creating a successful merger is a huge “NHS hospitals do estate which is not ‘fit for purpose,’ challenge, as evidenced by the fact that not have codifed which has been adversely impacting 82 percent of respondents to KPMG’s one or both of the hospitals for some study of Dutch hospitals state that management systems. time, and inevitably requires some they have yet to realise the intended You can’t take over or additional investment to overcome. Such benefits. One major hurdle is a lack of challenges, and associated costs, are focus on the long-term, with significant merge with another often wrongly attributed to the merger effort devoted to the approval process, organisation if you don’t itself they are, infact, are the result of and not enough resources allocated to longstanding issues that only came subsequent integration. already have a clear, to light when the two organisations came together. Governance was another barrier to documented way of doing progress. In the majority of Dutch things yourself.” The attitudes of the leadership can also hospital mergers, the executive team undermine integration efforts, with the was combined, yet the two organisations Nigel Edwards, CEO, the Nuffeld acquiring hospital’s management often remained separate legal entities, which adopting a ‘superior’ mindset, even in can restrict efforts to gain synergies and Foundation cases where its clinical performance is develop closer working relationships. worse than that of its new partner. Anne Some merged organisations failed to Gibbs, Transactions Director, London, show significant advantages (such NHS Trust Development Authority, as an increased range of services to observes that: “In some cases, the patients), indicating that the rationale for acquiring leadership has been very the merger had not been fully thought critical of the Trust it is taking over, through. And finally, in cases where alienating clinicians and management consultants are self-employed, they may and setting a poor foundation for the be less keen to work with new partners. future relationship.”

Hospital Collaboration in the NHS | 15

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The shocking truth about mergers is they actually work Carwyn Langdown, Executive Advisor, KPMG in the UK

Mergers are grossly misunderstood. This collaboration delivered a major The pressure on management to deliver Anyone reading the British press would turnaround in the unsustainable immediate savings often leads to a lack believe that nearly every M&A is a financial position at Good Hope, of vision about the ultimate organisation failure. This bad news overshadows and also enabled significant capital and service delivery they want to the success stories and fails to bring to investment in new inpatient facilities create. Under such conditions, it’s little light the severe, underlying difficulties and equipment. Beccy Fenton, Deputy surprise that so many leadership teams that NHS mergers typically have CEO and Chief Finance Officer Director hardly get past first base. to overcome. at the time of the merger, recognises Terminology is partly to blame, as the that “clinical and cultural integration There are some fantastic examples of term “merger” is often incorrectly probably took second place to the successful hospital mergers, such as used to describe enforced acquisitions financial aspects of the transaction, and Guys and St Thomas Foundation Trust, caused by a failure in one hospital. the lack of interstation in these areas which is now seen as a single entity Keen to avoid the aggressive-sounding still appears to create issues to this day. by both NHS staff and the general “acquisition,” Trusts, regulators and Clearly, future M&A must pay sufficient public. Similarly, the well-respected commissioners mislead us into thinking attention to these ‘softer’ areas as well.” University College London Hospitals that both parties entered into the NHS Foundation Trust, also the result While there have been failures in the venture of their own free will. of a succession of mergers, appears to past, I don’t think these were because The timeframe to embed cultural be too much of a good thing to make of the merger itself, but rather a fault integration is vastly underestimated. the front pages, which prefer to root in the design of the process that the Success should ultimately be measured out bad news. The first ever Foundation merging organisations went through. in terms of the quality of service that’s Trust acquisition saw Heart of England Mergers are often seen as a panacea being delivered, as well as long-term NHS Foundation Trust acquire and that will solve a problem; the end of a financial and operational sustainability. merge with the struggling Good Hope process rather than the beginning. Whether the merged Trust is instantly Hospital Trust. profitable is far less important than whether it is a sustainable model going forward.

16 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Collaboration should be about better healthcare for patients Mark Rochon, Associate, KPMG Canada and KPMG’s Global Centre of Excellence

Many of today’s hospital and broader Compared to the UK, Canadian Toronto’s renowned Hospital for Sick health care system structures are not fit provinces such as Ontario have fewer Children jointly manages the surgical for purpose and fail to meet the needs hurdles to clear enabling shorter time cardiac programme with the smaller of patients, particularly those who have frames through to deal execution. Children’s Hospital of Eastern Ontario in multiple co-morbid conditions and require I was involved in one merger, as Chief Ottawa, 350 kilometres away. A robust care that spans the continuum of service. Executive, where the time from concept triage system channels patients to Payers too are looking to improve the to execution of the transaction was just the appropriate provider, giving them value proposition of health care and are five months, without compromising due access to world class treatment, and causing providers to examine alternative diligence processes. overcoming risks associated with low organizational relationships. Collaboration volume providers. Culture is an important element in one form or another is vital for a of successful organizations. Another alternative is to achieve sustainable system. Understanding the cultural differences collaboration is through system or Successful organizational relationships and similarities between partners is province wide oversight structures. consistently exhibit a clear shared key to a successful future. Developing The Cardiac Care Network of Ontario vision that can be achieved by working shared values and promoting those establishes standards and advises together. One stumbling block to values through education, development the payer about capacity, wait times success is the lack of a shared vision; and performance expectations will over and quality. Cancer Care Ontario has if you don’t understand what you’re time create the conditions for a shared a similar purpose but also acts as the trying to achieve, you cannot move sense of purpose. purchaser of the majority of cancer forward together. The concept of services offered in Ontario enabling Staff associated with organizations winners and losers is especially appropriate aggregation of resources. about to undertake a merger are harmful. Collaboration should be about understandably worried about A further option is joint governance, better healthcare for patients, not what employment. Developing labour which can be effective in cases where organisation “won or lost”. adjustment policies and practices that two hospitals don’t necessarily want In many respects getting through promote fair treatment of employees to merge, yet share a common desire the execution of the transaction to will help reduce the anxiety associated to work together. A single executive implementing the integration is another with these undertakings. structure with delegated authority important ingredient for success. oversees the operation of the two Consistent, thoughtful and frequent Organizations with impending mergers entities. Finally, hospitals in difficulty communication to all key stakeholders often exhibit organizational paralysis and may benefit from the support of within and beyond the organization is risk losing key staff who fear for their management expertise from more critical. Being clear about the vision and futures while the transactional aspects stable peers who under contract provide rationale for change, expected benefits, of the merger take place. The parties executive leadership to the troubled time frames and so forth is key. should never short change appropriate organization. Although a temporary due diligence; however, the real work While mergers are one way to achieve arrangement, such relationships can and benefits come after the transaction collaboration, there are others including form ties that could later lead to more is executed. joint clinical program management. formal collaboration.

Hospital Collaboration in the NHS | 17

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. A growing appetite for Other forms of collaboration undertaken other than M&A alternative forms of 30% 4% 27% 18% 6% 25% 16% 4% collaboration 20% • Hospitals are starting to undertake 10% collaboration across tiers of care

• Trusts should ask whether their Joint Joint Joint New shared Clinical Other No existing form is right for delivering new construction treatment information assets networks partnership care models of new or for the between (e.g. undertaken facilities diagnostic purpose of Trusts to shared and no • Standardisation and codification and/or centre healthcare deliver rotas) intentions creates a foundation for property logistics/ healthcare smoother integration. management planning, services and (generally Mergers and acquisitions are by no exchange of large capital patient investment means the only option, and many Trusts related data required) around England have entered – or plan to

Sources: KPMG desktop research and survey 2014 enter – into other forms of collaboration. As Nigel Edwards, Chief Executive of the Nuffield Foundation, says: ‘When Trusts looking for a partner to collaborate with in the next three years you’re talking about collaboration, the first question has to be: “What problem are we trying to solve?” and choose the appropriate form of collaboration to 4% 17% 17% 7% 9% 17%7% 20% 2% address the challenge.’ Sixty percent of the respondents in Other our study are involved in one or more initiatives such as clinical networks, information sharing, joint treatment or

diagnostic centre diagnostic centres, new shared assets Joint treatment or Clinical networks Joint procurement and joint construction of new facilities. Healthcare logistics trusts to deliver healthcare Joint construction/facilities

New shared assets between English Trusts and Foundation Trusts are Corporate merger or acquisition also exploring the possibility of other Cooperative organisation form forms of collaboration such as joint ventures, franchises and cooperatives, Source: KPMG survey 2014 particularly across tiers of care. This may involve partnering with primary care providers, community and social care Collaborations of Acute Trust / Foundation Trust with other organisations in the care system providers or private sector organisations. Of the Trusts participating in the study, General practitioner more than half (56 percent) are looking 18% to collaborate with other organisations in Nursing home the care system. 4% Care home 4% Social care 13%

Community trust 17%

N/A 44% 0% 10% 20% 30% 40% 50% Source: KPMG survey 2014

18 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Leaders need to break out of the single hospital mindset, and recognise that collaboration brings better services at Exploring different organisational and collaborative models In a historic move in 2012, Amongst others, Moorfields Eye lower costs.” Hinchingbrooke Health Care NHS Trust Hospital NHS Foundation Trust has Sir David Dalton, became the first public hospital to established a network of 28 clinics across delegate management functions to a London, and has ventured into overseas Chief Executive, private company via a franchise with franchises. In this model, Moorfields Salford Royal Hospital Circle Partnership. Although the hospital offers ophthalmological services by is managed privately, the buildings collaborating with hospitals through NHS Foundation Trust are still under public ownership by the formal contracts, mainly in and around NHS and the staff remain employees London. Great Ormond Street Hospital of the NHS Trust. In early 2015, Circle for Children NHS Foundation Trust has announced plans to pull out of its 10-year also branched out beyond the UK. contract, citing that “unprecedented Another example is South Devon [accident and emergency] attendances”, Healthcare NHS Foundation Trust’s insufficient bed spaces for demand merger with Torbay and Southern Devon and significant funding cuts had NHS Health and Care Trust. It is the first undermined its efforts to maintain high ever case in the UK of an Acute Trust and clinical standards2. a health and social care trust coming Despite the apparent lack of success together to form a comprehensive, of this particular initiative, further integrated health and care service. are looking to partnerships of this nature may well The new organisation plans to act as a collaborate with other emerge in the UK, taking into account any ‘one-stop shop’ to provide support as lessons learned from early adopters. close to home as possible. organisations in the care system.

2 Circle to withdraw from Hinchingbrooke Contract, Health Service Journal, 9 January 2015.

Hospital Collaboration in the NHS | 19

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Mergers or acquisitions: Acute & community

• South Devon Health Care NHS Foundation Trust • Torbay and Southern Devon Health and Care Trust Phase:Appropriate regulator Monitor or TDA approval pending

Hospital University Teaching District General Treatment centre Community Hospital Community Trust

Source: KPMG Survey and desktop research

Despite the growing popularity of The 2014 NHS ‘Five Year Forward View’3 Five key themes of the 2014 collaboration in England, the 2014 expresses similar sentiments, calling for Dalton Review Dalton Review2 suggests that the NHS a variety of collaborations. These include: could accommodate a wider range of integrated hospital and primary care 1. One size does not fit all organisational forms. These forms include systems that combine general practice 2. Quicker transformational and buddying, informal partnering, clinical and hospital services (along the lines transactional change is required and strategic networks and mutual or of accountable care organisations); and social enterprises such as joint ventures, partnerships between smaller hospitals 3. Ambitious organisations with management contracts, integrated and local specialist hospitals as well a proven track record should care organisations and mergers and as hospitals further afield. A further be encouraged to expand their acquisitions. suggested option is integrated out-of- reach and have greater impact hospital care involving GPs, nurses, other As the review notes: “It is rightly 4. Overall sustainability for the community health services, hospital stated that ‘form follows function.’ provider sector is a priority specialists, and even possibly mental Organisational form should always health and social care. 5. A dedicated implementation be designed to support the delivery programme is needed to make of models and standards of care, and change happen. should not be an end in itself. This Review encourages boards to consider 2 Examining new options and opportunities for fundamentally whether their existing providers of NHS care, The Dalton Review, form is best designed to deliver new December 2014. Authored by Sir David Dalton, Chief Executive, Salford Royal Hospital NHS models of care and ensure the delivery of Foundation Trust. required standards.” 3 NHS Five Year Forward View, October 2014.

20 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Innovative forms of collaboration – two examples of a takeover in the Netherlands In the Netherlands, a number of hospitals have formed highly innovative cooperatives to rescue bankrupt Trusts, spreading the risks across a number of organisations, and giving smaller Trusts the opportunity to expand their influence. The survival of Zorggroep Pasana– Sionsberg Hospital, an Acute care Trust of the respondents that also provided community care, was in our study are in doubt until three other providers came up with the radical ‘Sionsberg 2.0’ plan to involved in one or combine primary care, community care, outpatient, day case and care at home. more initiatives such Crucially, the initiative has the support of as clinical networks, De Friesland Zorgverzekeraar, the region’s most important commissioner, in the information sharing, form of a contract with Sionsberg 2.0 that could extend to five years. joint treatment or Each of the providers brings something diagnostic centres, unique to the new entity, augmenting new shared assets Sionsberg’s existing 24-hour GP services and pharmacy with: and joint construction • Diagnostic, outpatient and day care of new facilities. services provided by DC Klinieken

• Community care offered by ZuidOostZorg A key reason behind their move was • Cardiologie Centra Nederland the opportunity to work together to delivering cardiology outpatient and reorganise Acute and complex care in day care. the Rijnmond region of Holland, which would ultimate improve quality and Bankrupt hospital Ruwaard van reduce costs. Putten was in a precarious position in 2013. A poor reputation, caused by high mortality rates in its cardiology department, had reduced demand and income to the point that it was unable to pay its employees. In this instance, the three Trusts that together took over the hospital chose to significantly change the service offering, with weekday-only clinics and a focus on planned care. Despite concern by banks and commissioners over the high cost of refinancing capital, the cooperative, consisting of Maasstad ziekenhuis, Ikaza ziekenhuis and van Weel-Bethesda, proceeded with the takeover.

Hospital Collaboration in the NHS | 21

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Thinking beyond Sir David Dalton, author of the Dalton Review, spoke to KPMG about the pros and cons of different potential models to deliver better care at lower cost, and how to overcome obstacles to change. This review supports NHS England’s These groups are also characterised by Towards more effective collaboration intent to get NHS Providers to think standardisation, initially of back office Collaboration should be viewed in terms beyond their existing boundaries, so functions, but increasingly covering of what’s best for the patient, rather that they can reliably deliver high quality procurement, care pathways, and than its impact upon organisational or services. NHS providers should be innovation improvement methodology, individual status. Too many hospital clear on the models of care they wish enabling new technology and devices to leaders see collaborative working, to create; the design principles they be deployed, at scale, across different partnerships and mergers as either a wish to pursue; and then determine the sites, to improve care quality and failure to offer a full range of services, governance arrangements to deliver the bring service reliability and significant or an opportunity to extend their power change. The future sustainability of our efficiencies. There is a relentless base. Often they are inclined to preserve NHS requires greater vertical integration drive for high reliability, to minimise their organisation rather than to find between primary, social and secondary operational variability. Regulations are alternative value-adding solutions. care and greater horizontal integration less onerous, providing greater freedom Hospitals must also break out of the between hospitals. NHS providers need to set their own standards, whereas outmoded ‘single hospital’ mindset, to create new strategic plans to organise in the NHS, hospitals must conform to where a single organisation is expected the delivery of this change. government-imposed targets. to provide every service from one site. Most healthcare organisations in other In the UK, it is assumed that staff will Currently, not a single UK hospital meets countries have an enterprise strategy, contribute to the Board’s strategy the Royal College of Surgeons standards and a mindset, for change, growth and and values, yet there are rarely formal for emergency surgery – something that development, but this is lacking in the processes for making this happen. can only happen through collaboration, NHS; hence the struggle to collaborate European hospital groups are more to achieve a sufficient concentration effectively. Across Europe and beyond, likely to adopt recognition and reward of talent. in contrast, larger healthcare groups programmes, to align performance place a greater emphasis upon strategic and behaviour with organisational planning, with most managers located goals, and to make clinicians and staff centrally in a corporate HQ, setting fully accountable. policy for the group and for each operating entity.

22 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Joint ventures of three-to-four hospitals The way in which NHS hospitals are through a long-term management can move us in that direction, although funded makes it hard to increase contract. This would be a quicker I appreciate the cultural challenges prices for good service. Therefore, at transactional solution than a merger, in bringing together institutions with an organisational level, there should be which would require the transfer of hundreds of years of heritage – and alternative ways to earn revenue, such staff and assets to new ownership. The clinicians whose entire careers are as opportunities to develop and support top 30-40 hospitals could receive a kite tied to one hospital. By pooling their other hospitals as part of a wider, mark or equivalent, and get involved in governance and creating single- connected group. managing other organisations through shared clinical services to serve long-term management contracts. It is not right that we should tolerate wider geographic populations, Trusts Ideally, high performing NHS providers the extent of variation in either can share risks and benefits. This is should have ‘earned autonomy’ and be quality or financial viability of our something that is successfully achieved free to set their own branded standards NHS organisations. The Care Quality with incineration and laundry contracts, and benchmarks. Commission and regulators can identify and now needs to be extended to those organisations in persistent Leaders of our NHS organisations clinical and back office services. difficulty; we can implore and should must now enjoin their talent and Staff should be supported to give of support these organisations to improve capability with the opportunities that their best. Incentives are an essential but, ultimately, you cannot force are presented, so that they can design part of what I call ‘systems of organisations to change. vibrant, high quality and sustainable consequence’ that reward excellence models of care. New ambitions and a Where improvement cannot be and intervene when an individual is not social entrepreneurial flair should create convincingly demonstrated, then, for contributing to the goals and values the governance and organisational the sake of providing high standards of the organisation. Better performers forms to enable the delivery of such of care, those organisations who can would be rewarded and promoted, and models. These are exciting times. demonstrate a track record of high worse ones, who are unable to improve, performance should be encouraged would be redeployed. to manage the failing organisation

Hospital Collaboration in the NHS | 23

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Standardisation will allow for more effective NHS collaboration Beccy Fenton, Partner, KPMG in the UK

Entrepreneurial culture is a valuable I’d argue that the adoption of ‘Lean’ Implementing these changes within the driver of clinical innovation in the NHS. continuous improvement processes NHS would require a total overhaul of This more autonomous approach also and tools, which require a high degree the way it currently operates. It will also permeates the management of NHS of standardisation, would enable need buy-in and belief from leadership. institutions, and runs counter to the idea the NHS to codify good practice, None of this is straightforward, and of standardisation that gives hospital improve the quality and productivity of it will require further research and chains, such as those in India and processes and be run in a much more investment at a national level, possibly France, far greater efficiency. effective way. being trialled in some high-performing Hospitals tend to rely on capable In addition to standardisation, another of organisations that have already started individuals running a tight ship. the founding principles of ‘Lean’ is that to head in this direction. The adoption However, these individuals often end of front-line empowerment. So you’re of a standardised, lean, continuous up firefighting daily problems, partly initially skilling up people to operate improvement methodology would because standard ways of working within standards. enable the NHS to deliver much greater aren’t embedded. value for money, improved quality and If those standards aren’t achieving the higher staff morale. Equally importantly, It’s simply not possible for good best results for patients or staff, or value it would provide a solid foundation managers or clinical leaders to replicate for money, then the staff will be skilled for collaboration, ensuring that all their activity across additional sites. and empowered to improve them. parties adopt a common approach, and The lack of standardisation and There’s a systematic way of making therefore easing the path to integration. codification means that they have to improvements that can still support inject a significant amount of personal the drive for innovation. So I think effort into running things. Staff end up you can achieve a balance between spreading themselves too thinly and innovation and standardisation, as in the performance is compromised. airline industry.

24 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Most healthcare organisations in other countries have an enterprise strategy, and a mindset, for change, growth and development, but this is lacking in the NHS.” Sir David Dalton, CEO, Salford Royal NHS Foundation Trust

Other examples of collaboration from around the world Hospital chains/groups Ramsay Healthcare Franchise Helios Australia’s largest private hospital group, Premier Healthcare Helios is a well-known German group Ramsay Healthcare, has network of This US provider, while describing itself as with 110 hospitals across the country, that 38 Acute hospitals and day procedure an alliance, has many of the hallmarks of a has grown quickly through acquisition. centres, providing a comprehensive franchise. It is a membership organisation It provides clinical services across the range of clinical specialties to private and dominated by not-for-profit hospitals. full spectrum of secondary and tertiary self-insured patients. In 2007, it acquired Not only does it carry out centralised care, and is characterised by a centralised the 22 UK private hospitals of Capio, procurement for its members, but it also management team supporting regions enabling Ramsay to expand beyond, records best practices from across the as well as individual facilities. One of and reduce its dependence on, its own network and develops these into care its strengths is a standardised quality crowded domestic market. By quickly delivery standards across the alliance, to management system applied rigorously to integrating the group, and applying its help reduce variation and improve quality. every hospital, to continuously measure well-proven management principles to a Reasons for success and improve performance. market with similar dynamics to Australia, the new hospitals achieved a significant The hospital system follows a physician- Reasons for success and sustained increase in profitability and led multi-specialty model. To ensure Following an M&A, Helios immediately market share over the following years. the effectiveness of its alliance and integrates the acquired hospital(s) into its multi-site provider network, the hospital quality management system, regularly Reasons for the acquisition adopted electronic health records. measuring and benchmarking their Ramsay successfully tapped the Thanks to healthcare IT that supported performance using a wide array of quality potential of dynamic nature of the UK its care model and quality improvement and outcome indicators. Any ‘sub-par’ hospital market. According to Pat Grier, processes, Premier received recognition results trigger a peer review, with a view Ramsay chief executive: “There is a huge as an Accountable Care Organization to improving treatment processes. This opportunity for a well-run national group in 20137. level of discipline has enabled Helios of hospitals to take advantage of this shift 6 to reduce in-hospital mortality in the to the private sector.” hospitals that it purchased5.

5 Hospital chains: a recipe for success? The Kings Fund blog, 27 February 2014. 6 Ramsay Health Care buys UK hospitals, Financial Times, 7 September 2007. 7 Wesley Ratliff and Premier Healthcare Use Health IT to Build an Accountable Care Organization, healthIT.gov, accessed 29 January 2015.

Hospital Collaboration in the NHS | 25

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “In some cases, the acquiring leadership have been very critical of the Trust being acquired. This approach can be challenging for staff and clinicians and sets a poor foundation for the integration plan of the future organisation.” Anne Gibbs, former Deputy CEO, West Middlesex University Hospital NHS Trust

Children’s Hospitals of Philadelphia Joint venture (CHOP) Medtronic This US group has been expanding its In 2013 US Medical technology giant reach to deliver integrated care through Medtronic announced a joint venture franchises. For its 11 community hospital with Apollo Hospitals in India, to market partnerships, paediatric in-patient units a haemodialysis system that increases think existing hospital are staffed by CHOP physicians and hope for the country’s estimated specially trained paediatric nurses. 75 million people suffering from chronic business models are Reasons for success kidney disease. Medtronic is the main sustainable BUT CHOP created highly targeted developer of the system, with Apollo development strategies for each providing clinical insights that can further local, super-regional, national and development efforts. international market, and utilised a In a win-win collaboration, Medtronic regional physician network, satellite receives access to a huge market, while facilities and partnerships to increase Apollo can extend affordable treatment its reach. The hospital chain also set-up across its nationwide network. referral networks for cardiac, cancer and expect moderate to major foetal care. Reasons for potential future success In providing low cost dialysis treatment change to their health in India, the alliance is exporting a well- systems proven system, using a low-cost, portable approach that doesn’t rely heavily on infrastructure, which suits a large, low- income country like India8. Source: KPMG pre-conference survey London 2014

8 Medtronic Enters Dialysis With Apollo Venture in India, Bloomberg, 9 October 2013.

26 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Creating the right conditions for collaboration Mark Hackett, CEO, University Hospitals of North Midlands NHS Trust, led the 2014 merger between University Hospital of North Staffordshire and Mid Staffordshire NHS Foundation Trust. You need time to reap the quality and In retrospect, I would not repeat The commissioners are in favour of financial rewards; benefits realisation the Stafford merger, and would the partnership, as it solves many is not a quick fix but a long haul. When opt for looser strategic alliances. local access issues. Such partnerships taking on a troubled Trust, transaction Our partnership with Mid Cheshire transcend individual leaders, becoming costs are inevitably higher and the Hospitals NHS Foundation Trust, for symbiotic relationships, like those main regulating body, the Trust Special example, brings together certain clinical between teaching hospitals and Administrator (TSA), should clarify services under a memorandum of universities. In some cases the contract upfront the available resources. Our understanding, enabling each Trust to actually gets in the way of doing the initial experience of mergers was remain independent. We can support right thing. not entirely positive, with unrealistic Mid Cheshire with more complex local Most collaborations could be achieved expectations that pushed up costs. work that they would otherwise be through joint ventures involving public It felt like Alice in Wonderland, where unable to provide at low volumes. Some and private organisations, with special the Queen of Hearts changed the rules of their services are being closed and purpose vehicles (SPVs) playing a role. every five minutes! We experienced moved to North Midlands, some are In the future there are likely to be loose too much interference from external going in the opposite direction, with affiliations between hospitals, covering bodies, so the acquiring organisation associated inter-provider agreements. procurement, internal audit, or particular needs the responsibility to meet its The service model, commercial clinical services. In time this could goals within a defined budget, and be framework, goals and values are progress to an alliance agreement, fully accountable to the TSA, with a clear based not on contracts, but on trust. with joint objectives that deliver mutual governance structure. We’ve also involved commissioners benefits. Joint ventures inevitably in discussions from the outset, to take the relationship to another level, demonstrate how the alliance gives requiring a long-term agreement, with better service to patients. a contract to cover the increased risk arising from capital expenditure.

Hospital Collaboration in the NHS | 27

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Without standardisation and codifcation, it’s simply not possible for good managers or clinical leaders to replicate their activity across additional sites.” Beccy Fenton, Partner, KPMG in the UK

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Collaboration can bring scale and fexibility, to help utilise facilities more effciently and cost-effectively.

Funding collaboration Demand for healthcare is rising According to a 2014 BBC report, incessantly, and expenditure is unable some Trusts are still counting on large ...health spend per to keep pace. Between 2009 and 2012, government bailouts, although such while government healthcare expenditure interim support, which totalled more than capital fell in real kept track with inflation, the proportion of £500 million to 31 trusts in 2013, could GDP spent on health in the UK fell by half run out or at least be rationed2. terms by almost a percent, and in the two years up to 2011 Consequently it is little surprise that 46 (the latest figures available), health spend percent of the Trust leaders taking part per capita fell in real terms by almost two in the study feel that their organisation percent annually1. is capital constrained, and 39 percent At the same time, hospital funding indicate that administration is ‘possible’ annually is becoming more unpredictable, within the next three years. due to increased competition, with commissioners able to choose between I believe my organisation is capital constrained a wider range of providers, including Strongly disagree Strongly Agree primary/community based care. The open market is also driving prices down, further 1 2 3 4 5 6 7 threatening turnover. With funding under severe pressure, 7% 13% 13% 20% 13% 20% 13% Trusts’ ability to invest in physical or Source: KPMG survey 2014 human resources is severely limited, and some are struggling to even maintain day- to-day running costs including salaries. The NHS Five Year Forward View 3, urges The public purse remains the main source a shift to care in the community, which of funding for capital expenditure on UK NHS Trusts in England ran up a combined could further reduce demand for Acute hospitals, through a process of capital deficit of £467 million in the first Trusts’ services, and render parts of allocation, provided as either debt or quarter of 2014-2015, and in 2014 the their estates redundant. Equally, moving equity. Public dividend capital (PDC) is NHS England’s chief executive, Simon care out of hospitals will also require the most common form of long-term Stevens, warned of a £30 billion annual investment in new, local infrastructure to government finance for NHS Trusts, deficit by 2020, with the health service support this new model of care. enabling them to purchase their assets, needing an extra £8 billion a year. with the Department of Health retaining an appropriate equity interest.

1 OECD Health Statistics 2013, http://dx.doi.org/10.1787/health-data-en. 2 NHS trusts borrowing heavily from state bailout fund, BBC, 30 October 2014. 3 NHS Five Year Forward View, October 2014. Hospital Collaboration in the NHS | 29

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The Integration Transformation Fund NHS investment, therefore, almost companies, often have the skills and (ITF) is a single pooled annual budget of always relies on some form of experience in building and managing several billion pounds, available for health collaboration with the private sector, large estates, as well as better access and social care services attempting to often involving private finance. Public- to capital. work more closely together in local areas. private partnerships (PPPs), primarily in In traditional PPPs, private investors the form of a Private Finance Initiative As public money gets ever scarcer, typically build and operate hospitals, (PFI) have enjoyed considerable capital investment plans are coming taking the full construction and asset popularity in the past couple of decades, under intense scrutiny. The approval performance risk as part of a 25-30- and the recovery in market liquidity is process for transactions has gone from year contract. The downside of such an once again raising the attractiveness of being slow and complex to tortuous and arrangement is that Trusts have little or no private sector capital. glacial, with three separate business case say in how the building is built and run, stages often requiring the approval of six There is a lot of logic in these and any modifications can be complex layers of Boards/government. In addition, arrangements, as a Trust’s core focus and costly. Increasing levels of criticism increasingly tight capital budget limits, should always be delivering excellent in and outside the press has also made combined with stringent accounting clinical services, while private sector Trust management generally hesitant rules serve to limit the availability of organisations, such as construction to pursue the PPP model, at least in the public capital. contractors and facilities management form of PFI or PF2.

30 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Where the NHS hospital already owns its buildings, the private partner sometimes takes over an ownership role in return for providing capital to develop ...

Innovative financing models to Maximising the benefits of collaboration bridge the funding gap Although only 17 percent of respondents Yeovil District Hospital NHS Foundation More recently, hospitals are starting to claim to be collaborating primarily to Trust has entered into a strategic estate lease both existing and new facilities improve financial sustainability, a merger partnership in a bid to move frail elderly that are funded by banks, pension funds, or joint venture can open up opportunities patients from Acute facilities into social equity investors and/or other financial to reassess the estate, and help raise care, with plans to create a nearby health institutions. In the case of a new build, funds to invest in new models based campus that includes a care home and this transfers less risk to the private around community care. health facilities such as gyms. The Trust party (a degree of construction risk but would be unable to fund such a move The majority of NHS mergers to little or no asset performance risk), but without private finance to build and date have been centrally funded, but gives the Trust more influence over operate the new buildings. many have subsequently suffered design and build, and greater flexibility from a lack of capital investment in to make changes. In some cases, the the new organisation. In order to NHS achieves co-ownership of the facility improve the merged entities, Trusts under a joint venture agreement. need to reorganise the way they Where the NHS hospital already owns its deliver care, sell, lease and/or upgrade buildings, the private partner sometimes different assets and invest in new, takes over an ownership role in return for community-based infrastructure providing capital to develop and/or re-use and services. These advances can this facility, or indeed other parts of the help consolidate Acute provision and estate that require further investment. reduce the number of beds in those Acute hospitals as part of a shift NHS Trusts enjoy a guarantee from towards primary/community care, the Secretary of State as payer of last and away from large, expensive, resort. NHS Foundation Trusts, on the Acute hospitals. other hand, have no explicit guarantee, although there is a general expectation One way to release cash is to work that the Government will back their with a third party through a strategic debts, something which is implicit in estates partnership (SEP), bringing in the legislation but probably necessary a specialist estates manager (usually in any event, for financial and political a private sector organisation) to expedience. PFI deals carry an explicit take responsibility for planning and assurance known as a Deed of Safeguard. managing the entire estate. Usually, These various mechanisms give lenders these organisations are empowered a high degree of comfort that obligations to propose new estate solutions and are likely to be paid, which, crucially, can can offer to source capital and carry out help to reduce the cost of private capital. essential development work as part of the joint venture.

Hospital Collaboration in the NHS | 31

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Global healthcare funding challenges

Netherlands Portugal Although the majority of funding Dutch banks’ appetites for funding comes from government, the healthcare capital have decreased private sector has assumed a amid fears that hospitals will be unable more important role as part of to repay their investments. Selective a programme of hospital PPPs. procurement from health insurers, Interestingly, almost a third of competition between providers, and healthcare expenses are paid falling demand for secondary care has privately, which is above average impacted revenues. Since 2012, Acute for most OECD countries. As some Trust turnover has decreased, and 80 of the deals encompass clinical percent of the leaders surveyed believe services, lenders take some of the that their organisations’ turnover will operational risk in addition to the become more volatile. Hospitals, design, construction, maintenance once regarded as a relatively safe With Trusts now seeking capital on and finance risks. There is no direct investment, now have a similar risk the open market (rather than from guarantee except for government profile to commercial organisations. Government), interest rates are likely default cases, but the government to be higher and credit margins lower, Half of the Trusts in the study cite acts as a guarantor of last resort. raising the cost of capital. This will financial uncertainty as a driver for necessitate tariffs and/or reduced The financial and sovereign debt collaboration, notably to enlarge their operating costs, and business plans crisis has brought tough austerity catchment areas by partnering with require support and endorsement measures and a stop on future a neighbouring Trust. Some have from health insurers, in order to investments. Despite PPP projects chosen specialisation as a means of satisfy traditional and new investors. potentially providing good value, differentiation – a strategy favoured by Acute Trusts are currently financed these deals attract considerable health insurers and capital providers – in by a small circle of banks, and should scrutiny – partly because of order to achieve greater efficiencies start to look further afield for funding, a lack of flexibility to reduce and increase quality of care. However, while simultaneously clarifying their payments during hard times – and specialisation reduces volume of service offerings and underlying consequently are currently on ice. turnover, threatening their ability to repay business models. interest and contractual obligations.

32 | Hospital Collaboration in the NHS

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Canada Australia The tightening of government budgets Australia has also embraced has held back growth of hospital capital PPPs, with equity capital funding budgets, and, in order to satisfy capacity coming from stock market for an aging population, PPP has taken listed organisations, specialist a foothold in Canada’s public healthcare infrastructure fund managers, system. Most of the private sector private equity fund managers money has flowed into longer-term, (typically for smaller hospital capital maintenance and ‘soft’ facilities facilities/groups), selected not-for- maintenance services such as grounds profit healthcare groups (often faith maintenance, with delivery of hospital based), and large superannuation programming and services remaining in funds. Banks are the main source the public domain. of debt funding for hospital When it comes to financing private operators and projects, with the Financing for PPP projects comes from hospitals, banks tend to prefer four major Australian trading banks a wide range of entities. On the debt brownfield expansion projects. For retaining a high degree of appetite side, almost all of the large Canadian greenfield initiatives, they would for healthcare. banks participate, along with several seek a strong counterparty to life insurance companies, while Lenders take on all the risks underwrite the volume risk, via a equity investors include major asset associated with property long-term lease. management, global construction and development, namely pre- Any hospital projects in Australia infrastructure groups. operation development risk (e.g. are impacted by difficulty in for planning and approvals) and The ultimate funding for hospitals finding appropriate sites, a lengthy construction risk, and at the is typically provided by provincial planning and approvals process operational stage will assume government, through milestone and high development costs. In a demand risk, operational risk payments during the construction consolidated private hospital market, and HR risks such as health and period, and availability payments during developers need to negotiate safety. In the case of PPP and PFI operations. Fixed price contracts are the competitive funding arrangements transactions, banks are prepared to norm, with the private sector taking on with private health funds. take operational risk. design and construction risk, along with lifecycle risks, to maintain the facility to pre-defined specifications and meet all handback requirements at the end of the project term. There is no revenue risk, as the public sector manages the operations.

Hospital Collaboration in the NHS | 33

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “Alone we can do so little; together we can do so much” Helen Keller

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The system needs completely new ways of delivering care. That is going to require collaboration between the different organisations...

Conclusion

The case for more and other forms of collaboration Checklist lessons learned Unprecedented challenges for the NHS Design the solution to match The NHS in England is currently facing This is a long list of really significant the problem unprecedented challenges. Certain parts challenges and it stands to reason that of the system are under severe pressure. incremental change won’t be enough Prioritise sustainability over short-term An example is the way that Acute to overcome them. The system needs fnancial aims hospitals struggle to keep up with the completely new ways of delivering care. rising demand. As a result, most of the That is going to require collaboration Ensure that both parties have A&E departments across the UK were between the different organisations in the something to gain unable the meet the four hour waiting system. There is considerable consensus targets for most of December 2014 and on the best way forward, namely: It’s about the patient January 2015. The main reasons for the • A shift towards primary and system being under severe pressure are: community care • Aging population resulting in Engage and communicate with staff • Greater integration between all parts increasing and changing demand of the care network. Acute Trusts • A growing population resulting in and Foundation Trusts working more Don’t under estimate the importance increasing demand proactively with community, mental of culture health and social care services. • Lifestyle factors resulting in increasing and changing demand NHS organisations will not be able to Standardise and codify good practice resolve these unparalleled challenges in • Changing expectations from the public isolation. Collaboration plays a vital role • Shortage of skilled staff like nurses in achieving such a transformation, to Align payment and incentives and consultants to meet demand improve quality and affordability of care. As this paper shows, a majority of Trusts • Rising costs of health care resulting in are already engaged in collaboration pressure on budgets and embrace new forms, something • As discussed in this year’s featured proposed in both the Dalton Review and topic, the challenge of insufficient the Five Year Forward view. Our review capital funding is now looming also highlights some of the frustrations large and arises from a mix of experienced along the way, and it is our macroeconomic, structural and hope that future collaborations can learn fiscal factors. from these lessons.

Hospital Collaboration in the NHS | 35

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Measures such as access times, readmissions, length of stay and patient flow are relevant, along with longer-term metrics including mortality rates, patient experience, patient reported outcome measures, and staff morale. Eight lessons learned to facilitate successful collaboration 3. Ensure that both parties have 1. Design the solution to match A district general hospital in south something to gain… the problem east England, on the other hand may Each of the hospitals or other Form follows function, so be sure that elect to collaborate more closely with institutions entering a collaboration is your choice of collaboration addresses its community – perhaps by taking a naturally concerned primarily about not just organisational and operational lead provider role in an integrated care its own specific problems. Formal efficiency, but the longer-term needs model – in order to improve patient ties such as contracts and joint of the population you choose to experience and outcomes. performance targets can create a care for. On an organisational level mutual interdependency that should 2. Prioritise sustainability over short- leaders should consider the following get all parties working together term financial aims things when choosing the form of towards a common goal. It takes an incredible amount of time collaboration: and effort to make a collaboration 4. …but remember that it’s not about • The type of organisation (patterns succeed, so Trusts, commissioners you, it’s about the patient from the past and current situation), and regulators should take a long-term Collaborations are not designed to perspective, and give leadership time widen one chief executive’s power • The purpose and strategy of the to right past wrongs, make appropriate base. Nor should the subject of a organisation (plans for the future), changes and achieve desired results. takeover, or a smaller party in a joint • The whole health economy that the The initial case for change should define venture, feel concerned about its organisation is part of. benefits (in terms of quality of care and status in the new organisational wider systemic value), which would model. The sole reason for the A specialist provider in London, for then be tracked. NHS’s existence is to benefit the example, might choose a network or patient. Everyone involved should franchise model to enhance specialist aim to ensure that whichever form services, along the lines of Moorfields of collaboration is chosen maximises Eye Hospital. value for the patient.

36 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Clinicians and other staff want to understand the rationale behind the collaboration and the impact it will have on their daily work.

5. Engage and communicate with staff 7. Standardise and codify good practice 8. Align payment and incentives Clinicians and other staff want to NHS organisations can operate in Currently Acute Trusts and Foundation understand the rationale behind the very different ways, often based Trusts are paid according to how many collaboration and the impact it will around the management styles of patients are in their beds. We need a have on their daily work. Clinicians individual leaders. Such random model that encourages collaboration can have a key role in planning the styles are impossible to replicate, across tiers of care such as primary and integration and the redesign of as they are based around people community care. Collaboration should services, achieve the right mix of not processes. Standardisation and result in Acute Trusts and Foundation capacity and capabilities across the codification of the way things are done Trusts working more proactively with system or to ensure that staff will want can significantly increase the success community, mental health and social to work across organisational borders. rate of collaboration. Particularly the care services. This requires a payment Through clear communications, and by types of collaboration impacting on the system and incentives that focuses on involving people in the decisions that autonomy of both partners. It will make what truly adds value for patients. affect them, it is possible to keep staff good practice more easily transferable engaged and enthused. between collaborating organisations. It can provide a solid foundation for 6. Don’t underestimate the importance collaboration, ensuring that all parties of culture adopted a common approach, and Before attempting to collaborate, each therefore easing the path to integration. party needs to get a clear view on the other’s similarities and differences in values, leadership style, decision making processes and accountability regimes, which can be extensive and potentially divisive. Cultural assessments can expose potential risks. It is unrealistic to expect to instantly build a homogenous culture, but it is possible to create some shared values that bring you closer together.

Hospital Collaboration in the NHS | 37

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Methodology Acknowledgements The observations and conclusions in this We would especially like to thank the publication are partly based on publically following people for their valuable available sources, and experiences in contribution to this study: our Audit, Tax and Advisory practice. All interview participants: Anne Gibbs, In addition, a survey was conducted Nigel Edwards, Sir David Dalton and amongst CEOs of Acute Trusts and Mark Hackett. Foundation Trusts in England. Seventeen CEOs have completed the survey. The KPMG project team: Beccy Furthermore, interviews were held with Fenton, Arno de Vries, Lous Klomp, four eminent leaders in healthcare. Carwyn Langdown, Matthew Custance, Marieke van de Kerkhof We are very thankful for their valuable and Samantha Calvert. contributions. Due to their cooperation and willingness, we were able to make KPMG firms’ Partners, Directors this document. In anticipation of the next and Senior Managers interviewed: report, we again hope to receive your Fernando Faria, Eric Wolfe, Anna van cooperation and valuable insights. Poucke, Marlies Prins and Adrian Box. Writers: Beccy Fenton, Matthew Custance, Roberta Carter, Carwyn Langdown and Arno de Vries.

38 | Hospital Collaboration in the NHS

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. References Desktop research - public sources Circle to withdraw from Hinchingbrooke Contract, Health Services Journal, 9 January 2015 CQC, North Cumbria University Hospitals NHS Trust, Quality Report, page 5 Examining new options and opportunities for providers of NHS care, The Dalton Review, December 2014. Authored by Sir David Dalton, Chief Executive, Salford Royal Hospital NHS Foundation Trust HMT Public Expenditure Statistical Analyses 2014, Tables 1.10, 1.111 Hospital chains: a recipe for success? The Kings Fund blog, 27 February 2014 http://www.bbc.co.uk/news/uk-england-26953455 http://www.circlepartnership.co.uk/ http://www.getsurrey.co.uk/news/health/frimley-park-completes-long-awaited-merger-7840922 http://www.hsj.co.uk/hsj-local/Acute-trusts/chelsea-and-westminster-hospital-nhs-foundation-trust/chelsea-west-middlesex-merger-business-case- due-by-end-of-2013/5064295.article http://www.hsj.co.uk/hsj-local/Acute-trusts/north-cumbria-university-hospitals-nhs-trust/north-cumbria-and-northumbria-decide-takeover- date/5056833.article http://www.ibtimes.co.uk/mid-staffordshire-nhs-trust-dissolved-stafford-hospital-495910 http://www.lgcplus.com/opinion/health/more-on-health-and-social-care/special-administrator-recommends-dissolving-mid-staffs/5061855.article http://www.liverpoolecho.co.uk/news/liverpool-news/massive-hospital-merger-plan-aintree-3337264 http://www.ntda.nhs.uk/blog/2014/07/01/the-acquisition-of-barnet-and-chase-farm-hospitals-nhs-trust-by-the-royal-free-london-nhs-foundation-trust/ http://www.ntda.nhs.uk/blog/2014/10/01/merger-of-the-north-west-london-hospitals-nhs-trust-and-ealing-hospital-nhs-trust/ http://www.rnhrd.nhs.uk/about-us/proposed-acquisition-of-the-rnhrd-nhs-ft-by-the-ruh-nhs-ft http://www.royalsurrey.nhs.uk/proposed_merger_asph http://www.sdhct.nhs.uk/hospitalandcommunitycare/ http://www.staffordshirenewsletter.co.uk/Stafford-Hospital-NHS-leaders-meet-staff/story-20906479-detail/story.html http://www.thestrategicprojectsteam.co.uk/george-eliot-hospital-nhs-trust-securing-a-sustainable-future/ http://www.waht.nhs.uk/en-GB/About-The-Trust/News-and-Media/Press-Releases/Press-Releases-2014/New-NHS-only-partnership-route-for- Weston-Area-Health-NHS-Trust/ NHS Choices; http://www.nhs.uk/servicedirectories/pages/Acutetrustlisting.aspx NHS five year forward view NHS major trauma centres OECD Health Statistics 2013, http://dx.doi.org/10.1787/health-data-en. picanet.org.uk Ramsay Health Care buys UK hospitals, Financial Times, 7 September 2007 Report – State of Healthcare 2007 & 2008, Report – Anatomy of health spending Taking the Pulse, a global study of mergers and acquisitions in healthcare, KPMG International, 2011 The Guardian, Public spending 2011/12 The King’s Fund, Future organisational models for the NHS – Perspectives for the Dalton Review Websites of 160 Acute Trusts in England Wesley Ratliff and Premier Healthcare Use Health IT to Build an Accountable Care Organization, healthIT.gov, accessed 29 January 2015

KPMG Survey 2014 A survey was conducted amongst CEOs of Acute Trusts and Foundation Trusts in England. Seventeen CEOs have completed the survey.

Interviews Interview participants: Anne Gibbs, former Deputy CEO, West Middlesex University Hospital NHS Trust Nigel Edwards, Chief Executive, the Nuffield Foundation Sir David Dalton, author of the Dalton Review Mark Hackett, CEO University Hospitals of North Midlands NHS Trust

© 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contact us

Andrew Hine UK Head of Healthcare and Public Sector Partner, KPMG in the UK T: + 44 (0) 20 7694 5125 E: [email protected]

Beccy Fenton Partner, KPMG in the UK T: + 44 (0) 121 232 3759 E: [email protected]

Matthew Custance Partner, KPMG in the UK T: + 44 (0) 20 7311 8140 E: [email protected] www.kpmg.com/uk/healthcare

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