Introducing the first in a series of features on the changing shape of the healthcare property market, published in association with Brabners Chaffe Street, Rider Levett Bucknall and Taylor Young.
The Government's White Paper on healthcare will have major implications on the existing healthcare estate through the significant restructuring it advocates. Significant changes to the way projects are procured, with the private sector becoming increasingly involved in partnerships with health organisations, come at a time the sector faces a 17% cut in capital spending according to the comprehensive spending review.
Ben Brookes is assistant director of Drivers Jonas Deloitte, advising Trafford Council on the new Altrincham General Hospital, said: "There is likely to be a renewed focus on making the health service's existing estate work harder."
He added: "We have recently seen the emergence of public-private joint ventures within the health sector – which aim to secure private sector capital and gain benefit from private sector expertise in running estates."
Lancashire Care NHS Foundation Trust is one such trust exploring this new model. Back in August it was announced that healthcare property specialist Ryhurst and LCFT would be equal shareholders in a joint venture partnership. The partnership is a private company that will contract with the trust to deliver the full spectrum of estates services.
At a time when public sector funding is almost non-existent, partnerships like this may ensure alternative sources of private funding for future projects.
David Houghton, director of Brabners Stuart, said: "The changes forecast for the NHS are not a potential, they are already happening. A number of non-critical services are already seeing their funding cut as Primary Care Trusts struggle to balance their books and this is having a direct impact on the service providers; the Acute Trusts managing hospitals.
"This situation does however present opportunities; private companies are being encouraged to work in partnership with acute trusts and this leads to opportunities for alternative ownership structures for what have previously been NHS assets. These alternative structures can bring private sector management expertise into the NHS arena, bringing greater asset utilisation, significantly improving efficiency and hence reducing costs per patient treated.
"They also bring opportunities for redevelopment and improvement expenditure into the NHS estates where central government funding might be scarce.
"In the wider picture, the objectives for improving carbon efficiency within the NHS estate should offer the chance to show case industrial green technologies such as photovoltaic electricity generation. The current excitement around these technologies, particularly within the Institutional funding arena may allow additional private sector investment to assist with reducing the overall energy spend of the NHS whilst also meeting carbon reduction targets."
There is still work happening. The £100m revamp of Whitehaven's West Cumberland Hospital was saved in the spending review and changes to the redevelopment will be reflected in a new full business case for the project, due to be submitted to regional health bosses in January. The £42m Women's and Children's Unit at the Royal Oldham Hospital is also going ahead.
The number of bidders for the new Royal Liverpool University Hospital has been confirmed. Balfour Beatty, the Hospital Company, a consortium of Carillion and Royal Bank of Scotland; and Horizon, Spanish-based FCC, John Laing Investments and Interserve Investments, are on the list and the trust will choose the winner within the next 12 months with work expecting to start in 2012.
Steven Jenkins, partner at property consultancy Rider Levett Bucknall, said: "There is a huge opportunity here for the health sector to make things better, not just cheaper. It is a chance for the sector to redesign the way its services are offered and find ways to deliver healthcare more efficiently.
"With projects being cancelled because of funding shortfalls, now is the time for trusts to revisit plans and assess whether they are getting value for money and a scheme which meets their objectives.
"The focus in the future will be on 'spend to save' initiatives, alongside efforts to transform service delivery. Healthcare clients will need to prove that by spending money upfront they can deliver a better service, at a reduced cost and in a more efficient manner.
"It's important to look beyond the construction of the building – designs should also be planned from an operational, clinical and property perspective.
"This process needs someone to take an overarching view, bringing together the trusts, estate teams, designers and contractors, so that the operational, practical and aesthetic needs are all considered before a solution is reached.
"A common mistake is for hospitals and care providers to simply replicate the existing services when designing new buildings. However, a new development gives them the opportunity to innovate and provide a more efficient operation and better quality of space which works more effectively on a practical level.
"This is a major opportunity to provide better solutions at a lower cost and improve the health sector."
There are other areas in which the construction industry could benefit from recent changes. The NHS has pledged to become one of England's leading sustainable and low carbon organisations and to meet the Government's target of an 80% reduction in carbon emissions by 2050.
This pledge is set out in the strategy, Saving Carbon, Improving Health, launched in 2009.
Upgrading the NHS's existing estate will be a crucial part of this pledge.