King's Mill merger 'will not take on' PFI debt, but may have to pay £1bn Skanska charges

King's MIll may be able to write off some debt as part of an NHS merger, but will likely still have to pay 20m in service charges to its private sector landlord.

King's MIll may be able to write off some debt as part of an NHS merger, but will likely still have to pay 20m in service charges to its private sector landlord.

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A new NHS trust for Nottinghamshire hospitals may be able to pass on massive debts to central government, but it may still be lumbered with a £1bn bill for hidden costs.

The chief of Nottingham University Hospitals (NUH) stressed to county councillors yesterday (October 11) that the trust will never take on over a billion of debt from Mansfield's main hospital.

But when we quizzed them on the possibility of writing off Skanska's expensive service charges, the trust admitted they may have to take on the £1bn bill over the full 38 year period, as part of the maintenance deal with the construction firm.

A proposed merger between Nottingham University Hospitals and Sherwood Forest Hospitals, which runs King's Mill Hospital in Sutton, could be at risk due to the heavy debt to the hospital's contractor. Chief Executive of NUH Peter Homa said the PFI was a 'red line' for the merger, and could scupper any hopes of its success.

SFH Trust signed a £976 contract with Skanska for a PFI deal to build King’s Mill Hospital and run some services until 2043.

But is now subject to heavy debt, mortgages and management fees an fluctuations in inflation the latest estimate for it's total cost by the end of the contract is £1.942bn (Source: SFH).

An FOI request made by the Chad showed that of that £20m a year is spent on service charges for "ongoing maintenance, life-cycle replacements and facilities services". Using the some inflation factor as the hospital, we estimate this cost to be £1.272 billion over the life of the hospital.

NUH said the service charges were a 'separate matter' to the debts that the trust has firmly said it wouldn't be able to take on, because it would threaten the quality of its services in Nottingham.

But any new trust may still be left to pay this £1.27bn bill for service charges, which have been criticised in the past for extortionate bills for simple jobs like changing lightbulbs and cleaning.

Merger planners gave Nottinghamshire County Council's Scrutiny Committee an update on their pgress yesterday (Octber 11), and the NUH chief said the two organisations would remain separate, but integrate services where appropriate.

Peter Homa said: “The aim of the proposed merger of NUH and SFH is to provide patients with consistently high quality care in all local hospitals across Nottinghamshire. Both Trusts have significant financial challenges.

"We are working with our local health partners, regulators and our clinicians to develop a compelling case which sets out how we will bring the merged organisation into financial balance as quickly as possible over the coming years. The merger will bring new opportunities for efficiencies, not least through procurement and rationalisation of our estate, over time. The additional costs associated with SFH’s Private Finance Initiative (PFI) will be subject to national support, details of which are to be worked through. NUH will not take on the PFI debt.”

SFH has a deficit of £41.2m while its soon-to-be new owners, NUH, also have a year-end deficit of £47.2m fo 2015-16

Councillor Colleen Harwood, on the Couny Council's Scrutiny committee said: "They were saying yesterday it's a red line for the NUH - negotiations have to take place before they can finalise anything.

"I am concerned that it won't go ahead if this is their red line. It makes me worried what will happen to King's Mill hospital. We've got problems with recruiting and consultants - there's a lack in the East Midlands and if they have a merger the consultant posts can be shared across the three sites. It would mean an improved service, so instead of going all the way to Queens people in Mansfield may be able to see them locally."

The Mansfield East councillor said she couldn't say if she was confident the trusts would find a deal to pass the cost of the PFI to central government, but added: "All I know is we don't want to be losing the hospitals in the Sherwood and Mansfield areas."