In a deal that could become a model for future developments and provide a lower-cost alternative to private finance initiative (PFI) schemes, Wychavon District Council has built a centre that houses a 13-GP practice, a 26-bed hospital and a suite for NHS dentistry. The total cost was £6.7 million.
‘What we have achieved has blown the socks off the NHS,' said Dr Chris Perks, the Pershore GP who has led negotiations between the practice and Wychavon council.
Five years or so ago the council was looking for better returns on the £40 million it raised in the 1990s by selling its housing.
A rental income of 7 per cent or more would mark a rise of at least 3 per cent on its ‘prudently' invested capital and allow the council to stay near the bottom of the national council tax league table.
As an elected body, however, Wychavon's reinvestment plans were also informed by political principle.
‘Our three objectives for reinvestment were that capital should be used for regeneration, for community benefit and put to local use,' says Jack Hegarty, Wychavon's former head of planning and council managing director since April 2004.
Meanwhile, Dr Perks, his six partners and the two employed GPs at Pershore Medical Practice had outgrown their premises, rented from what was then South Worcestershire PCT. An attempt to strike a PFI deal failed when nowhere could be found to site a new surgery.
Then the PCT provoked local outrage by announcing the planned closure of Pershore Cottage Hospital, transferring its beds to a local nursing home.
Realising the political capital within its grasp, Wychavon conceived a new idea.
Cottage hospital plan
Building on a quarter-acre site, yards from the town's civic centre, the district council could build a cottage hospital for the townspeople and, since the square metrage for the GP premises matched, house the new surgery on the upper floor.
‘But why would a big PCT talk to a little district council like us?' mused Mr Hegarty. Perhaps because the council had exactly what the PCT was short of - capital. South Worcestershire PCT faced debts of £12.8 million before it was amalgamated this year into Worcestershire PCT.
In the event the PCT imposed tight cost limits on the new build: the cottage hospital, eventually switched to the first floor, should cost no more than the previous nursing home option.The GP premises on the ground floor, with administrative space on the second floor, was also cost-limited.
Brian Norfolk, then head of corporate projects at Wychavon council and now retired, said: ‘There was a constant constraint, there was no more money available.' There was concern at first whether the GPs' wishes could be met within budget. But the scheme allowed the building to be customised.
Dr Perks said: ‘If we'd gone down the PFI route, we'd have had an off-the-peg design.'
As it was, initial plans from designers Tangram Associates were scrapped and a design adopted that offered 21 generic doctor/ nurse consulting rooms, a diagnostics unit, a minor surgery suite, a board room that doubles as a library and enough administrative space to rattle around in.
The council also admitted flexibilities, passing on a district valuer's allowance for fitted furniture to the GPs to spend as they wished. The GPs put in some of their own funds, spending an extra £2,000 on aesthetically pleasing furniture for the staff common room.
Dr Perks said: ‘I was concerned at first that this might not be a good deal for us. But we have been able to make comparisons with 12 other simultaneous applications from the PCT to the SHA for premises, some PFI, others not. This scheme has proved to be hugely more cost effective than the others.'
Building started in October 2005, with handover 12 months later. Last December, the cottage hospital moved into the first floor, opening 19 of the 26 beds.
Developing the premises
Meanwhile Wychavon council has bought the practice's old premises and plans to develop car parking spaces and affordable housing there. Mr Norfolk estimated that a scheme that could have cost £26 million under PFI could be completed for just £10 or £11 million under a public finance initiative.
‘This is not a panacea for saving the health service but it should be seriously considered and could be replicated elsewhere,' he said.
The essence of the Wychavon deal is a partnership between two public sector bodies that does not have to allow for PFI profit, a ‘third way'. The NHS purse is fuller by the difference between the 12 to 15 per cent of £6.7 million that would have been required under PFI and the 7 to 7.5 per cent expected by Wychavon.
‘I'm amazed the NHS isn't jumping up and down about this. If the PCT criticises me over prescribing costs, I feel more confident in standing my ground knowing that my rent is £200,000 less than it should be because of this building,' said Dr Perks.
Already an award-winning council for the quality of financial information it issues to residents, the development of a new ‘medical campus' on the doorstep of its own civic centre has helped to put Wychavon in the running for the Local Government Chronicle's best achieving council of the year.
Since the scheme went public a dozen other councils have approached Wychavon. The council has allocated funds for a planning project for a new hospital in nearby Evesham, where the PCT has threatened closure of the community hospital. Similar deals could be struck with councils without capital to invest, Mr Norfolk said.
Using loans from the Public Loans Board, a deal would be more expensive than investing ready capital but still cheaper than a PFI. And having a local authority landlord is good news said Dr Perks: ‘Having a landlord which is publicly accountable gives me some comfort. If something went wrong in the future, there is a clear legal framework.'
Use of public not private finance initiative
Source: Wychavon council