Circle Heath to launch legal challenge over NHS tender .

Hospitals of the University of Pennsylvania

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Circle Health, the privately owned healthcare company, is expected to launch a legal challenge against National Health Service commissioners this week for tendering a contract at a price it says will require dramatic cuts to services and deliver poorer quality care.

Circle Health has been running the Nottingham Treatment Centre, which employs 720 doctors providing diagnostic testing and treatment for cancer and other illnesses, in a deal worth £67m a year in 2017-18. But the contract is being re-tendered by the local NHS commissioning group at just £50m a year, requiring cuts to services, according to the company.

Paul Manning, director of hospitals at Circle Health, said the company had already withdrawn from the tender process because it was “poor commissioning that assumed drastic cuts to services from day one at a time when healthcare services in the region are already overstretched”.

“Any provider that wins this contract is going to be hamstrung by insatiable demand and unlimited liabilities on the provision of care and drug costs,” he said. “As a result there will be significant harm to healthcare provision in Nottingham.”

The legal challenge is one of a growing number of disputes involving NHS contract awards. Private sector involvement in delivering NHS services has increased markedly since the 2012 Health and Social Care act, but there has been concern over the quality of procurement processes, which leaves them vulnerable to challenges.

In 2016, for example, a cross-party committee of MPs found that an £800m contract to provide care for the elderly, including accident and emergency services, in Cambridgeshire and Peterborough was hastily awarded to the lowest bidder in a deal it said highlighted “gaping holes” in the commissioners’ business acumen. The deal collapsed after eight months.

The Greater Nottingham Clinical Commissioning Partnership said the procurement for the Nottingham Treatment Centre was advertised in “accordance with procurement law and has had the benefit of extensive clinical input”.

“The commissioners have been advised that they should make no further comment at this stage,” it added.

Warren Taylor, healthcare partner at CMS Law, said private providers were becoming more confident in appealing against decisions they saw as unjust. “There also seems to be less concern among private sector operators that they will lose future contracts as punishment for challenging in one area,” he said.

Last year Virgin Healthcare, part of Richard Branson’s business empire, won an undisclosed sum after it lost a bid to provide children’s services in Surrey to a consortium of in-house providers and a social enterprise, and challenged the decision.

In December, Care UK, the private equity owned healthcare provider, won a £55m contract to run the North East London Treatment Centre. The company had been running the contract until 2015, when Barking, Havering and Redbridge University Hospitals Trust were named preferred bidder on a new contract. Care UK, which also runs care homes and health services in prisons, challenged the deal and won.

Justin Crowther, healthcare partner at Catalyst Corporate Finance, said another issue driving challenges is that a number of the contracts had proved “relatively uneconomic”.

“A lot of these companies have only been in the market for less than a decade and they are now finding that the contracts aren’t as profitable as they expected, especially when you take into account the high cost of bidding.”

Circle Health is best known for its takeover of Hinchingbrooke Hospital, the first and only NHS hospital to be taken over by a private provider. The deal came to an abrupt end in January 2015 when the company pulled out just three years into a 10-year contract amid financial troubles and mounting criticism of its performance.

Circle Health was delisted from Aim and taken over in June 2017 by Toscafund, a private equity group, that had been its largest shareholder. The company is expanding, including in China, where it is opening a number of clinics.