The enclosed map shows the layout for the Plaza option produced by Urban Initiatives. They have relocated QEPH on the other side of Vincent Drive but the accompanying text also suggests a 'remote site' away from the immediate area.

The consultants acknowledge that the relocation of QEPH will slow down the building of the new hospital but if we are to have a modern and efficient hospital that offers maximum flexibility to take us well into the twenty-first century, it is worth getting the project absolutely right.

Finance for a New Hospital

The initial capital cost given for the development of the hospital on the ‘Plaza’ site is £192.7 million. This includes a £9 million contribution towards the cost of the new road, but excludes estimated land sales income (for the Selly Oak site) of £14 million. Additional costs for the relocation of QEPH are also excluded from the Trust's option.

The consultation document gives no indication of the effect of this expenditure on its annual running costs. More efficient working will save on running costs but there will be additional costs of paying for the new buildings.

NHS Trusts are required to make a 6% return on their average net assets, which, for UHB are currently less that £90 million. With traditional public financing arrangements, there would be greatly increased charges because of the increase in the value of the Trust’s assets.

All Trusts are required to test any major capital procurement for private finance (PFI). Using PFI results in lower debt charges (because the borrowing is carried out by the private company), but higher rental and other payments to the private company. I wrote to the Chief Executive of the University Trust, Dr Jonathan Michael, asking what assessment had been made of the impact of the proposal to build a new hospital using a) conventional NHS finance arrangements and b) using PFI on resource availability for other NHS priority investments in primary care and ambulatory care. Although it took Jonathan Michael seven weeks to reply, I was none the wiser. He said:

"As any strategic outline case in support of our development has to be agreed with the Health Authority and the Regional office of the NHS Executive, it would be up to the Health Authority and the NHSE to confirm whether they felt that the development proposals being submitted by the Trust had an impact on overall NHS financial arrangements and how it fits into the priorities."

In earlier consultations, the Health Authority said it expects capital projects to deliver a 13% return on investment. At that time, Jonathan Michael told a meeting of Birmingham MPs that savings through new build of the order expected by the Health Authority would not materialise. In my September 1998 response to Birmingham Health Authority’s consultation, A Framework for Health Investment, I expressed concern that the Health Authority had failed to provide the necessary information to justify its expectation of a 13% return on capital investment. That concern remains.

The Health Authority is on record as accepting the view that we should not invest in new models of hospital based care, particularly those which involve bed losses, without a prior investment in primary care services. They have promised not to allow the hospital development to go ahead at the expense of other priorities in Birmingham.

The importance of the impact on other services was also pointed out by the Independent Advisory Panel, who considered that the costs of a new hospital should be such that they do not jeopardise investments in other priority areas, particularly in primary care. The Health Authority has failed to explain how it will keep its promise to ensure that a new University Trust Hospital will not be built at the expense of other priorities. This is a fundamental flaw in the current consultation, and the Health Authority should issue a supplementary document addressing this point. My support for the new hospital is provisional on the Health Authority honouring its commitment that other services will not suffer.

Once the Health Authority gives its approval for a new hospital development, it will be necessary for the University Hospital Trust to produce an "outline business case" for any capital investment, regardless of the eventual method of financing. Where the procurement is by PFI, regulations require there to be a "robust public sector comparator" and for the NHS to be an "informed purchaser" of services during the PFI process.

The concern at this point is that, to be affordable, the size of the hospital will be scaled down. At a meeting with Birmingham MPs, Jonathan Michael explained that the outline proposal was for a new hospital with 950 beds, but that planning assumptions needed to be agreed with the Health Authority based on their assessment of needs. In response to a question about existing bed numbers, he said that, at present, there were 1040 open, but that this number fluctuates. I wrote to Dr Michael on 5 July 1999, asking the number of bed days it is anticipated would be available in the new hospital, as compared to current arrangements together with any justification for reductions. The reply I received on 21 July, after several reminders, informed me that "the answer to the question is 346,750". I presume that this is number of bed days to be provided in the new hospital, but noted that comparison with the present arrangements was avoided. Dr Michael went on to note that "this is a preliminary figure based on the outline planning assumptions to which we are limited at this stage in the procedure". My support for the new hospital is provisional on assurances about the adequacy of bed numbers.