Given the current financial climate, many NHS Trust are looking at their facilities, assets and services with increasing concern at how they will keep their service quality with current levels of funding available. All NHS Trusts are focussed on delivering improved healthcare services whilst also looking at ways of reducing costs and improving productivity. Senior executive are seeking new ways to update facilities, assets, and services to enhance their patient services whilst minimising their costs; maximising the value delivered through their facilities, assets and services.
The worldwide facilities management outsourcing market will be $1.314 trillion in 2018. (Glenn Hodge, 2014) Managed services (including the provision of capital equipment) form part of this growth and is estimated to grow from $107.17 billion in 2014 to $193.34 billion by 2019, at a Compound Annual Growth Rate of 12.5%. North America is expected to be the largest managed services market in terms of revenues generated, but Asia-Pacific is expected to emerge as a high-growth market. (MarketsandMarkets, 2016)
Growth is evident across all outsourcing markets, from North America and Europe to Latin America and Asia Pacific. The market is not just expanding, however; it is evolving, with growing public- and private-sector demand for managed facility solutions that are both global and integrated. Along with this evolving market, customer expectations are broadening to include more value-added services; customers increasingly expect service providers to assume responsibility (i.e., accept risk transfer) for regulatory and labour law compliance, for example, and to take an active role in advancing the healthcare organisations strategic mission (Alexander Redlein, 2014). To this end, current service providers have to evolve from being service providers to becoming strategic partners.
Moving from traditional in-house to contracted-out facilities
Hospital executives and politicians have to respond to increased social, economic and regulatory pressures. Their decisions whether or not to outsource can have a significant impact on the productivity and organisational costs. Having modern facilities with modern equipment and Information Technology can allow greater throughput of patients, thereby impacting on revenues and costs. Within these modern facilities, NHS staff can access cutting edge healthcare technology, such as up-to-date Magnetic Resonance Imagers (MRI), with high speed connectivity enabling improvements in organisational efficiencies.
NHS Trusts are working with companies that can partner with them to enhance the effect that technology has within their facilities, providing assets (MRI) and services (Maintenance and training) as part of the facility has a positive impact on staff morale, patient care, and budgetary control. An outsourced managed facility, such as an MRI facility can bring benefits to their core business of the Trust by increasing diagnostic capabilities. These managed facility type partnerships work best through development of strategic relationships with companies that are facility and asset management experts.
NHS Trusts are also looking to save money through simplification of procurement processes and have a target to deliver £1.5Billion on non-pay spend by the end of 2016 (NHS England, 2013). This simplification can be accelerated by working with facility management partners that have experience and scale to deliver a broad range of healthcare management services, including multi-year refreshment planning and replacement of assets within the facility. Another benefit under current Treasury rule is the ability to reclaim VAT on a managed facility contracted out service.
Contracting out rule 45 for VAT recovery:
Operation of hospitals, health care establishments and health care facilities and the provision of any related services:
This heading is concerned with the provision of a fully operational managed hospital; or healthcare facility, where all services relevant to that facility ‘short of medical and nursing services’ are supplied to the NHS by the managed facility provider. It includes the ancillary provision of equipment together with the service of operating and maintaining that equipment, and it includes utilities when provided as a part of the whole package and paid for within the single unitary charge.
When assessing the level of services provided within the facility, it is important to consider the actual use of that facility and that the services provided are consistent with that usage. (Establish if there are sufficient services to facilitate the operation of a hospital, healthcare establishment or healthcare facility).
VAT is recoverable if a full package of services necessary for the operation of that hospital; healthcare facility, etc. - for example estate management, reception, porterage, cleaning, laundry, catering, security, equipment maintenance, technicians. i.e. As outlined earlier, arrangements for MRI scanners and similar medical equipment, within a facility that is supplied with staff presence of labour and expertise, remains eligible for VAT to be recovered under heading 45.
The contracted out services normally require longer-term contracts, Trusts should be looking for provider partners that are strategic thinkers and can deliver increased value through their facility assets and services. Ultimately they are looking for vested partners that are experts to guide them in getting the best out of their facilities, assets and services.
The NHS is already under tremendous pressure to save money. Contracted out services could be a way of replenishing assets at a lower cost with higher rates of efficiency and productivity.
Dr John Sandham CEng FIHEEM MIET
Alexander Redlein, Barbard Redlein, Anders Soborg, Reinhard Poglitsch. 2014.
Managing and Mitigating risk within Strategic Facility Management. s.l. : ISS, 2014.
Glenn Hodge, Reinhard Poglitsch, Peter Ankerstjerne. 2014.
Perspectives on the FM market development. s.l. : ISS, 2014.
Managed Services Market worth $193.34 Billion by 2019. [Online] 2016. [Cited: April 22, 2016.]