Statement regarding Hinchingbrooke

Circle Holdings plc

("Circle" or the "Company")

Statement Regarding Hinchingbrooke

9 January 2015

Circle today announces that it has determined that its franchise to operate Hinchingbrooke Health Care NHS Trust ("Hinchingbrooke") is no longer sustainable under current terms and that it has entered into discussions with the NHS Trust Development Authority ("TDA") with the view to ensuring an orderly withdrawal from the current contract. 

Since Circle took on Hinchingbrooke in early 2012, the hospital has been transformed. Hinchingbrooke faced closure. It was described as a 'basket case'. We invested in the quality of care, in staff and in facilities. Now, it has won a number of awards. It consistently hits the most important outcome measures, including low mortality rates, excellent patient feedback, and meeting all major waiting time targets. In the first two years of the franchise, Circle made financial savings significantly above the NHS average. We have saved the taxpayer approximately £23 million.

Circle has the right to terminate the franchise in the event that it is required under the contract to make aggregate support payments to Hinchingbrooke in excess of £5 million. To date, Circle has made payments totalling approximately £4.84 million. There have been significant changes in the operational landscape for NHS hospitals since the contract was originally procured in 2009, including unprecedented increases in accident and emergency attendances, insufficient care places for patients awaiting discharge, and funding levels that have not kept pace with demand. These conditions have significantly worsened in recent weeks and, save for the £5 million cap on aggregate payments, it is highly likely that Circle would be obliged to make further support payments that would exceed the £5 million cap. 

Funding for Hinchingbrooke has been cut by approximately 10.1% this financial year. To maintain the standards that patients deserve will therefore require substantial investment for the foreseeable future, on top of the £5 million we are contractually obliged to provide. We believe that solving the problems facing Hinchingbrooke can only be achieved through joined-up reform in Cambridgeshire across hospitals, GPs, and community services. We fully support the vision of NHS England Chief Executive Simon Stevens' 5-year Forward View, but these proposed reforms are too far into the future. If reform in the region develops fast and a new role for us does become clear, we are happy to play our full part.In addition, we were one of the first hospitals to be inspected under the Care Quality Commission's new process. We understand the CQC report will be published soon, and expect it to be both unbalanced and to disagree with many of its conclusions. We are not the only hospital to find their process problematic, and believe that inconsistent and conflicting regulatory regimes compound the challenges for acute hospitals in the current environment.

As a consequence of these factors, Circle has reluctantly concluded that operating the franchise is no longer viable under current terms. Under the contract, Circle could be required to make a final support payment of approximately £160,000 to Hinchingbrooke, bringing its maximum total support to the capped £5 million level. Circle is also obliged to cover termination and re-procurement costs incurred by Hinchingbrooke, capped at £2 million under the contract. Further announcements regarding the outcome of our discussions with the TDA will be made in due course and we expect to provide an update in our trading statement in February.

Steve Melton, Chief Executive of Circle, said:

"Like most hospitals, over the past year Hinchingbrooke saw unprecedented A&E attendances and not enough care places for healthy patients awaiting discharge. At the same time, our funding has been cut. We also believe that inconsistent and conflicting regulatory regimes compound the challenge for acute hospitals in this environment.

This combination of factors means we have now reluctantly concluded that, in its existing form, Circle's involvement in Hinchingbrooke is unsustainable.

We have entered into discussions with the Trust Development Authority, and the patients of Huntingdon are our absolute priority in these talks. 

I would like to pay tribute to the amazing work of our staff. I will be speaking personally to them over the coming days and weeks. I've been humbled by the compassion, dedication, and professionalism of doctors, nurses, and managers. The hospital's remarkable improvement over the past two years is a credit to them."

Michael Kirkwood, Chairman of Circle, said:

"It is with regret and after considerable thought we make this announcement. The Board has unanimously concluded that current conditions in the healthcare economy and regulatory environment are unsustainable for a franchise operator. We are proud of our colleagues' achievements at Hinchingbrooke. Circle remains a committed partner of the NHS at our elective treatment centres and independent hospitals. Our clinician-led and employee co-owned model has a proven track record of efficiency and quality improvement, and we will continue to play a substantial role in the NHS."

further information, please contact:

Circle Holdings plc

Michael Kirkwood, Chairman +44(0) 20 7034 5258

Steve Melton, Chief Executive Officer

Gordon Hector, Head of Communications

Hinchingbrooke Health Care NHS Trust +44(0) 1480 847441 Press Office

Numis Securities Limited

Michael Meade, Nominated Adviser +44(0) 20 7260 1000

Alex Ham, Corporate Broking