Joint Ventures

Most trusts that treat private patients do not give any indication as to whether they generate any profit, but a few do. The 2006 NHS Act says that a trust must list its private patient income in the section 44 declaration (PPI Cap) in their Annual Accounts. Some trusts have joint venture companies or subsidiaries and have chosen to give the profit of these companies in their accounts where they are supposed to give income.

The Christie Clinic LLP

For example, The Christie FT created a joint venture company (with HCA International Limited) called The Christie Clinic LLP. The trust says that all their private patients are treated by this joint venture and not by the trust, and so in the trust’s Annual Accounts it says that its income from private patients is zero. Figure 1 shows the “Income from activities” section from their Annual Accounts [1].

Figure 1 Income from Activities from The Christie Annual Accounts 2011/12

Figure 1 Income from Activities from The Christie Annual Accounts 2011/12

The note to this section indicates that the trust no longer treats private patients, and that from 14 September 2010 private patient activity was “novated to The Christie Clinic”, the joint venture. The table says that the private patient income from the previous year was £4.557m, but even this figure is not correct, since (as explained below) the figure quoted includes the profit, not the income from private patients.

For the trust’s Section 44 declaration of private patient income, The Christie gives £10.7m (at 7.6% this is conveniently below its PPI cap of 9.4%). This figure includes rent from the joint venture, income from performing clinical work for the joint venture and its share of the profit from the joint venture.

Monitor interprets the section 44 private patient income cap in the Schedule 4 statement as:

(Private patient income)/(Total patient related income)

This says income, not revenue from activities.

The Annual Accounts for The Christie say that the joint venture income is £7.129m which is described as:

Joint venture income relates to services provided to The Christie Clinic via Service Level Agreements, property rental income and other contractual payments.

That is, this £7m includes payment by the joint venture for work the trust carries out for it, and rent the joint venture pays for property owned by the trust used by the joint venture. The remaining £3.578m is identified as the trust’s share of profit of the joint venture, and this is the bottom line in Figure 2, which lists the income and expenditure of the joint venture.

It is worth re-iterating this: the income from the joint venture income includes the profit from the joint venture as well as the rent the trust charges the joint venture and the payment for work it carried out for the joint venture (that is, treating private patients). In other words, the trust gets an income from doing work for the joint venture and it gets a share of the profit from the work that it does.

The income and expenditure of The Christie Clinic LLP are shown in Figure 2. This says that the operating income of the joint venture company was £18.514m and since the majority of this income is from private patients, it is this figure that should be used for the private patient income for The Christie FT. In 2011/12 the total patient related income of The Christie was £140.841m and the PPI cap is 9.1%, so the trust could have £12.817m of private patient income and remain below the cap. The real value for private patient income for The Christie is £18.5m. This is significantly above the PPI cap and represents a proportion of 12.5% of total income, rather than 7.9% as declared by the trust.

Figure 2 Income and expenditure for The Christie Clinic LLP

Figure 2 Income and expenditure for The Christie Clinic LLP

The Christie is clearly using the joint venture to reduce its Section 44 declaration. This is moot since Section 44 was repealed by the Health and Social Care Act 2012. (However, it raises the question why Monitor allowed The Christie to hide its private patient income this way for two years.)

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[1] www.monitor-nhsft.gov.uk/sites/all/modules/fckeditor/plugins/ktbrowser/_openTKFile.php?id=12971

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