Trust Charities ‘Owning’ Private Patient Companies

A joint venture is not the only way to hide private patient income: some trusts have created a charity to ‘own’ a company that treats private patients in the hospital. In this scheme, the private company ‘donates’ its profits to the charity and then the charity donates the money to the trust. This way it is the profit from treating private patients that appears in the trust’s Section 44 declaration rather than the actual private patient income.

Great Ormond Street Hospital for Children NHS Foundation Trust

GOSH became a Foundation Trust on the first of March 2012. The trust has had ambitions to be a Foundation Trust for many years, but there has been one big problem: the size of the private patient income in relation to the PPI cap.

In 2007 GOSH was an NHS Trust and its private patient income at £25 million [1] exceeded the PPI cap (9.7% of total patient income):

Chief Executive Dr Jane Collins said:

“We need to find a legal, open, fair, and sound solution to our international patient issue. We want to become a Foundation Trust, independent within the NHS. However, the ‘private patient cap’ would require us to limit our international income, from an estimated £25m this year to only £17m, an £8m shortfall. At a time of financial pressure, this would have a significant effect on our financial stability, particularly in future years.”

In 2007 the trust said that the private patient division was 10% of patient admissions, but 16% of the trust’s income. The trust said that 77% of the private patients were “sponsored by foreign governments and healthcare systems”; 15% were foreign self pay patients and 9% were UK patients. The majority of these patients came from the Middle East or Greek speaking countries. Using these figures, the trust argued that the majority of their international business was paid for by foreign governments rather than individuals, and hence argued that this could be regarded as “charity” rather than a private business. As a consequence, in 2007 the trust’s private business was split from the NHS business and called the International and Private Patient division (IPP) [2]. The IPP is owned by the Great Ormond Street Hospital Charity.

GOSH have carefully managed the private patient income that they declare that the trust generates. The PPI cap is set at 9.7% and for the first eleven months of 2011/12 (when GOSH was still an NHS Trust) the PPI was conveniently 9.6%. For the single month that GOSH was an FT, the Annual Report says that the total income from activities was £27.366m and the income from private patients was £2.655m again, the proportion was conveniently 9.7%.

The PPI cap was abolished on the 1st October 2012. The GOSH board papers for September [3] show the effect: for the first five months the total clinical income was £129.9m and the income from the IPP division was £17.8m. That is, in the first five months of 2012/13 the private patient income had shot up from 9.6% of total patient income to 13.7%.

It is clear that in the case of GOSH abolishing the PPI cap has resulted in the trust treating more private patients.

Salisbury NHS Foundation Trust

The trust has a private patient unit called the Clarendon Suite [4] and the patients are treated by a private company called Odstock Private Care Limited. The Annual Report [5] says:

The Trust treats private patients through a partnership with Odstock Private Care Limited (OPCL). To support this, the Trust has a designated unit called the Clarendon Suite, where private patients can be treated on the Salisbury District Hospital site. While (OPCL) is contracted to provide private care on site, income generated is used to benefit NHS patients by supporting our services.

OPCL has a controversial past. The trust tried to have the company registered as a charity in 2007, but the Charity Commission refused the application [6] saying that:

Odstock is not established for exclusively charitable purposes and cannot be entered onto the Central Register of Charities.

The Commission said that the reason for rejecting the application was because there was a lack of public benefit:

8. The application was initially rejected on 26.01.2007 on grounds of lack of public benefit, the arguments against registration then being that:

a. the arrangements were to facilitate the practice of private medicine at the Hospital which would benefit medical practitioners, insurance companies and the Foundation Trust. Odstock seemed merely the administrative machinery whereby this was achieved.  In particular, the arrangements facilitated the practice of private medicine by a limited number of medical practitioners at the Hospital for the benefit of their own patients in some cases in conjunction with insurance companies

b. if the effect of charging is to exclude the less well off from benefit, then it cannot be for the public benefit.

Indeed, the company was originally set up to allow consultants an opportunity to carry out private work, and the Charity Commission remarked:

A consideration in setting up Odstock had been to ensure that the needs of consultants in performing private patient work were met. Agreements with insurance companies would be entered into to enable private work to be undertaken for them.

The consultants were clearly benefiting from carrying out private work, so they were not contributing to the charity.

In response to the Charity Commissions decision to refuse registering OPCL as a charity the trust then created a separate charity called Odstock Charitable Trust [7] and transferred ownership of OPCL to this new charity. That is, OPCL is the wholly-owned trading subsidiary of OCT, and OCT receives gift aided profits from OPCL. In 2011 OPCL paid OCT £95,607 (profit on a turnover of £816,051 [8]) and the charity made a donation of £83,750 to the Salisbury District Hospital Stars Appeal.

The Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust

The trust has a separate company called The Bournemouth Private Clinic Ltd which operates within the Royal Bournemouth Hospital and makes use of its facilities. In 2008, the Foundation Trust created a charity called The Bournemouth Healthcare Trust charity as a Company Limited By Guarantee. This charity owns Bournemouth Private Clinic Ltd (BPC). All the profits from BPC are donated to the charity and the charity donates its surplus to the Foundation Trust [9]:

The Bournemouth Private Clinic was established in 2008 by the Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust to manage and develop private patient services carried out within its specialist facilities. […]

BPC is the trading subsidiary of a registered charity (The Bournemouth Healthcare Trust). BPC has its own Board of Directors and all donations are approved by The Bournemouth Healthcare Trust, which is managed by its own Trustees.

The trust’s Annual Accounts are opaque about how they calculated the figure for private patient income. The Section 44 declaration says PPI was £2.335m in 2011/12. The BHT accounts on the charity commission site [10] say that the charity income was £4.077m from BPC turnover and the charity made a Gift Aid donation of £1.795m to the trust. A Gift Aid donation effectively increases the donation by 25% which means that the charity donated £2.243m; the £92,000 difference between this figure and the private patient income reported by the trust is covered by an expenditure entry in the charity accounts of “RBCH secondment”, in other words, RBCH staff working for BPC. So the RBCH private patient income includes income from its own staff working for BPC and the profit from BPC.

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[1] www.gosh.nhs.uk/news/press-releases/2007-press-release-archive/great-ormond-street-proposes-to-manage-international-patient-division-through-new-charity/
[2] Interestingly, the website for this business is a Kuwait domain: www.gosh.com.kw
[3] Finance Report, page 5, www.gosh.nhs.uk/EasySiteWeb/GatewayLink.aspx?alId=122601
[4] www.salisbury.nhs.uk/InformationForPatients/Wards/clarendonsuite/Pages/ClarendonSuite.aspx
[5] www.monitor-nhsft.gov.uk/sites/all/modules/fckeditor/plugins/ktbrowser/_openTKFile.php?id=12841
[6] www.charitycommission.gov.uk/Library/start/odstockdecision.pdf
[7] www.civilsociety.co.uk/finance/news/content/3420/odstock_sets_up_trust_to_overcome_barrier_to_charitable_status
[8] www.charitycommission.gov.uk/Showcharity/RegisterOfCharities/CharityWithPartB.aspx?RegisteredCharityNumber=1123991&SubsidiaryNumber=0
[9] www.bournemouthprivateclinic.co.uk/
[10] www.charity-commission.gov.uk/Accounts/Ends97%5C0001122497_ac_20120331_e_c.pdf