The NHS estate can be a driver for change

The floor area of the NHS estate in England would cover the City of London 10 times over. The land it owns totals 7 million hectares − the size of two London boroughs − while the total trust and primary care trust floor space was estimated at 28.5m square metres.

‘Many buildings are over-specified and inflexible, making them expensive both to operate and to reconfigure’

Little real attention has been given to how this huge resource could help to improve efficiency, move more care out of hospitals and exploit new technologies. Models of care remain designed around buildings. Could rethinking the way the NHS uses its estate catalyse service change?

The NHS has many underused properties and a significant amount of its estate is in poor condition or unfit for its current purpose. The cost of clearing the maintenance backlog is over £4bn. The total unoccupied or unused NHS estate is estimated to be 1.5m square metres.

Unfortunately, some of the newer estate, developed to deal with the previous maintenance backlog and as part of service developments in the past decade, has created new problems such as investment in buildings in the wrong places, or those that now appear surplus to requirements or are rapidly becoming out of date as care and treatments change. Many of these buildings are over-specified and inflexible, making them expensive both to operate and to reconfigure. 

Underused land and buildings

Much of the NHS estate houses back office functions and services that could be provided in much lower cost buildings. High cost buildings and equipment are, in general, substantially underused.

‘There are few examples in which the potential for combining public sector buildings has been properly exploited’

The NHS estates management function has been largely concerned with the maintenance and operation of buildings. There has been little development of more entrepreneurial property management skills. Building use is often not actively managed. The way the NHS accounts for land and buildings is an issue and it is likely that many providers do not receive enough to create reserves to replace their assets. 

Likewise, national and local government have a large portfolio of underused land and buildings. There are few examples in which the potential for combining public sector buildings has been properly exploited; this relates partly to the challenges in aligning different funding and governance arrangements. 

The NHS is not unique in experiencing these problems. Many other industries find estates and property difficult to manage and this task is increasingly being outsourced. While all of this means there are unexploited opportunities for improving value for money, perhaps the most important concern is that opportunities for new models of care are not being maximised and that the existing estate is an obstacle to innovation.

What should be done?

Experts the King’s Fund spoke to think the NHS must be more ambitious. The current model of ownership and operation needs to be challenged and new methods of financing need to be developed that avoid the very significant downsides of private finance initiatives (in particular, the associated intergenerational transfer of debt).

The objective of any change must be to support and encourage new or improved models of delivery that bring healthcare, social care, housing, private sector provision of long term care and other related services together in a more integrated way and creates more value for the wider community.

These models may need to separate service provision from building ownership. Providers can change more rapidly and be more imaginative about models of delivery if they are not tied to a particular location. 

‘The absence of any sort of strategic banking function for NHS providers is a major obstacle to change’

Innovative approaches to estates could help break down the barriers between primary and secondary care, mental health and social care. The case for creating multi-purpose, more flexible facilities for extended primary care teams, integrated community and social care staff, diagnostics and specialist consultation made in Lord Darzi’s Next Stage Review is sound and should be developed.

Creating campus developments with a mixed use and ownership offers opportunities for much more flexible space and the ability to ensure a high level of utilisation. There is also potential for mental health providers and housing and employment services to explore a more integrated approach to the estate to open up new opportunities for supporting service users, and to help unlock issues around discharge from hospital. This means primary care development should be part of a wider strategy to develop networked integrated services. Incentives to develop these new approaches are needed. 

‘Op Co-Prop Co’ split

Most radically, our experts suggested models that split ownership from operation and the creation of a large, professionally managed property fund that might own some hospitals and other health assets. NHS Property Services is a move in this direction. The experts would go further and see this more proactively raising finance and using its large portfolio to make investments to facilitate change through strategic investments.

The absence of any sort of strategic banking function for NHS providers is a major obstacle to change. Organisations need to be able to borrow not just for buildings and equipment, but also to restructure their operational and business models.

The best UK example of this model is regional health authorities’ long term financial support to allow the closure of asylums and the development of community services in the 1980s. A banking function could use bonds or the property fund model to create working capital and use this to fund lending for restructuring. 

Separating ownership from control of the building would allow more multiple use of buildings and could be used to facilitate more competition where required, or to bring together services from different sectors and providers where more integration is needed. 

The land and buildings of the NHS could be seen more as a mechanism for driving change than their current role as a cost and an obstacle.

Nigel Edwards is a senior fellow at the Kings Fund and a director at KPMG