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NHS East of England, the strategic health authority for the region, said that without the deal the hospital "might have had to close" or "receive a large subsidy paid for by the taxpayer" due to its large debts.
The SHA's board has recommended that Circle be appointed be for a 10 year franchise term, and during that period repay all of Hinchingbrooke's debt. Subject to approval by the Department of Health it will take over the operation of the hospital from 1 June 2011, although staff will remain NHS employees.
"Circle's John Lewis style partnership model and track record of turning around NHS services make them our preferred partner to transform the first NHS trust to be franchised," said Dr Stephen Dunn, director of strategy at NHS East of England. "We have selected a cutting edge partner with an innovative approach that will propel Hinchingbrooke into the premier league."
"This is not privatisation," he added. "Staff and assets will be protected, and the taxpayer will not be forced into bailing out Hinchingbrooke. This could be a model for hospitals that face similar challenges."
Circle, a staff-owned partnership which already runs NHS treatment centres in Nottingham and the Midlands centre in Burton-on-Trent, beat Serco to secure preferred bidder status. In March, the firm opened a newly-built private hospital in Bath, where it has implemented a paperless patient record system supplied by Alert Life Sciences. It is thought to be the first UK private hospital group to adopt an entirely electronic health record system for its patients.
Ali Parsa, Circle's managing partner, described the partnership as a "social enterprise," adding: "Circle's co-operative model offers a Big Society solution for Hinchingbrooke – liberating doctors and nurses to deliver the best services for the patients they know best."
A spokesperson for Circle told SmartHealthcare.com that it had no immediate plans to introduce a similar paperless system at Hinchingbrooke. "Obviously technology provides great efficiencies and technological solutions, but it's not a major objective. I'm sure we'll be looking into it at some point, but I wouldn't say it's our main objective at the moment," she said.
The spokesperson added that the main aims for the firm at Hinchingbrooke were to achieve greater efficiencies and provide the best care for patients.
The agreement will reopen the debate about private involvement in public sector operations. However, the Department of Health said that the NHS has always used the independent sector "in some capacity" to help deliver care for patients. "GP practices have been contractors to the NHS for many years, responsible for delivering GP care to NHS patients but run as independent businesses," said a spokesperson.
"Under the franchise, NHS staff will remain employees of the NHS and the hospital will remain part of the public sector. We are committed to the founding principles of the NHS – that care is free at the point of use, based on need and not on ability to pay."
The department stressed that Circle will be subject to the same "rigorous regulation" from the Care Quality Commission as other hospitals.
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