Is surplus NHS estate the answer to funding transformation?

Both The King’s Fund and the Health Foundation have called for a properly resourced 'transformation fund' to support the kind of large-scale change outlined in the NHS five year forward view. But how big would such a fund need to be and how would it be resourced? We are exploring the answer to these questions as part of our project with the Health Foundation.

Could selling unused, or underused, NHS estate provide the necessary funding? Of course, this depends on how much surplus estate there is and how much it is worth – and it isn’t easy to answer either of those questions.

According to data submitted to the Department of Health, in 2014, just over 650 hectares of trust and foundation trust estate (around 910 football pitches) was surplus or potentially surplus; in addition, NHS Property Services lists 59 sites (mostly ex-primary care trust estate, size unknown) as available for disposal.

It’s unlikely that these numbers tell the whole story. Our research suggests that many individual parcels of unused land or areas within buildings are too small to release for sale and therefore go unreported. Other sites, although not labelled ‘surplus’, are underused and could be released through modest reconfiguration.

Unsurprisingly, this complicates efforts to value surplus estate. Monitor’s 2013 report, Closing the NHS funding gap, valued underused assets across the acute and mental health sector at between £4.8 billion and £7.5 billion. This covers not only the value released immediately from estate sales, but also the potential savings generated over time through more efficient asset use (using operating theatres more intensively, for example) to free up capacity. The analysis estimated the value generated by assuming the least efficient organisations improved to the level of the most efficient. Monitor’s report did note however that fully realising these savings in practice was likely to be difficult for several reasons, including the challenge of selling portions of assets.

However, focusing specifically on estate reported by trusts and foundation trusts as surplus gives a much lower figure. We used information from previous estate sales to derive an average value per hectare and applied this to the hectares reported as surplus in 2014. This gives an estimated value of approximately £700 million. Applying a similar calculation to the 59 vacant sites held by NHS Property Services (albeit based on the number of sites rather than hectares) suggests these might generate roughly £30 million.

So what’s the right answer then? In practice it seems most helpful to view surplus and underused estate in three distinct categories:

  • surplus estate that is immediately saleable –we estimate this to have a value of approximately £700 million
  • vacant or underused estate that could be released in the medium term through reconfiguration – this is impossible to quantify, but even if it were to double the total volume of estate currently identified as surplus, it would generate only another £700–750 million
  • estate that could be released in the longer term through significant changes to its configuration and management – estimating the value of this requires significant further work.

There are clearly some practical obstacles to unlocking the value in surplus estate. Furthermore, there is no incentive for organisations to release surplus land and buildings if they are unable to retain the proceeds locally. Currently, foundation trusts and trusts (for the most part) can keep capital receipts generated by sale of their estate, and indeed most attempts to release estate are tied to proposals for service development. Persuading organisations to instead release these receipts for a transformation fund is likely to be difficult unless they can see a clear benefit for themselves.

So, can surplus estate release enough value to support a transformation fund? It seems likely that the resources immediately available won’t be enough, not least as the NHS needs resources right now. However, the potential for unlocking additional value from the estate over the longer term should not be underestimated. There may also be some innovative approaches to generating revenue from this estate, working with other local organisations or the private sector to develop and/or lease out estate no longer needed by the NHS. There are some examples of this happening already, but much more work is needed to fully understand the nature and scale of these opportunities. 

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Comments

#543584 Umesh Prabhu
Medical Director
Wrightington Wigan and Leigh FT

NHS definitely needs more money but also needs good value based leaders who can use the money wisely. Getting rid of asset is not the right thing to do. But avoiding unnecessary wastage is the right thing to do. If we can get elderly care pathways right by integration, reduce unnecessary heroic surgeries, unnecessary investigations, medications right and provide good care for dementia patients and look after our staff well so that they get inspired and motivated and do wonderful job then NHS can save huge amount of money and can provide excellent care to all our patients.

We also got to streamline management system so that there are not too many leaders from too many organisations making decisions. If we get values, culture, leadership, governance, staff and patient engagement right then we can transform NHS.
http://t.co/cb4Nr9Lmcc Please read this interview as to how we transformed one Trust. We are not perfect and still there are many challenges. But we have come a long way by defining our values and appointing value based leaders.

This is where King's Fund should focus.

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