How much capital investment is being made in new (rural) hospitals?

The New Hospital Programme was set up in 2020 to build 40 new hospitals in England by 2030. The Government allocated £3.7 billion in capital funding for this up to March 2025, with more to be provided for the following five years. How has the Programme been implemented so far, and what does it mean for how health care is delivered in the future? Jessica Sellick investigates. ………………………………………………………………………………………………..

The NHS in England has around 1,500 hospitals where most emergency and elective care is carried out. In accordance with the Health and Social Care Act 2008 and the NHS Constitution, NHS providers are required to comply with legal requirements to ‘deliver care in a clean, secure and suitable environment that is properly maintained’. 

Back in September 2019, the Department of Health and Social Care (DHSC) published a 5-year plan setting out a programme of investment in health infrastructure, including a new hospital building programme. Known as the Health Infrastructure Plan (HIP), it described how 6 new large hospital builds would be receiving funding to go ahead (aiming to deliver by 2025), 21 more schemes had been given the green light to go to the next stage of developing their plans (with the aim of being ready to deliver between 2025 and 2030), and how there would be opportunities for other schemes to bid for funding in the future. The HIP focused on 3 areas to make NHS infrastructure fit for the future: 

1. A new 5-year rolling programme of investment in NHS infrastructure – including waves of investment in new infrastructure and multi-year capital settlements to provide greater certainty to plan effectively and get better value for money. 
2. A reformed system underpinning capital to ensure funding addresses need – ensuring funding reaches the frontline when and where it is needed, with national infrastructure to support this. 
3. Strengthening capital funding in wider health and care sectors which support the NHS. 

In July 2020, the Public Accounts Committee (PCA) published a report on NHS capital expenditure and financial management. This highlighted how some NHS trusts had been using their capital budgets to sustain day-to-day services, estimating that they had a backlog of maintenance costs of £6.5 billion to restore their estates to an appropriate standard, of which £1.1 billion was high-risk, indicating an increased risk of harm to patients. The Committee called on the DHSC and NHS England to identify a capital strategy to support the NHS Long Term Plan, including expectations on how backlog maintenance costs would be addressed. 

In line with the HIP, in October 2020 the then Prime Minister, Boris Johnson, confirmed funding to rebuild 40 hospitals, with a further 8 schemes invited to bid for future funding, leading to the expected delivery of 48 hospitals by 2030. 

“The dedication and tireless efforts of our nurses, doctors and all healthcare workers have kept the NHS open throughout this pandemic. But no matter what this virus throws at us, we are determined to build back better and deliver the biggest hospital building programme in a generation. From Morpeth to Milton Keynes, we are building 40 new hospitals across England to level up our NHS so more people have top-class healthcare services in their local area”, Boris Johnson, 2 October 2020. 

Alongside a £3.7 billion capital investment, the Prime Minister also announced the development of work to standardise the design of new hospitals including making use of modern construction methods to speed up builds. 

Figures from 2021-2022 highlighted how 43% of the NHS estate had been built before 1985, and that the maintenance backlog at the time had reached some £10.2 billion. Seven hospitals were also found to be structurally unsound and in need of urgent replacement because of the use of reinforced autoclaved aerated concrete (RAAC). Surveys also found a further 41 buildings at 23 hospital trusts to contain the material.     

In 2020 the DHSC set up a New Hospital Programme (NHP) to deliver the Government’s commitment to the NHS estate.  The NHP was tasked with contracting and improving efficiency, quality, and standardisation in hospital construction. The NHP intended to allocate the 48 schemes across 5 cohorts: 

• Cohort 1 – 1 new hospital (Dyson Cancer Centre in Bath) and completion of 7 schemes under construction or pending full approval prior to the NHP. 
• Cohort 2 – 10 schemes entering construction up to 2024-2025, of which 9 were new hospitals and 1 a pre-existing scheme.  
• Cohort 3 – 8 schemes for most or entire construction from 2025-2026 onwards. 
• Cohort 4 – 14 schemes for construction from 2025-2026 onwards. 
• Cohort 5 – 8 further schemes not yet selected to be constructed in the late 2020s.  

What progress has been made by the NHP since 2020, how might the Programme operate to 2030, and what might this mean for rural communities?  

How has the NHP been implemented to date? In July 2023, the National Audit Office (NAO) published a report examining whether NHP was being managed in a way that is likely to achieve value for money. The report covered the need for new hospitals, the progress made by the NHP between 2020 and 2023, and the issues, risks and opportunities for the NHP going forward.  

• Initial funding and selecting schemes for the NHP: the NAO found Government had only allocated capital funding up to 2024-2025 and had not made funding and scoping decisions about later cohorts because the DHSC had not yet developed a new centralised, standardised approach to build them. This has resulted in uncertainty for schemes in cohorts 3, 4 and 5. After the DHSC received less funding than it assessed it needed for the NHP’s first 4-years, the DHSC decided to start with smaller schemes first and leave most construction for the final 6-years. The NAO found this increased the risk that in later years many schemes would need to be under construction at once, meaning it could be harder to find construction companies willing or able to build them at a good price. The NAO found the DHSC was not able to fully document the process it had used for selecting the 32 schemes that were announced in October 2020. Officials told the NAO that the final selection of schemes involved choices and judgements for which no further documentation was available. The NAO found that the DHSC had adopted a board definition of ‘new hospital’ encompassing completely new hospitals, complete rebuilds of existing hospitals, major new buildings at existing sites and major refurbishments of existing hospital buildings. Excluding the 8 pre-existing schemes in the NHP, the NAO estimates that of the remaining 32 schemes 11 represented new hospitals and 20 others elements of the DHSC’s definition. 

• Progress with cohorts 1 and 2: the NAO found in its first 3-years, the NHP had made slow progress constructing hospitals in cohorts 1 and 2. By June 2023, 3 of the 8 schemes in cohort 1 had part-opened against an expectation of 5. The other 5 schemes in cohort 1 had been delayed between 1 month and 16 months. As of May 2023, none of the 10 schemes in cohort 2 had entered construction, though some pre-construction site works valued at £11 million had commenced. The NHP attributed these delays to the approval of individual business cases. The NAO found forecast costs for schemes in cohorts 1 and 2 had increased by 41% between 2020 and 2023. The causes of the cost increases have been ascribed to higher-than-expected inflation and an under-estimation of costs by some NHS Trusts. Where these costs fall in the period up to 2024-2025 they must be meet from the NHP’s existing £3.7 billion capital funding. 

• Progress with cohorts 3, 4 and 5: the NHP has been planning for schemes in later cohorts to use standardised hospital design and modern methods of construction to reduce costs and timescales and to improve the quality of new hospitals. Estimates suggest this will lead hospital construction to be 25% cheaper and 20% quicker compared to traditional approaches. The NHP’s central team has been working on a standardised design, known as ‘Hospital 2.0’, since 2021 and has assessed that it will take until May 2024 to complete this task. Until Hospital 2.0 is complete there are limits to the NHP’s ability to progress with planning schemes in cohort 3 and later. The NAO’s review of the minimum viable product (MVP) of Hospital 2.0 suggests it may result in smaller hospitals with lower initial building costs and lower running costs than other potential specifications. This may result in hospitals that are not big enough for future needs. The NAO also flagged bed occupancy data in suggesting that running hospitals very full in the future would reduce the amount of spare capacity for coping with normal variations in demand, unexpected shocks, and health crises. The NHP had only identified 4 contractors able to consider building a complex, large, new hospital leading to further concerns about their demands and capacity to deliver the Hospital 2.0 pipeline. 

• The NHP team’s capacity and skills: the NAO found the NHP had experienced difficulties staffing its team and had depended more than it had wanted to on consultancy services. By February 2023 the NHP team had filled 361 posts but the remaining 165 posts were still vacant. Of the 361 posts that had been filled, 30% were with permanent employees and 62% through consultancy services. Between April 2021 and March 2023, the NHP used £70 million of its £89 million resource expenditure on consultancy services. The NHP is estimating £842 million of consultancy spend between 2023-2024 and 2030-2031. The NAO highlighted the risk of a lack of continuity and loss of knowledge on a long-term programme. 

• Agreeing funding for the NHP: during 2022 it was not possible to set an indicative budget for later years because of issues with the scope of the programme, delivery capacity and the programme plan. In March 2023 HM Treasury agreed a funding envelope, indicating that spend on new hospitals between 2025-2026 and 2030-2031 would be £18.5 billion.  

The Government’s Infrastructure and Projects Authority (IPA) has been monitoring NHP delivery. Over the last 3-years it has categorised this delivery between amber (where successful delivery appears feasible but significant issues exist) through to red (where successful delivery of the project appears to be unachievable). The NAO has indicated that 2023-2024 is a critical period ‘during which the NHP needs to consolidate its scope, timetable, funding and approach to construction’ (page 16).    

In July 2022, NHS Providers published the findings of a survey it had carried out into trusts’ experiences and progress to date with the NHP. Representatives from 26 out of the 35 Trusts engaged in the NHP responded. On funding: 96% of respondents ‘strongly agreed’ and 19% ‘agreed’ that the Government should confirm the funding envelope beyond 2024-2025. Half of all the trusts that responded were ‘not confident’ or ‘not at all confident’ that their funding allocation would be sufficient to deliver their project. On delays: completion dates were behind schedule for 39% of schemes in the trusts surveyed – and all reported that costs would increase because of the delay. 62% of respondents said the delays somewhat affected their ability to deliver safe and effective patient care. 

In November 2022, the NHS Confederation cited 4 reasons why NHS capital investment had fallen behind the times. Firstly, successive Governments have failed to invest enough in capital. Secondly, the impact of inflation, which has hit the construction industry particularly hard. Thirdly, a reduction in the amount of capital investment per worker by 17% between 2010-2011 and 2017-2018. Fourthly, accessing capital remains difficult, and the business case sign-off process is opaque. In a survey of its members in June 2022, 9 out of 10 respondents said their efforts to reduce the size of their waiting lists was being hindered by a lack of investment in buildings and estate. More recently, in its response to the NAO’s report, Matthew Taylor, chief executive of the NHS Confederation described how “members will be concerned by the delays to many part of the New Hospitals Programme…especially as some trusts are having to find additional money to tackle ongoing maintenance issues such as new roofs, when they were led to believe they would be moving to a new site or given funds to build something new…a comprehensive and long-term capital investment plan is needed, and work needs to start ahead of what is likely to be another tough winter for the NHS”.    

How will the NHP be delivered to 2030? On 25 May 2023, the Secretary of State for Health and Social Care announced a reset of the NHP. The reset includes: 

• Rebuilding all 7 RAAC hospitals by 2030, 5 more than the DHSC included in the original programme back in 2020. Building works on the first hospital site are planned from 2025. 
• The completion of 8 cohort four schemes will be delayed until the 2030s when they will form part of a new 5-year rolling programme of planned hospital upgrades. 
• Plans for 8 new hospitals to come forward and form cohort 5 have been replaced by the 5 additional RAAC hospitals.
• HM Treasury has indicated that capital funding between 2025-2026 and 2030-2031 will be up to £18.5 billion (subject to future spending reviews). 
• Government has given approval to the NHP to build all of the hospitals from cohort 3 onwards. This is less than the NHP requested in its business case and it will be developing a further business case to find more savings. 

In addition, three mental health schemes in Surrey and Borders NHS Foundation Trust, Derbyshire Healthcare NHS Foundation Trust, and Mersey Care Foundation Trust will be delivered. While these hospitals are not part of the NHP, they do meet the DHSC’s definition of a new hospital and part of a commitment to eradicate dormitory accommodation from mental health facilities across the country and put mental health on equal footing to physical health.  

In the longer term, the DHSC says it recognises the need for continuous investment in healthcare infrastructure. It intends for the NHP to become part of a rolling programme of investment in new health capital infrastructure to deliver new hospitals up to 2030 and beyond. 

Following the NAO’s report, the Public Accounts Commitment launched an inquiry to examine national programme management, support for and challenges to local projects within the NHP, progress compared with expectations, and the management of programme-level risks.  The Committee accepted written evidence up to 25 August and held an oral evidence session on 7 September.  While recognising the need to prioritise the eradication of RAAC from the NHS estate, in the evidence it submitted, NHS Providers flagged that each of the 100 trusts who had applied for the final 8 places on the NHP are still in need of vital capital investment. NHS Providers also highlighted a lack of parity in funding in overlooking the capital needs of mental health, ambulance, and community trusts.  In its evidence the NHS Confederation argued that the NHP should not be considered in isolation, but part of a wider dialogue on infrastructure and digital. They highlighted the knock-on effect of underinvestment in capital on workforce productivity, staff vacancies and patients on waiting lists for treatment. They argue there has been a tendency to provide short-term funding stipulated for specific projects which does not reflect the wider reality of the challenges the NHS is currently facing and that a systems wide approach is needed.  

What does the NHP mean for rural areas? The evidence suggests that up-to-date facilities and equipment can lead to improvements in the recruitment and retention of health care staff, patient safety, and the development of existing and new services. 

On an annual basis all NHS Trusts, including Ambulance Trusts, submit an estates return to NHS Digital [known as ERIC]. This contains information relating to the costs of providing and maintaining the NHS estate, including buildings, maintaining and equipping hospitals, the provision of services (e.g. laundry, food), and utilities. This shows, for the period 1 April 2021 to 31 March 2022: 

• The total costs of running the NHS estate were £11.1 billion – this is an 8% increase since 2020-2021. 
• The total cost to eradicate backlog maintenance was £10.2 billion – this is an increase of 11% since 2020-2021. 

While the data reports for ERIC provide a breakdown per Trust of capital investment for new build, capital investment for changing/improving existing buildings and capital investment for maintaining existing buildings, this information is not collated to show rural level data within or across Trusts. However, the site level data for each Trust does contain postcode data so it may be possible, for existing sites, to see if/how the quality of the buildings, age profile and safety varies in rural areas. 

Back in 2019, the National Centre for Rural Health and Care (NCRHC) commissioned the Nuffield Trust to explore the impact of rurality and sparsity on the costs of delivering health care. The review looked at the key factors for calculating health allocations to local areas: with adjustments in funding made for population need, unmet need/inequalities, costs and financial stability. The key determinant here is population and demographic needs within a given area. A further adjustment is made for the higher costs of running hospitals with 24-hour A&E departments in remote areas. Funding from what was then Clinical Commissioning Groups to rural areas made adjustments for (i) the extra cost of ambulance provision and (ii) an allowance for remoteness. However, these two factors are outweighed by a further two factors (iii) market forces and (iv) health inequalities. The impact of iii and iv sees the total budget for core services move around £600 million of funding from predominantly rural areas to urban and less rural areas. 

Nuffield’s analysis revealed how six rural hospital trusts were carrying a quarter of England’s health service’s funding deficit. Furthermore, data provided to the Nuffield Trust by then NHS Improvement suggested that, to November 2018, 17 trusts had applied for local modifications. Of these applications, the majority (11 applications) were for rurality (or sparsity/economies of scale); with the remainder consisting of rationale relating to case-mix complications (2), Private Finance Initiatives or estates (2), A&E services (2), and clinical negligence scheme costs (1). Only one trust, Morecambe Bay, had been successful in its request for formal compensation for higher costs due to rurality. This analysis suggests that the way the NHS allocates and distributes funding does not fully compensate remote and rural areas for the extra costs they face.  

The NHS Long Term Plan commits to developing a ‘standard model of delivery in smaller acute hospitals who serve rural populations. Smaller hospitals have significant challenges around a number of areas’ (page 23). The Government publishes a map and a list of projects where hospital builds, hospital upgrades and investments in equipment and technology are being made. Similarly, a map of the location of the NHP by cohorts was produced (page 27). While the displays show national and regional distribution, to what extent each of these new investments is taking place in a rural area and/or to what extent rural patients will benefit is not shown. It is also unclear to what extent the NHP has been rural proofed.   

The Parliamentary Inquiry into Rural Health and Care identified five distinctive health and care needs in rural communities based on the evidence given by witnesses: 

1. Ageing population: rural areas have a disproportionate number of older people leading to higher levels of demand. 
2. Mental health: isolation and loneliness can heighten mental health issues in rural areas and there is limited data available on rural mental health. 
3. Distance from services: people in rural areas need to travel further to access treatment and often have less access to specialist provision and to emergency services. 
4. Housing: the cost of housing, prevalence of older properties, fuel poverty and older populations living alone can increase the vulnerability of poor health and chronic illness. 
5. Cultural and attitudinal differences: rural patients often seek medical help later; and rural poverty and deprivation is linked to a lack of confidence and aspiration. 

The Inquiry highlighted examples of how investment in smaller rural buildings is not as attractive to funders who prefer larger scale urban estates. 

In a short debate on Healthcare in Rural Areas in the House of Lords on 23 February 2023, Baroness Bennett of Manor Castle highlighted how “We see repeated attacks on the whole concept of community hospitals, and we have seen cutbacks and further cutbacks, but there needs to be a vision for such hospitals—that is, a strategy of how they can best be used for local people and the local healthcare system, taking medium acuity patients to relieve some of the enormous pressures that the acute hospitals are experiencing and, of course, making sure that people can visit patients and that patients can remain in and be part of their communities”.

We do not know enough about the current and future health care needs of rural communities – and the people, physical and digital infrastructure required to meet these needs.  

The NHS is one of the largest landowners in England. While the main function of the NHS is to provide health services, NHS bodies are also anchor institutions, in that they play an active role in supporting local communities and other organisations to address the physical, social and environmental factors that can cause ill health. According to NHS providers, this role is more pertinent in a rural community where there are few other public service institutions and key employers playing a similar role. NHS England has developed guidance for estates and facilities managers on the 10 Building Blocks for Building for Health – this document also references the role of the NHS in facilitating economic development and regeneration in rural areas.  At the same time, the NHP’s work suggests there will be ‘model of care shift’ where patient care will increasingly shift out of hospitals and into adult social care, outpatient services, community care and digital healthcare. Within and outside of the NHP, is there a strategy and funding to support the delivery of this shift – and the increased costs of providing these services in rural areas?  

10% of the NHS estate is owned by NHS Property Services. Alongside the formation of Integrated Care Systems (ICS) they have been developing community spaces for social prescribing programmes. A report from The Health Creation Alliance for NHS Property Services back in October 2022 aimed to get a better understanding of what matters to ten different communities, both in terms of the kinds of spaces that support wellbeing and the processes involved in making them available. The report included a case study of people from rural communities. This identified 7 themes that matter to rural residents in overcoming physical, social and economic isolation:  

1. Transport is frustrating. 
2. Physical meetings are preferable to digital ones. 
3. Become problem solvers. 
4. Create an environment of comfort and warmth. 
5. Be opening and welcoming. 
6. Harness the whole community for longevity. 
7. Work with partners to develop a sense of shared ownership. 

By connecting and using the community, community organisations and partners as resources, the authors of the report suggests some of these barriers can be overcome and opportunities harnessed. 

Where next?The NHP was launched at time when the hospital estate had experienced a period of underinvestment and had a maintenance backlog. Over the last 3-years the NHP has struggled with funding, staffing, and developing a standard approach to construction.Following the recent reset of the NHP, the NAO estimates that the DHSC’s plan will lead to 32 hospitals by 2030 according to the definition it used in 2020; with another 8 hospitals following after 2030. Some schemes publicly announced back in 2020 may now face delays, inevitably having implications for NHS staff and patients. However, the Government believes it is on track to deliver its commitment to build 40 new hospitals in England by 2030. While it is admirable to want to build new hospitals, a much broader discussion is needed about capital investment in the NHS, adult social care and community estates. For while big can be beautiful, we owe it to our rural communities to develop health and care provision that matches their needs both now and in the future.  

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Jessica is a project manager at Rose Regeneration and a senior research fellow at The National Centre for Rural Health and Care (NCRHC). She is currently evaluating hospital discharge and hospital avoidance schemes, and a service that supports older people to maintain their independence. Jessica also sits on the board of a charity supporting  rural communities across Cambridgeshire. 

She can be contacted by email jessica.sellick@roseregeneration.co.uk. 

Website: http://roseregeneration.co.uk/https://www.ncrhc.org/ 

Blog: http://ruralwords.co.uk/ 

Twitter: @RoseRegen 

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