A Review of the Implementation of Private Finance Initiatives in UK Hospitals

Abstract

Since their inception in 1992, Private Finance Initiatives (PFIs) have become the dominant mode of procurement for UK National Health Service (NHS) hospitals.  The private sector initially finances new initiatives which are then repaid through unitary service charges. Despite a great deal of rhetoric around the promise and potential of this funding mechanism, more recently PFIs have been criticized for bringing some NHS trusts to the brink of bankruptcy.  Moving forward, assessing whether PFIs can achieve their intended purpose; the provision of more sustainable and affordable solutions, is critical in determining their future usefulness. The purpose of this paper is to identify past and current benefits of the PFI, and evaluate post implementation problems. Our results suggest reduced labour costs and greater productivity are paramount, as is sharing risk. However, in measuring whether PFIs have delivered these benefits there has been a dearth of quantitative performance measurement. Additionally little research has concentrated on critical analysis and performance of PFIs, hampering attempts to evaluate the affordability and sustainability of this solution.