Partners please

While big Public Finance Initiative (PFI) projects in the healthcare sector have grabbed the headlines in recent years because of their scale, equipment manufacturers and suppliers are using the same funding principles as a way of updating catering equipment in hospital kitchens.

In particular, this applies to cases where the hospital catering department is seeking to purchase single items. In such instances, the funding arrangement is not usually called a PFI, but a partnership. It is, though, essentially the same kind of leasing or joint funding agreement, where a supplier provides some form of capital investment in return for a long-term contract.

One of the best examples of how this partnership between a hospital and a supplier can work in healthcare has been at the Leeds NHS Trust. This is the largest NHS trust in the UK, with six hospitals providing 2.8 million patient meals a year.

By the late 1990s, it was obvious that the trust was not only failing to deliver patient meal satisfaction, but the standards were falling short of the levels the trust was obliged to deliver. A patient audit at the main St James site, which was running a cook-serve food operation, showed a 68% satisfaction level, 2% below the catering department's acceptable minimum. But satisfaction levels in sites using a cook-freeze system were significantly higher, at 82%.

It was clear that changes had to be made, but where would the funding come from? The six hospitals had a mix of service provisions - cook-chill, cook-freeze and cook-serve. After looking at the options from a quality and cost-effectiveness point of view, the trust brokered a ground-breaking deal with Tillery Valley Foods, the chilled and frozen food arm of contract caterer Sodexho.

Tillery Valley agreed to produce food to a guaranteed quality and delivery standard, and also funded a central receipt and distribution unit on the north Leeds hospital site at Seacroft. This would hold chilled or frozen single- and multi-portion foil packs of food, and would be the centre from which the six hospitals would receive daily deliveries.

While most of the main meal food provision for the Leeds hospitals comes through Tillery Valley Foods, the trust runs a hybrid operation to maximise cost-efficiency. With a food production facility still on site, sandwiches, salads, medical diets and some cold dessert items are made locally by the trust's own catering staff.

Food for each hospital is assembled in chilled containers and delivered to receipt and transfer units in each one, for distribution around the wards and regeneration in heated trolleys.

Les Darlington, sales director for Tillery Valley Foods, says that the company was happy to make a substantial investment in the Leeds site because the volume was obvious and there was a long-term commitment from both partners.

Equipment manufacturer Hobart has also recognised the capital expenditure constraints that the healthcare sector is under, not least because the public sector is worth £12m to its business each year. So the firm has come up with a hospital partnership deal in conjunction with merchant bank Close Brothers, which funds leasing for the equipment.

Roger Kellow, national chairman of the National Association of Care Catering (NACC), and government account manager for Hobart, says that leasing (instead of capital purchase) has been a feature of the NHS for many years on items as diverse as specialist surgical equipment and delivery vans. "We thought this was something that would work equally well with catering equipment," he adds. "Leasing is growing in popularity every year."

One of the biggest areas of capital costs for a hospital kitchen is warewashing. Meiko, one of the leading suppliers of dishwashers into healthcare in the UK, has introduced extended leasing schemes for hospitals which can run for as long as seven years. It also offers contract hire where there are multiple warewashing units in a hospital.

The extra payoff from this scheme is that, at the end of the lease period, a hospital can opt to buy the warewashing equipment for a nominal price. Instead of the funding coming from an outside finance house, Meiko fund the deals itself.

Medirest, the healthcare division of Compass Group, has formed a commercial partnership of a different kind with cleaning materials manufacturer P&G Professional. Compass had an existing high specification for cleaning chemicals, but they were mainly unbranded or low-profile brands.

Ian Moore, strategic development director for Medirest, explains the thinking behind joining a partnership with P&G Professional. "Hospital cleaning is always an issue for patients and the media," he says. "We wanted to raise the awareness of our cleaning standards, build confidence in what we do - and using big-name brands on the ward, that patients, nursing staff and visitors recognise, does that."

With high-recognition brands such as Fairy and Flash, and cleaning materials carrying the appropriate logo, Medirest is delivering the same service as before, but the perception of the service level has lifted.

In the terms of the partnership, Medirest gets free promotional materials, and training in the best use of the cleaning chemicals from P&G Professional. The same branded products are used back of house, but the benefit is that staff see high-profile brand names as evidence of commitment to top-quality materials.

The partnership deal with the healthcare sector put together by Aga Foodservice Equipment (AFE) hinges on persuading a hospital that going down the sole supplier route for equipment produces better service and keener prices. Colin Nevitt, sales director for the public sector, says the partnership deal involves more than design, planning and installation of equipment, but also lifetime cost projections of equipment to help a catering manager budget years ahead.

Another feature of the AFE partnership deal is that it will undertake asset management of catering equipment across an estate, telling managers what equipment is available, its age and efficiency. Nevitt says that having the majority of equipment from one supplier can lead to a more joined-up service and maintenance programme.

Public sector procurement For many years, successive governments have recognised the combined buying power the public sector has to negotiate the lowest possible prices. The total annual public sector budget for procurement is more than £13b, making it the biggest single customer for catering suppliers.

The Office of Government Commerce (OGC) is a body set up to ensure that a product meets specifications, and also satisfies a price-match guarantee that the product bought through the OGC could not be purchased cheaper elsewhere. All the prices are transparent, and next year every aspect of OGC procurement will be online.

Contacts
Aga Foodservice Equipment 0116 281 6057

P&G Professional 0800 716854

Hobart 07002 101101

Meiko 01753 561561

Tillery Valley Foods 01495 322119