How does the NHS use them?

Service

Examples

Estates management 

Maintaining and upgrading an expensive and varied NHS estate is a difficult and complex task, particularly given current constraints on capital expenditure and investment. A significant number of trusts have established wholly owned subsidiaries to manage their estate. This enables trusts to attract the right number and type of staff with the specialist expertise required in what has often been and remains an area of substantial recruitment difficulty. The establishment of a wholly owned subsidiary also enables a dedicated governance and management focus in a highly specialised area that a trust wide board and management team are unable to provide.  

Wholly owned estates management companies can support the spreading of good practice. For example, following the successful negotiation of a PFI buy-out, one trust company now actively offers its services to other trusts looking to renegotiate their PFI contracts, helping to save money across the NHS. 

Facilities management and catering

In order to improve the environment for patients and staff, some trusts have set up wholly owned subsidiaries to manage their facilities, including catering, waste management, and cleaning services. Rather than outsourcing these services to the private sector, a wholly owned subsidiary can retain expertise and skills in house and avoid expensive agency and service charges.  

Subsidiaries also present an opportunity to generate additional income for the NHS through developing economies of scale and delivering the services to other organisations, which NHS trusts are being encouraged to do (e.g. by providing catering and facilities management to local councils and colleges). One trust’s wholly owned subsidiary company recently won an HSJ award for its facilities management and procurement work.  

Outpatient pharmacy services 

Many trusts have set up wholly owned subsidiaries to manage their own outpatient pharmacies. 

Since VAT was introduced in 1973, private pharmacies have been exempt from this tax. Despite protracted lobbying the NHS is unable to benefit from this exemption. In setting up a wholly owned subsidiary, many trusts see themselves levelling the playing field when it comes to managing these services. Rather than outsourcing to commercial retail pharmacies, wholly owned subsidiary companies set up by trusts ensure all VAT savings are brought back into the NHS and can be directed to fund patient care.  

In one trust an outpatient pharmacy subsidiary was able to dispense GP and community prescriptions, something the trust had been previously unable to do, leading to a more integrated system and experience for patients.  

Shared clinical services, such as pathology

Following Lord Carter’s review of NHS pathology services in 2008, some trusts have looked to established wholly owned subsidiary companies in response to the review’s recommendations to consolidate pathology services, and to ensure better integration across neighbouring organisations. A wholly owned subsidiary brings dedicated focus and appropriate governance to a complex and difficult task.  

Putting new care models in to operation

Wholly owned subsidiaries offer a model for organisations to collaborate horizontally and vertically, establishing the new models of care set out in the Five Year Forward View and addressing workforce challenges.

For example, a community trust is currently developing a wholly owned subsidiary to employ local GPs who wish to become part of the trust but do not want to become salaried employees on Agenda for Change terms. The structure of the wholly owned subsidiary provides the governance to appropriately involve GPs, which would not have been possible at a whole trust level.  

Invest and support innovation and technological advances 

A number of trusts have set up wholly owned subsidiaries to develop and bring innovations to market. This mirrors the approach used in university sector which also invests in innovation and tech start up companies. This organisational form allows appropriate reward and provides incentives to those developing innovative products.

A wholly owned subsidiary of this type also uses its governance structure to include innovators from other sectors on the board. This approach would not be appropriate for a main trust board.    

Shared back office functions 

In separating core and non-core services, trusts are able to allow clinicians and board members to focus on quality, care and patients, while also ensuring the best quality support services. 

Establishing separate boards for wholly owned subsidiaries gives focus to some services which have traditionally been neglected but that make an important contribution to the overall patient experience. 

Trusts are being encouraged to share back office services across a number of different trusts. This was one of the recommendations in Lord Carter’s review on productivity. Wholly owned subsidiaries offer the opportunity to share ownership between the trusts and develop a form that reflects common values and purpose.