Serco is making its latest retrenchment, following the sale of its transport technology business to Cubic last month (see here). It has now completed a review into its clinical health operations, and will take a £17m non-cash charge in FY13 to cover future losses against three unprofitable health contracts at Braintree Hospital (£3m), NHS Kernow (£5m), and Suffolk (£9m).
Serco is also exiting the deals at Braintree and Kernow in December 2014 and May 2015. Apparently the predicted level of patient referrals didn’t materialise at Braintree. Meanwhile Kernow, Serco’s much-criticised GP out-of-hours service (see here), problems had apparently arisen as a result of operational challenges, including the implementation of the NHS Pathways IT system. The Kernow debacle has been terrible PR for Serco.
Serco is holding onto the Suffolk community health contract. Interestingly here, demand has actually been higher than expected, but this has had negative consequences, putting pressure on resources. It would seem that these additional resource costs have been borne by Serco.
These contracts have proved too difficult for Serco to make money on – either because demand was too low, too high, or because of operational and IT challenges. Serco should be able to make money on operations that have high demand, hence the reason it is sticking with Suffolk. However the underlying issues raise significant concerns about how low Serco has been bidding on contracts to secure such business, and the levels of risk it had been prepared to take.