The East of England Strategic Health Authority has handed the running of a debt-ridden NHS trust to a private limited company that describes itself as a social enterprise.

Circle Health Ltd has won the contract to deliver NHS services at Hinchingbrooke Hospital in Huntingdonshire (pictured), which has been previously managed by an NHS management team and is now nearly £39m in debt. Circle will be the first independent provider to manage an entire NHS acute hospital in England.

Circle describes itself in its statement variously as an “employee-owned social enterprise”, a “John Lewis-style partnership model” and a “co-operative model”.  A supplementary statement by the Social Enterprise Coalition states that “Circle is not a private company.  It is a social enterprise” and declares that: “The majority of the profits from the contract to run the Hinchingbrooke hospital will be reinvested back into the local community.  These are the advantages of a social enterprise running our health services over a private company.”

But ‘social enterprise’ is not a constitutional form in law, so Civil Society pressed Circle on how it is actually constituted.

Spokeswoman Christina Lineen confirmed that Circle is registered at Companies House as a private limited company. She said that Circle employees, from the most senior doctors to the porters, own just over 50 per cent of the organisation, with the rest owned by external investors.

Circle already boasts a healthcare partnership of more than 2,600 clinicians UK-wide, through its running of NHS day-surgery hospitals in Nottingham and Burton.  Its staff remain NHS employees, seconded to Circle.

Lineen said the “vast majority” of profits made by the company are reinvested in the business “to support the local health economy”. Once certain benchmarks are reached, some profits will be returned to investors and shared amongst the employee-owners.

New employees are given an initial allocation of shares in the business when they join, and there is an annual distribution of further shares on the basis of company performance.

Circle won the Hinchingbrooke contract after a year-long tendering process against competitors that reportedly included Serco Health and Guy’s and St Thomas’ Hospital.

NHS East of England’s board has recommended that Circle run the franchise for at least ten years, on the understanding that it will pay off all Hinchingbrooke’s £38.8m debt during the period.

Circle will take over the operation of the hospital from 1 June 2011, subject to approval of the contract by the Departmentof Health.