Extra payments ‘not discussed in detail’ says iSoft

iSoft has said contract payments were ‘not discussed in detail’ with the government before further news of its precarious finances broke last April.

The statement was made in response to revelations published in the Guardian on Friday about events leading up to iSoft’s headline-making financial troubles. In an extensive, but unsourced, analysis the newspaper charted events preceding the near-collapse of the company’s finances under its previous chief executive.

It said that the government refused a last ditch request by iSoft’s former chief executive, Tim Whiston, for a multi-million pound upfront payment on top of nearly £82m already advanced over two years in respect of existing contracts by the Department of Health.

E-Health Insider sought a response from iSoft on Friday but none was available. However, an iSoft spokesman said yesterday: “It was perfectly sensible to have initial discussions about extending these contracts. The payment structure, however, was not discussed in detail.”

There was no outright denial of the report’s truth, but sources suggested that the situation was not as ‘black-and-white’ as the article suggested.

The Guardian, however, alleges: “By April [2006] not only did Mr Whiston expect the Department of Health to extend contracts relating to antiquated iSoft systems, but anticipated payment would take the form of a multi-million pound upfront lump sum.”

The report says that Connecting for Health, the NHS’s IT procurement agency, told Whiston that there would be no contract extension and no further upfront cash at the end of the company’s financial year in April this year.

As a result of this, the report says, iSoft was forced to issue a warning to the stock market on 28 April predicting pre-tax profits up to £25m below expectations.

This was followed by the announcement from the company that it would abandon aggressive accounting practices resulting in operating profits for the financial year ending April 2005 being revised down to zero. Whiston resigned from the company shortly afterwards.

Last month, the company reported a £344m pre-tax loss for the financial year ended April 2006, with a 15 month extension on existing banking arrangements.

As reported earlier, the upfront payments totalling £81.8m related to a contract to maintain existing iSoft software in the NHS. An enterprise wide agreement gave iSoft money in advance in exchange for £20m worth of savings and other concessions in areas such as contract terminations.

The Department of Health and Connecting for Health have been at pains to stress that the deal saves money and procurement time for the NHS and that it is not part of the National Programme for IT which has an avowed policy of paying only when systems are installed and working well.

However, even outside the national programme, upfront payments are highly unusual. E-Health Insider asked whether similar arrangements were included in any of the 13 other enterprise wide agreements in place between CfH and suppliers and was told: “No”.