Submission To Commons Health Committee Inquiry Into The Role Of The Private Sector In The NHS September 2001

The Role Of The Private Sector

Submission To Commons Health Committee Inquiry Into The Role Of The Private Sector In The NHS Drafted by Ursula Pearce September 2001


The SHA wishes to express its grave concern that current government policies and proposals will increase the very inequalities that we are all committed to reducing. The statement in our election manifesto that ‘specially built surgical units, managed by the NHS or the private sector, will guarantee shorter waiting times’ is the latest in a series of policy changes effectively preparing the NHS for wide-ranging privatisation of the management – and in some cases provision – of clinical health care.

The Concordat with the private sector which Alan Milburn signed last October puts the private sector and NHS onto an equal footing by requiring NHS managers to involve private hospitals and nursing homes in workforce and long term capacity planning. The high cost Private Finance Initiative has resulted in money intended for patients being channelled away from patient care and into the coffers of business. In every area with a first wave PFI hospital scheme, some 30% of NHS beds are being closed with reductions in clinical staff budgets averaging 25%.

The Health and Social Care Act 2001 accelerates these trends by enabling commercial companies, underwritten by the government, to build, run and finance GP and primary care centres. They can also provide services by employing clinical staff. Although the Health and Social Care Act allows more care to be provided for profit, the government pledges that patients will not have to pay for operations. However, a clause in the Act distinguishes (free) health care from personal care and hotel costs, which can attract a charge. Under the Act, Primary Care Trusts with pooled budgets and Care Trusts -a new type of NHS body – will be allowed to charge for care. The government has already published new Intermediate Care Guidance limiting NHS health care to six weeks except in exceptional circumstances.

The SHA strongly opposes New Labour policies and proposals that support the introduction of private sector management and user charges into NHS clinical services (the latter by creating mechanisms that will allow NHS bodies to charge for the non-nursing elements of care). Such changes will disproportionately affect the poorest and most vulnerable people in our society, and as such represent a direct challenge to the fundamental principles of the NHS that we have all fought so hard to retain.


NHS Concordat with the Private and Voluntary Sectors requires NHS managers to involve private hospitals and nursing homes in long term workforce and capacity planning – for elective care, critical care and intermediate care – where this offers demonstrable value for money and high standards for patients.

1. Value for Money

1.1 The Concordat, rather than delivering value for money, encourages commissioners to provide intermediate care services in the private sector where user charges can be levied. It is an inequitable policy that effectively shrinks the NHS for some of the most vulnerable patients. Over 270,000 people could be affected (NHS Plan). Patients receiving intermediate care in community based settings or in their own home will be fully funded on a time limited basis, typically lasting no longer than six weeks. Many episodes will be much shorter than this e.g., 1-2 weeks following acute treatment for pneumonia or two to three weeks following treatment for hip fracture. (HSC2001/01: LAC (2000 )1. If patients are not recovered or ready to return home after the time allotted in their care plan, they will undergo a second assessment including an assessment for social care for which they will be means tested. The 2001 Health and Social Care bill carries a clause extending the provision of free nursing care to all patients in private nursing homes. However, patients will still have to pay for the cost of accommodation and personal care , on average 80% of the total fee of £350 to £400 per week (HSJ Aug 9th ’01). A recent consultation document (London: Department of health: January 2001) suggests that doctors charge up to 55% of a patient’s income for the costs of personal care in private residential settings.

1.2 The Health and Social Care Bill 2001 allows PCTs to form new NHS bodies called Care Trusts holding pooled budgets for health, social services and other health related LA functions. Care Trusts retain the requirement of the local authority to charge for services such as provision of residential care and the discretion to charge for others such as transport, certain equipment and non-residential social care.

The concordat encourages Care Trusts to maximise the use of the private sector and to define personal care as broadly as possible in order to increase charges. It also provides cash strapped PCTs and Care Trusts with an opportunity to use private intermediate care beds as a substitute for expensive acute care (see 2.2). People requiring prolonged hospital and community health care e.g., following complex surgery, trauma or acute conditions such as stroke or cancer may find their eligibility for free NHS care seriously curtailed ( Pollock A. BMJ 2001 322 964-967)

1.3 The government expects the private sector to deliver value for money. This seems disingenuous. The private sector has higher costs than the NHS. Doctors and nurses salaries are higher and there is a duty to maximise profits. Typically, the NHS fee for a consultant surgeon on the maximum scale is £115 for three and half hours work whereas private sector rates could be up to £180 an hour. Surgeons clearing NHS backlogs in private sector hospitals are paid at the higher rate (Guardian 31 August 2001). Birmingham Health Authority, between October 2000 and March 2001, paid four times more to buy intermediate care beds in private nursing homes than it did for intermediate care beds in two NHS community hospitals with the full range of rehabilitation facilities (£1,200 per week compared with £320).

1.4 The concordat encourages the private sector to recruit and compete for staff trained at great public expense, at a time when serious recruitment and staffing problems are threatening the ability of managers to deliver the NHS plan. Shortages of skilled staff have been identified by health authorities across the country as the biggest threat to meeting NHS plan targets (HSJ Aug 9th ’01). Two thirds of NHS nurses in a recent RCN survey say staffing at the hospitals and clinics where they work is insufficient to meet patient needs (Guardian 18 September 2001). There are many examples of NHS beds and theatres closing because of staff shortages.

1.5 Even if numbers of trained nurses and doctors increase in line with the NHS plan, the NHS will still be at a disadvantage. Private sector salaries for doctors and trained nurses are highly competitive and terms and conditions of employment often more attractive than those in the NHS. NHS trusts with cash limited budgets will find it increasingly difficult to attract staff as the private sector expands. Private hospitals have already treated 50,000 more NHS patients since the concordat and the Independent Health Care Association expects numbers to grow (HSJ Aug 23rd ’01).

1.6 Contracts that appear to be better value initially could end up the only option and costing more. East Surrey Health Authority has used private hospitals to remove almost 1,000 patients from its waiting lists. It found prices were comparable to and sometimes cheaper than the NHS, patient satisfaction seemed high and consultant productivity was higher. Both the health authority and the private sector are now strongly in favour of developing long term arrangements (HSJ 6 September 2001).

Such arrangements are likely to weaken local NHS provision by reducing the pool of staff available. As a result the private sector could become indispensable and in a position to charge more. The NHS and local authority in Birmingham were held to ransom when Birmingham Care Consortium which represents owners of 178 independent homes in the city refused in the midst of a major ‘bed blocking crisis’ to accept new residents from the council unless the local authority was prepared to increase payments. The home owners accused the city council of deliberately under-paying the independent sector in order to recoup a social service deficit of £14 million (Birmingham Post June 19th ’01 ).

2. Standards of Care

2.1 Treating NHS patients in private sector beds for elective care and intermediate care may be justified on a short term basis to reduce waiting times and to avoid some patients being ‘trapped’ in a hospital bed. By encouraging long term arrangements, the concordat appears to mimic health care in the United States – a system notorious for generating fraud, malpractice and inequalities. The medical director of BUPA admits ” private practice offers fewer of the safeguards and support that help to minimise adverse events and reduce patient risk in the public sector” (Vallance, Clinical Risk Journal 2, 27-30 1996).

2.2 The Concordat gives local commissioners the responsibility for ensuring high standards are adhered to. But it also gives commissioners faced with financial difficulties the freedom to use the private sector in order to avoid the cost of acute hospital care. There is a real risk that some patients, particularly those who are elderly, may not get the most appropriate treatment. An intermediate care bed in a private home is expensive but still costs less than an acute bed in a hospital and can be means tested. Managers on limited budgets may be compelled to purchase intermediate care in private care homes even though such places may not have the resources for the expensive specialist geriatric rehabilitation provided by the NHS and required by many patients.

2.3 The Concordat seems to encourage the perception that intermediate care is a cheap option stating :

“In some cases the level of care required does not need to be the full acute nursing care delivered in a hospital setting. It is for this reason partners should consider the supporting role private and voluntary nursing homes, residential homes and home care could play in providing these services.”

Research shows that intermediate care is not a cheap option – one study by a senior lecturer in gerontology and health policy at Southampton University showed that intermediate care was more expensive than acute care and produced no added benefits for patients (HSJ April 19 2001). The British Geriatric Society notes the lack of evidence for the effectiveness or cost efficiency of intermediate care and urges cautions against dismantling established effective specialist services. It warns that ageism is a real danger . (BGS Compendium Document D4).

Geriatricians writing in the BMJ share this view “Specialist geriatric units are crucial elements of comprehensive acute hospital services but are expensive. In medical care, as in anything else, you get what you pay for. It is convenient for managers to confuse convalescence (spontaneous recovery) with the more expensive rehabilitation that is necessary to make non-spontaneous recovery happen. Geriatricians who have contrived to defend specialist rehabilitation units against the cutbacks of the past 20 years may now have to fight to prevent them being degraded to intermediate care. Indeed managers may seek to close rehabilitation units to free money for purchasing intermediate care in private sector nursing homes. Those ‘extra’ beds will have to come from somewhere else.” ( BMJ 2001; 322:807-8.)

2.4 There is wealth of evidence from compulsory competitive tendering to show that the bulk of private sector ‘efficiencies’ are at the expense of non-clinical staffing costs and the quality of patient care. According to King’s Fund research, the ‘best value’ tool introduced into local government 18 months ago is not preventing councils from “driving down costs at the price of quality” (King’s Fund Report: Future Imperfect?). It found that the hourly rate for care workers in private sector homes was below £4.

2.5 The Annual Report 1999/2000 of Birmingham City Council’s Inspection Unit found that local authority and independently run care homes both had problems relating to staffing shortages. But whereas the local authority homes had staffing shortages largely relating to sickness and lack of funding for maintenance, the private sector homes had difficulties with recruitment and retention.

The report states : “financial constraints on fee levels coupled with rising costs may have resulted in corner- cutting in some homes to an extent that is unacceptable for the interests of residents. The great competition for staff in the area has a marked effect and most homes have had difficulty in replacing staff that leave. Despite this, some employers have been found to pay less than the minimum wage, by employing people without training and in difficult circumstances. Such employment is unlikely to last and the staff turnover has a detrimental effect on the welfare of residents”.

Private Finance Initiative

3.1 On 15th February 2001, Health Secretary Alan Milburn announced that another 29 new hospitals, totalling £3.1 billion, were to be built under the private finance initiative, “if that represents best value for the taxpayer and the NHS.” He declared “There will also be more beds in the new hospitals. For four decades, the number of hospital beds has been falling —157,000 were cut between 1980 and 1997 alone. More than 60,000 of those were general and acute beds. In the year to December 2000, the number of general and acute beds started to rise again. I am determined that that trend should now continue”

The two statements contradict one another. The first, that the new hospitals are to be privately financed, will lead to service reductions and bed closures as research by Professor Allyson Pollock and others has shown. The second, that the new hospitals will have more general and acute beds, indicates the NHS has reached a capacity ceiling due to previous bed losses and growing demand and needs to increase the number of beds.

4. Value for Money

4.1 The DoH asserts that bed numbers in new hospitals are determined by commissioners well before a decision is made on whether to fund the hospital through public or private funding (HSJ 15 June 2000). In practice, Trusts are forced down the PFI route.

During public consultation on the new hospital recently approved for south Birmingham, the Chair of the trust wrote ‘ There is only one source of funding for hospitals – the Private Finance Initiative. We have investigated all the other suggestions but have been told by the NHS Executive that any scheme costing more than £25 million must be PFI (Bham Post 14 July 1999).’ When drawing up the Outline Business Case in August 2001, the Trust told members of South Birmingham Community Health Council that it would not get the funding for a new hospital if the Public Sector Comparator proved to be better value for money. (information from South Birmingham CHC).

4.2 In June 1998, the DoH issued guidance on preparing the Strategic Outline Case covering capital investments over £25 million. The guidance requires trusts and health authorities to show that they can afford both the capital and revenue consequences of building hospitals under the private finance initiative. So at the earliest planning stage, Trusts are compelled to draw up plans constrained by the costs of private rather than public financing. Health authorities and trusts planning new hospitals must reduce expensive in-patient care in order to accommodate the extra costs of the private financing .

5 Bed capacity

5.1 The DoH has promised an extra 2,100 acute general and acute beds and 5,000 more intermediate care beds for England and Wales (the first increase in 30 years) by 2004. It has also instructed health authorities not to plan for a reduction in bed numbers, including general and acute beds, except in exceptional circumstances (HSC(2001)3LAC(2001)4.

5.2 The recently approved new hospital for the University Hospital Birmingham NHS Trust (UHBT) – a new single site acute hospital to replace the Selly Oak and Queen Elizabeth Hospitals in Birmingham- seems to show the same trend in acute bed reductions as that found in the first wave of PFI hospitals.

Existing and proposed bed numbers for UHBT’s new hospital scheme
Bed Numbers based on current activity
OBC SOC Existing OBC minus Existing
Intermediate Care 160 150
Day Case 67.2 68 50 +17.2
Patient Hotel* 25.2
Acute 786.2 810 1017 -230.8
Total 1038.6 1028 1067 – 29.4
  • * Patient Hotel – overnight accommodation for patients and relatives who are self caring
  • SOC -Strategic Outline Case, Published May 2001
  • OBC – Outline Business case, in preparation. projected bed numbers from UHBT

The loss of 230 acute beds represents a 23% reduction, more than twice as big as the 9% reduction proposed in the ‘care closer to home’ scenario of the National Bed Inquiry.

5.3 The true extent of the above acute bed reduction could be obscured by 106 additional beds planned for regional specialties which have been agreed with other Health Authorities in the West Midlands and will be funded separately (information from the trust). An increased caseload is anticipated due to the transfer of beds from other hospitals and new government targets. There will also be more community intermediate care beds in line with the NHS plan.

Replying to a letter from Roger Godsiff M.P expressing the concern of Birmingham Trades Council , under Secretary of State Yvette Cooper wrote: “It is important to note that the proposed on-site intermediate care beds still fall into the category of general and acute and not the definition of intermediate care stated in HSC (2001)1.”

One of the planning assumptions of Birmingham Health Authority is that on-site intermediate care beds will be nurse led and at least 40% cheaper to run than traditional acute hospital beds (BHA, Framework for Investment 1998). Attempts by the DoH to re-define established bed categories provides another opportunity to hide the real extent of acute bed reductions.

5.4 The fudging of bed definitions parallels a decline in evidence based planning. Birmingham planners assume that when the new hospital opens in 2008, levels of activity and funding will be the same as they were in 1999. The rationale for this assumptions is that the Trust can address the rate of increase in emergency admissions – averaging 3%per year – by deploying intermediate care beds and other ‘new models of care.’ (Consultation on proposals for the Development of Acute Services in south Birmingham 1999). The consultation document provides no trend or activity analysis or any other form of evidence to prove that the ‘new models of care’ will reduce the need for acute hospital care or improve clinical outcomes. The chief economist at the DoH and author of the Bed Inquiry document, Clive Smee, admits that ‘evidence of the effectiveness and cost effectiveness of introducing services into new settings is not as good as we would like.”(HSJ April 25 2000).

6. Filling the Gap

6.1 ‘New PFI hospital schemes involve reductions in the number of acute beds , many involve closures of other hospitals and services. The first 14 PFI hospitals involve bed reductions averaging 33%’ , according Prof Pollock and colleagues writing in response to the IPPR Commission on Public private Partnerships.

Health authorities, particularly those building new PFI hospitals, are beginning to use the private sector Concordat to fill the gap. In the new Hereford PFI hospital, bed numbers are due to fall from 377 to 250, a reduction of almost one third. The Trust has been told that it will only be able to meet the targets of the NHS Plan if it makes a substantial investment in intermediate care. As the local GPs are short of money, these are likely to be purchased in private care homes, where patients will contribute to the costs of their care . Surgeons from North Durham have been compelled to treat NHS patients in private hospitals at extra costs because the new PFI hospital there has insufficient beds to meet local needs (Guardian, 31 August 2001).

The Department of Health does not keep figures on how many patients are being treated at extra cost in the private sector. But the short fall in acute beds seen in PFI hospitals makes the Concordat a necessity, irrespective of cost and standards of care. Without it ‘the biggest new hospital building programme in the history of the NHS’ is unlikely to succeed.