Finally - the Health and Social Care Bill has received Royal Assent after more hours of debate than most people can ever recall. Much of the argument has been about the use of the independent sector to deliver NHS services even though the essence of the Bill is actually about NHS organisational change and the continuation of prevailing patient choice and competition principles.
The twin accusations of privatisation and the imminent demise of the NHS under the cosh from EU competition law have shown precious little regards for the facts. Regrettably, there has effectively been no debate about what the independent sector could bring to the support of the NHS if the two were allowed to work in partnership with each other.
The dialogue has reflected, at best, genuine concern about the impact of choice on the NHS system, borne out of inexperience and misinformation, and at worst, self interested scaremongering. So, let’s state some clear facts.
The independent sector currently contributes less than 5% of mainstream NHS activity yet achieves superior clinical and patient satisfaction outcomes.
Free choice of provider across NHS general hospitals, general practice (GPs) and community services (district nursing) has only been permitted for elective surgery –less than 5% of total NHS spend. Independent providers have been allowed to offer their hospitals for NHS care for around five years, mainly focused on orthopaedic procedures. The Department of Health has gathered patient satisfaction data during those years and this has incontrovertibly established levels of satisfaction some 15% better than NHS hospitals.
Regrettably, because the NHS struggles to collate such information, we have been starved of similar independent, comparative data on clinical outcomes. However, last year, Dr Foster’s NHS Hospital Guide was extended to include independent hospitals providing treatment for NHS patients. To ensure data was as comparative as possible, Dr Foster’s clinicians adjusted all hospitals’ case mix for complexity. Independent hospitals dominated the resultant league tables, with four of the top five hospitals providing hip replacements and all of the top five hospitals providing knee replacements for NHS patients being independent companies. This is borne out by peer-reviewed academic research looking at clinical outcome data (and, oh, how we need more of that), such as that done by the Royal College of Surgeons.
This clearly demonstrates the nonsense of the suggestion that independent providers put profit before patients. When business longevity depends on reputation, the opposite is true. To suggest otherwise is not just to miss the quality-led commercial case, but is offensive to the clinicians – some 41,000 of them, who deliver NHS care through independent healthcare organisations. It should also be remembered that successful providers in healthcare, including GPs, tend to reinvest their profits in new services for the benefit of patients and the NHS generally, representing the virtuous cycle of profitable enterprise.
The independent sector is paid the same price as NHS providers, yet incurs a penalty cost of pension contributions and VAT.
The NHS ‘tariff’ is derived from average real cost from across the NHS and is paid to all providers, whether public sector or independent. The tariff is designed to reflect procedure complexity – more complicated procedures for patients with multiple conditions are paid more than relatively routine procedures.
Additionally, NHS organisations are ‘charged’ a pension contribution rate by the Treasury of 14% of employment costs. To provide pension benefits equivalent to the NHS pension, as a result of actuarial calculations, the independent sector organisations would have to make employer contributions of between 28% for basic NHS pension transferring employees and around 50% for those enjoying extended entitlements, including GPs and those accorded special class status.
Healthcare provided by the NHS is deemed to be a VAT exempt service, meaning that suppliers of goods and services to the NHS cannot recover their ‘input’ VAT. So, compared to a NHS hospital, an independent sector hospital has to absorb the impact of its VAT.
If we combine the impact of pension and VAT differences, despite being paid the same tariff price as NHS providers, independent sector providers carry a material cost disadvantage – often as much as 20%. To counter this ‘state subsidy’ unfairness, it is often argued in mitigation that NHS providers carry the cost of medical training. This is factually incorrect as the vast majority of medical training is funded by Royal Colleges and not NHS hospitals. It also ignores the fact that independent sector companies provide extensive training to their medical and other professionals.
The UK allocates a materially greater proportion of its healthcare budget on hospital than primary and community care
The evolution of healthcare in the UK has prioritised the role of hospitals over more local GP managed and provided care. Because of market access restrictions, GP provision in the UK is a fragmented market of owner managed businesses that have demonstrated little inclination or capacity to invest in locally accessible diagnostics and treatment services, invariably preferring to refer patients to hospital rather than to develop more sophisticated primary care solutions. GP practices tend to be little more than consulting rooms with little in the way of direct access to diagnostics. Consequently and shockingly, the UK has less than half the number of MRI and a third of the CT machines than the average (not the highest) level across the OECD countries.
Professor Lord Darzi, Health Minister for the previous Government, championed the evolution of community based ‘polyclinics’. Whilst there may be debate around the precise configuration of such health centres, few argue with the principle.
The transition of commissioning responsibility to Clinical Commissioning Groups is an opportunity for the NHS to ‘catch up’ with more progressive health systems. The independent sector is willing to support this transition with investment in rapid access to local diagnostics and community based clinical assessment and treatment.
Indeed, the original motivation for using the independent sector in partnership with the NHS was to supplement capacity and thus reduce waiting times. That succeeded beyond expectations. Waiting times for hip and knee replacements has plummeted from years to months, or even weeks, since the introduction of patient choice – partly from the new independent sector capacity and partly from improved NHS performance. How much the latter was stimulated by the presence of the former is subject to conjecture.
The investment and organisational capacity and the quality excellence of the independent sector is ready, willing and able to respond to the opportunity to invest, at risk, on the same terms as state owned NHS providers, to add the right capacity in the right place to help the NHS respond to its fundamental cost and quality challenge. Tell me again, what’s the downside....?