This article was orginally written has part our Verdict series which analysed the big questions in health and social care for the 2015 election. A more recent article on privatisation, published in August 2017, is now available.
The King's Fund verdict is our take on the big questions in health and social care. Here we look at the thorny issue of NHS privatisation.
The issue in a nutshell
The most heated debates around the Health and Social Care Act 2012 were about whether it would lead to the NHS being privatised. The coalition government wanted to accelerate patient choice and competition, consistent with the wider belief that competition in public services drives improvement. The government’s critics recognised that competition was not new, but were concerned that the NHS reforms would result in much greater involvement of for-profit companies in the NHS.
Private companies provide a vast range of products to the NHS – medicines, CT scanners, radiotherapy machines, beds to name but a few. Private sector provision of health care services has always been more controversial, even though some services, such as dentistry, optical care and pharmacy, have been provided by the private sector for many years and, technically, most GP practices are private partnerships. In general, the issues that cause concern in health care are different from those raised by privatisation in other industries which focus on the sell-off of state assets. For the NHS the focus has been instead on outsourcing – giving contracts to the private sector to run NHS services.
The involvement of private sector providers
The Health and Social Care Act 2012 did not begin the involvement of private sector providers in the provision of NHS services – both the Blair and Brown Labour governments used private providers to increase patient choice and competition as part of their reform programme. However, the 2012 Act did extend a market-based approach to the NHS, emphasising a diverse provider market, competition and patient choice as ways of improving health care. The Act clarified the role of the competition authorities in relation to health care and that procurement decisions in the NHS are open to scrutiny and challenge, not just from private providers but from NHS providers too.
Any Qualified Provider
Any Qualified Provider (AQP) was a government policy intended to encourage all NHS, private, third sector or social enterprise health service providers to compete for contracts on an equal footing. It required clinical commissioning groups (CCGs) to put in place arrangements for certain services where patients could choose treatment from a range of providers who must all be licensed by the Care Quality Commission. The Department of Health put mandatory requirements in place until 2012/13 that all commissioners open a small number of services on this basis. However recent reports indicate limited enthusiasm for this approach at national level and patchy use of it at a local level. There are no requirements for commissioners to use AQP for services in 2013/14 or 2014/15 and 77 of the 183 CCGs did not open any services to AQP approach in 2013/14.
What is spent on private sector providers?
A range of other non-NHS providers provide health services, including social enterprises, local authorities, charities and community interest companies. It is difficult to determine exactly what is spent on private sector providers, as opposed to other non-NHS providers, particularly as some contracts for services are let to consortia that may include NHS providers, voluntary sector organisations and private providers. Overall, the Department of Health’s annual accounts suggest some £10 billion of the total NHS budget of £113 billion is spent on care from non-NHS providers (not including dentistry, medicines or general practice). The BBC reported that in 2013/14 £6.5 billion of that £10 billion was spent on private sector providers.
Analysis of the Department of Health’s published accounts show that between 2012/13 and 2013/14 there was a 6.74 per cent growth in real terms on non-NHS providers, compared to 4.26 per cent growth in the previous year and 1.44 per cent the year before that. However, it is not possible to determine from the published accounts what proportion of this is spend on private sector providers as opposed to other types of providers. It also appears that a change in the way the accounts were reported in 2013/14 (to include spending by foundation trusts on services to be provided by non-NHS providers) accounted for most of the increase in that year.
Other evidence shows that spend on non-NHS provision of health care has increased in some areas more than others.
- The rate of spending on non-NHS providers of acute care has slowed, with commissioners spending about £14 million less in real terms on non-NHS providers in 2012/13 compared to 2011/12.
- The proportion (by value) of community health services provided by the private sector increased from 12 per cent in 2010/11 to 18 per cent in 2012/13.
- Spending on private sector mental health service providers (mainly in-patient care) increased by 12 per cent (£126 million) between 2010/11 and 2012/13, while spending on mental health services provided by NHS bodies fell by 2.5 per cent in real terms (£17 million) over the same period.
Some evidence shows that private providers have been more successful than NHS providers in winning contracts put out to tender, particularly in community services and diagnostics, but the value of these contracts is relatively small. A recent study by the British Medical Journal also found that one-third of the contracts to provide NHS clinical services awarded in the year from April 2013 were won by private providers, but the value of these contracts was only 5 per cent of the total value of all contracts awarded.
Some very large contracts, particularly ‘prime provider’ contracts, have attracted particular attention. For example, in Staffordshire, CCGs are seeking bids for a 10-year contract worth £1.2 billion for cancer and end-of-life care, which – although not finalised at the time of writing – looks likely to have significant involvement of private sector providers.
Franchising to private sector operators
Only one NHS hospital, Hinchingbrooke Health Care NHS Trust, was franchised to a private sector operator, Circle, in a process initiated before the 2010 election, but in January 2015 Circle announced that it intended to hand management of Hinchingbrooke back to the NHS following financial pressures and a critical CQC inspection report that resulted in Hinchingbrooke being put into special measures. Further management franchises by private sector providers seem unlikely in the short term, in part because the significant financial challenges facing the NHS that make franchise arrangements less attractive to non-NHS providers.
The King’s Fund verdict
The NHS has always commissioned a proportion of health care services from private providers and spend on private sector providers has increased in recent years in some areas of care. About 10 per cent of NHS spend on health services is on non-NHS providers which includes for-profit companies, local authorities, social enterprises, charities and community interest companies.
There has been growth in non-NHS provision of care, but there has been no wholesale privatisation of the NHS. It is hard to predict the extent of further growth of non-NHS provision in the short to medium term. The appetite for such work, particularly among commercial organisations, may be limited given the degree of financial pressure within the system and more limited prospect of profit generation. On the other hand, the NHS may make use of spare capacity in the private sector to treat patients when targets are missed if NHS hospitals are unable to take on this work, as has happened under successive governments.
For-profit, non-profit and NHS providers can provide high-quality care and equally all sectors can fail to do so. Whether a provider (public or private) makes a surplus/profit from its trading with the NHS does not automatically mean that quality of care is compromised. The Fund’s view is that who provides the service is less important than the quality and efficiency of the care that is provided.
Competition can bring benefits but these benefits can be outweighed by costs and difficulties of competitive process. This means that the commissioning of and contracts awarded to any provider must be highly effective in demanding the best outcomes for patients and value for money for the taxpayer. In addition, the choices made by commissioners should not prevent changes that may be necessary to ensure more joined-up care. Regulators have a role in reporting comparative information on quality of care and in ensuring minimum standards are met.