What’s the issue?
The involvement of the private sector in the NHS is a hotly contested topic. Private companies have always played a role in the NHS, but critics claim that their increasing involvement is evidence of growing privatisation of care and is undermining the service’s core values.
What’s behind this?
Private provision of health care services has always been controversial, even though some services, such as dentistry, optical care and pharmacy, have been provided by the private sector for many years and most GP practices are private partnerships.
Analysis of the Department of Health’s published accounts shows that the share of spending by NHS commissioners on the private sector was 7.3 per cent1 of the revenue budget in 2017/18. This compares to 7.7 per cent in 2016/17.
Total spending by NHS commissioners on non-NHS organisations (including the voluntary sector and local authorities as well as private providers) was £13.1 billion in 2017/18. This accounts for 10.9 per cent of total revenue spending, and is similar to the 10.9 per cent spend on non-NHS bodies in 2016/17.
Due to changes in definitions, it is difficult to precisely measure changes in the amount spent on private or non-NHS organisations over time. However, a trend of small incremental rises in spending on private provision is consistent with longer-term gradual increases over the past 15 years. The extent of private sector-commissioned services also varies between different areas of care. For example, evidence suggests that spending on private providers between 2010/11 and 2012/13 increased more quickly in community services and mental health than in other services.
The Department of Health’s accounts also show that NHS providers spent £1.1 billion2 on services from non-NHS organisations in 2017/18. This includes outsourcing elective hospital treatment in order to deliver waiting times targets. NHS Improvement reports that NHS providers spent £221 million on outsourcing services to other providers, including the private sector, in 2017/18. Though this is less than the £381 million spent on outsourcing in 2016/17.
These are not new developments. Both the Blair and Brown governments used private providers to increase patient choice and competition as part of their reform programme, and additional capacity provided by the private sector played a role in improving patients’ access to hospital treatment. The NHS and the private sector have also established partnerships for the delivery of clinical services such as radiology and pathology and non-clinical services such as car parking and management of buildings and the estate.
The Health and Social Care Act 2012 extended market-based approaches, emphasising a diverse provider market, competition and patient choice as ways of improving health care. There is evidence that this led to a large number of contracts being awarded to private providers, but it did not result in a significant increase in spending on the private sector. This was in part because these contracts tended to be smaller than those awarded to NHS providers.
A potentially controversial exception was the decision to tender for a £1.2 billion contract in Staffordshire to deliver end-of-life and cancer care. In the face of widespread criticism, and after a lengthy delay, the cancer element of this contract, worth a potential £687 million, was dropped. In July 2017, it was announced that the remaining part of the contract, for end-of-life care, would also be dropped.
Hinchingbrooke Hospital is another controversial example. The hospital was franchised to a private sector operator, Circle, in a process initiated in 2009. In January 2015, Circle announced that it would hand management of Hinchingbrooke back to the NHS as a result of financial pressures and having been put into special measures. Further management franchises seem unlikely because the significant financial challenges facing the NHS make them less attractive to the private sector.
More recently, in November 2016 the government proposed to sell a majority stake in NHS Professionals, which supplies flexible staffing to the NHS. This sale was an attempt to provide NHS Professionals with extra expertise, technology and investment to work with more NHS hospitals. However, in September 2017 the Department of Health announced it would keep NHS Professionals wholly in public ownership, after deciding that offers to buy a majority stake in the company undervalued its potential.
The King’s Fund view
Following the Health and Social Care Act 2012, the number of contracts awarded to private providers increased, though there is little evidence of a significant increase in spending on private providers or widespread privatisation of NHS services. In many cases the use of private providers to treat NHS patients reflects operational challenges within NHS providers and is a continuation of longstanding practices. Provided that patients receive care that it is timely and free at the point of use, our view is that the provider of a service is less important than the quality and efficiency of the care they deliver. More positively, the NHS can benefit from partnerships and joint ventures with the private sector to deliver some clinical and non-clinical services.