From a distance
by Paul Gosling
Private sector healthcare providers have responded with their feet to delays and confusion over phase two of the Independent Sector Treatment Centres programme. Many are no longer seeking large volumes of NHS patients and have walked away from dependence on NHS contracts.
Back in 2003, it looked very different. A £1.7bn programme of ISTCs was launched, with an initial 23 schemes approved. These were so attractive to the private sector that 147 companies bid for contracts. Two years later, a second phase of ISTCs was announced, with the intention of a further 27 schemes being commissioned, at a cost of £3.75bn. But things went wrong – just 10 have been given the go-ahead so far.
While the principal intention of the ISTC programme was to increase treatment capacity and help dramatically cut waiting lists and waiting times, it was always intended they would also have the effect of improving performance within the NHS itself and avoid the high costs of ‘spot purchasing’ from pre-existing private health care facilities.
ISTCs have assisted in meeting those objectives, according to health minister Ben Bradshaw. Announcing the latest ISTC approvals, he said: “The independent sector is providing NHS patients with fast access to high quality treatment and diagnostic services, offering greater choice, driving down waiting times and galvanising the NHS to raise its game.” ISTCs have now carried out over a million elective procedures for conditions including hernias, hip replacements and cataract removals.
But there is growing scepticism within the private sector about how much more ISTC contracting there will now be. Dr Neil Bentley, CBI director of public services, says: “The second wave of centres will be far smaller than orginally anticipated, and while this may reflect poor planning, it also sends a message that the private sector is just there to be parachuted in to deal with specific issues rather than being seen as a permanent partner in the NHS. The ISTC programme was intended to stimulate improvements within the health service by forcing existing public sector providers to up their game. This principle must be maintained if the NHS is to meet increasing patient demand in a time of lower spending increases.”
The future commissioning of ISTCs will be in the hands of local NHS commissioners – which is hoped will overcome much of the resistance felt at present by local NHS bodies to nearby ISTCs. But this change of commissioning structure is creating further uncertainty for those who expected ISTCs to be an important business stream. Most of the major private sector healthcare groups are now reducing their plans to supply the NHS. BUPA has sold off its hospital business to Spire, seeing greater opportunities in the provision of social care and private medical insurance. Spire says that the NHS is no longer seen as a core market.
Nuffield Hospitals says that it expects to continue to contract with the NHS – but at the margins of its business. “Providing treatment for NHS patients is an important, albeit currently small, proportion of the Nuffield Group’s total service provision,” says its spokeswoman Philipa Cox. It does, though, believe there is the opportunity to grow this as part of Patient Choice and refers in particular to its “excellent working relationship with the NHS in Scotland”.
The largest private sector hospital business in the UK is BMI Healthcare. Its spokeswoman Carol Friend says that delays over the ISTC programme have caused it to rethink its plans. “BMI Healthcare and its holding company General Healthcare took the view a while ago that the private healthcare sector has a life and a long term future and we had to differentiate that from healthcare services which one might expect on a tax funded basis,” she says. “It then created a separate business Netcare UK, which developed some dedicated physical facilities for ISTCs and other national contracts available at that time. Going forward, there are no new national contracts at the present time, though there will be local ones and those may or may not be large. So Netcare may have local contracts.
“BMI hospitals around the country will happily contract locally, but on an average basis they would never expect more than 10% of patients to be funded through the NHS. If you make it more than that, you change the nature of your provision.”
The slowdown was already evident in the healthcare spending statistics for 2006, according to sector analysts Laing & Buisson. Whereas spending on healthcare through the independent sector rose by 9.5% in 2005, it grew by just 2% in 2006 – the lowest growth ever recorded by Laing & Buisson. While the strong growth in 2005 had been spurred by most of the onset of the ISTC programme, this levelled off the following year as new ISTC contracts were cancelled or delayed, and NHS trusts cut back on commissioning as they struggled with deficits.
“2006 confirmed that while the NHS has become a much larger benefactor of the independent acute medical/surgical hospital sector, the Government’s estimates for additional capacity were ‘over egged’,” says Philip Blackburn, senior economist at Laing & Buisson. “Going forward, although there is unlikely to be a reversal of committed NHS fortunes for independent providers under the current Labour leadership, providers’ expectations of future NHS activity have likely become very grounded.”
Blackburn adds that growing demands for healthcare from an ageing population still generate new opportunities for the private sector. This perception gained strength with the publication of the latest figures from the Association of British Insurers, which showed that despite falling waiting lists, the number of people covered by private medical insurance policies is continuing to increase and has now reached four million – though more than three quarters of policies are arranged by employers.
If, as seems likely, the Conservatives become the government at the next General Election they may find that the independent sector is no longer in a position to take a leading role in providing alternative taxpayer funded healthcare, at least not quickly.
But exactly what reforms the Conservatives would want to implement is unclear – their recent policy statements have not spelt this out and the party failed to respond to repeated requests from Health Service Review for details. However, the shadow health secretary Andrew Lansley said, when Tony Blair was prime minister, that there was “a consensus” on the principle of healthcare reforms, just variation in detail. We can therefore assume that a Conservative government is likely to increase the number of ISTC contracts, but perhaps not dramatically.
However, in a recent speech party leader David Cameron provided a hint of scepticism about the role of the independent sector. “I often can’t help thinking that Labour have been blinded by the private sector – not just management consultants but private providers too,” said Cameron. He criticised moves by primary care trusts to take services away from GPs and contract them instead with the private sector at what, Cameron said, were “preferential terms”. “This is a flawed strategy,” he argued. “It didn’t work in secondary care when the Government paid for block contracts with independent sector treatment centres at 11% more than the equivalent cost in the NHS. And it won’t work if executed in the same way in primary care.”
Without assurances from either government or opposition about the size of future contracting opportunities it is no surprise that the independent sector is avoiding binding itself too tightly to the NHS. With projections of continuing increased demand within the private market, independent providers may decide it is safer to be even more independent.