Earlier this year, in the aftermath of the NHS Long Term Plan, NHS England opened up a discussion of proposals to change or remove sections of the 2012 Health and Social Care Act, notably to remove the requirement on Clinical Commissioning Groups to carve up services and put them out to competitive tender.

There was a distinct change in the language used, as NHS England sought to persuade unions, campaigners and politicians that their agenda was one of “integration”, replacing competition between public and private sector for contracts with collaboration and cooperation.

The response has been mixed, with some even dismissing the proposals as a covert, if convoluted, route to further privatisation (“This legal change will not halt the privatisation of the NHS, it will accomplish it!”). Many campaigners found it difficult to understand the contradictory role of NHS England, which was on the one hand vigorously driving forward with new privatisation initiatives while at the same time professing frustration with the law they were implementing.

The Lowdown has carried numerous reports on the new inroads being made by the private sector into NHS budgets, notably the moves to establish new multi-£billion pathology networks in which private sector providers will be leading or prominent components of consortia, and imaging networks, which are likely to follow the model of the controversial privatised contract for PET-CT scanning in Oxfordshire.

In issue 2 we reported plans to include private healthcare companies in decision-making on the allocation of NHS mental health budgets totalling over £2 billion, and (unsuccessful) attempts to involve a large number of private providers in an innovative plan for Child and Adolescent Mental Health services in Kent, Surrey and Sussex.

Some critics and campaigners conclude from these and other manifestations of privatisation that the path leads inexorably to much wider extension of privatisation, with talk of “endgame,” and claims that NHS England’s plans are leading towards a US-style system complete with charges for care and private insurance.

However it’s clear that the private sector sees the situation very differently. Circle Nottingham management are licking their wounds and counting the cost of their failed legal challenge to the loss of their most lucrative NHS contract – and they are by no means the only private providers who are arguing that the system is increasingly “unfair” and making life difficult for them.

Responding to the NHS England proposals for legislative changes, the Independent Healthcare Providers Network argued that from their point of view they do not want an American-style system based on private health insurance (“The NHS remains and in our view should continue to remain publicly funded and free at the point of use”). Indeed they realise that only government funding can pay for many of the contracts and episodes of care that keep the private sector afloat. But the IHPN also went on to attack the “myth” that the NHS is being privatised.

The IHPN began by pointing to their own findings from Freedom of Information requests to England’s CCGs which showed the proportion of NHS contracts awarded through competitive tendering has fallen in recent years, from 12% of all contracts in 2015/16 to 6% the following year, before recovering partly to 9% in 2017/18. The value of these contracts as a percentage of CCG spending on clinical services has fallen by a third, from 3% to just 2% over the same period.

This is consistent with previous findings from NHS Providers that the private sector has been most successful in winning community health services contracts, with many more contracts than the NHS, but that most of these are small in value, leaving NHS trusts with just 21% of contracts, but 53% of the contracts by value compared with just 5% for the private sector.

Department of Health and Social Care Annual Report figures show the amount spent by the NHS on private providers of clinical services rising each year from 2006, from just over £2 billion to almost £9 billion by 2016, and the private sector share of NHS spending rising from 2.8% to 7.7% over the same period. However this flat-lined in 2016/17, and declined to £8.7 billion (7.3%) in 2017/18.

These figures are for CCG spending only, and do not include the contracting out of services by NHS and foundation trusts, so they significantly understate the scale of private sector involvement in the NHS.

Recent research, looking at NHS data for 130 hospital trusts from 2010 to 2014 found that an average of around 40% of hospital trusts had contracted out their cleaning services, at an average cost of £3.84m per trust (although there is wide variation) – suggesting this service alone was costing an additional £500m per year five years ago. We know many other support services have since the 1980s been contracted out to private companies – catering, laundry, security, car parking, patient transport: these too are additional to the DHSC Annual Report figures.

In some areas clinical support services have also been contracted out by trusts, increasing even further the role of the private sector.

In terms of clinical care, the BMA late last year found that 44% of NHS private spending was on community health services, and 11 % on mental health.  The BMA’s online report included a useful breakdown of the top 12 private firms, identifying the number of contracts awarded to private providers by the 73 CCGs that responded to FoI requests.

This showed the private acute hospital chains holding the largest numbers of contracts over £50,000, with Spire (52) and BMI (49) followed by Ramsay (28) and Nuffield Health (26) together making up more than half the total of 287. The private hospitals have been keen to cash in on the under-funding and lack of capacity of NHS acute trusts after nine years of reductions in front line beds while the population and pressure on services has increased. Even prestigious teaching hospitals such as King’s College hospital in London have been driven to outsource elective care to private hospitals.

As a result, according to the IHPN “elective care is critically dependent on independent sector provision”. However this seems to be an exaggeration, to judge from the IHPN’s own claim that around 6% of NHS elective admissions are now going to private hospitals. This leaves leaving the NHS to deal with the other 94% – as well as 100% of the emergencies, complex and chronic care.

There is little scope for a major rapid expansion of the private acute hospitals themselves. With a few exceptions the hospitals tend to be very small, averaging just 46 beds, and focused entirely on quick turnover elective treatment. And while private hospital bosses would prefer to be able to fill beds with self-pay and privately insured patients who pay higher fees, there are not enough of these patients around.

So private hospitals have become dependent upon NHS-funded patients (and self-pay patients driven by despair or chronic pain to leapfrog growing NHS waiting lists) to fill otherwise empty beds. Of course they also depend upon NHS-trained and often NHS-employed medical and nursing staff to deliver treatment and care.

Far from the private sector feeling chipper and anticipating good times ahead, a recent IHPN blog indicates a much less positive mood:

“Private healthcare finds itself at a crunch point. Low (or no) growth across local and international markets, spiralling costs, falling medical insurance subscriptions and “intelligent consumerism” continue to challenge the sector.”

This follows on a downbeat assessment of the prospects for private hospitals from market analysts Laing & Buisson in 2018:

“a number of providers face clear challenges. Notably, those which have a heavy reliance on NHS as a customer have faced some market disrupters recently, as growth has grounded. Growth may return when the NHS uses additional funding to clear waiting lists, though in the longer term, market fortunes in this area are difficult to predict.”

Another problem faced by would-be private providers of NHS services is that the near-decade of austerity ushered in by David Cameron’s government and maintained ever since has meant that many of the contracts that have been offered up for tender have been under-funded – to the point that private bids have been withdrawn prior to the contracts being awarded, companies have not even bid at all, or in some cases simply walked away from contracts that were incurring or threatening them with losses.

This happened at Hinchingbrooke Hospital, and with many patient transport services, and contracts in community and primary care. Virgin recently revealed it will walk away from an underfunded community contract in East Staffordshire.

Many of the large-scale Integrated Provider Contracts that campaigners (despite the assurances of NHS England) fear could be opened up for the private sector include the more costly, risky and less profitable services that the private sector has always been careful to avoid.

With this danger in mind it seems likely any private sector involvement in IPCs or Integrated Care Systems will centre on specific tasks with guaranteed profitable prospects – such as so-called “backroom” services handling data, managing processes, drawing up specifications, along the lines tried and tested by UnitedHealth subsidiary Optum in England and in the US; or supplying apps and other IT expertise and equipment; or clinical support such as pathology and imaging contracts.

It’s important to remember that private health providers are not in it to make a point, but to make a profit. They don’t like risk, and Virgin in particular has seen that ‘loss leader’ contracts tend to go on not to more profitable contracts but to large losses, or even services being brought back in house.

So while we fight on to resist every further encroachment of the private sector, and aim to roll back the privatisation that has taken place, it’s clear that we have a lot of NHS still to defend, and the private sector are far from content with the position they are in. The increasing combativity of health unions mobilising NHS staff to resist outsourcing of services to “wholly owned companies” – with some successes already achieved — and with contractors’ staff currently waging campaigns including strikes to secure parity of pay with NHS staff, there is a strong basis for unions, campaigners and supportive politicians to challenge any and every further attempt to erode our NHS.

The Lowdown will take a further more in depth and historical view of privatisation in future issues.

Mental Health: a stronghold of private provision 

The story is different on mental health services, where the NHS reliance on private providers can be much greater. Department of Health figures compiled by the Nuffield Trust showed a massive 24% of mental health spending was from non-NHS providers in 2012/13, and that private provision was growing at the expense of the NHS:

“funding for independent sector mental health service providers increased by 15 per cent in real terms between 2011/12 and 2012/13 alone, while funding for NHS-provided mental health services decreased by 1 per cent”. (page 6)

Laing & Buisson estimate 30% of mental health hospital capacity is now in the private sector, and revenue is increasing. A report early in 2018 notes:

“robust revenue growth for independent mental health hospitals in recent years, amounting to 12% in 2015 and 4% in 2016, though pressure on prices by financially stretched NHS agencies has meant some diminution in profit margins. […]

… the main driver continues to be the long-term trend towards NHS outsourcing of non-generic mental health hospital treatment, which shows no sign of abating. CCG block contracts with NHS Mental Health Trusts, which give the Trusts little incentive to expand their own in-patient capacity or even maintain what they have, limited NHS capital budgets, and risk averse behaviour of Trusts all contribute to the growth in demand for independent acute mental health bed capacity.”

However the imbalance is even more dramatic in child and adolescent mental health: recent reports reveal that no less than 44% of the £355m NHS spending on CAMHS care goes to private providers, and figures given in parliament last November again show how the private sector spend has grown by 27% over 5 years from £122m to £156m, although spending on NHS providers has risen faster (by 40%).

The private sector domination is most complete in the provision of “locked ward rehabilitation”, in which a massive 97% of a £304m market in 2015 was held by private companies, the largest of which was the (now merged) Cygnet/Cambian  (20-30%), with substantial involvement also of Acadia (Priory Group) with 10-20% and Huntercombe with 5-10%.

The merged Cygnet in 2017 reported operating 2,400 beds across 100 sites, with over 6,000 staff. In the summer of 2018 it also took over the Danshell Group, operating 25 units with 288 beds for adults with learning difficulties. While Cygnet Health Care recorded a loss of £9.4m on turnover of £121m in 2017, the Group reported a very healthy profit of £40m on turnover of £334m.

The increased proportional spend on private providers has made them even more dependent on funding from the NHS to prop up their balance sheets: the most recent accounts of the largest mental health provider, the Priory Group, show that 52% of its income of almost £800m came from the NHS, and another 38% from social care – a total of 90%.

According to the Competition and Markets Authority the market for mental health services was worth a total of £15.9 billion in 2015, 275 of which was for hospital services, and the private hospital sector had grown by 8% in the previous five years, while NHS capacity had been cut by 23%.

John Lister
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