Public Finance has always tended to be the sort of publication that provides serious, evidence-based analysis of the state of play in public services, linked to the Chartered Institute of Public Finance and Accountancy.
So why did it decide to give space on July 22 to Carly Caton, a lawyer specialising in commercial healthcare, to argue for NHS trusts to expand their private patient units?
Caton suggests several ways in which a trust can increase the revenue it makes from a PPU:
“Firstly, it could increase its PPU capacity by adding beds, consulting rooms and treatment rooms.
“A standalone private hospital could even be explored, perhaps in partnership with other providers such as private hospitals and clinics,” or
“Investing in technology could enable the PPU to improve patient care and increase efficiency without requiring further space.”
The suggestions make no sense on any level.
Firstly, there is no money to invest. Public Finance confirmed this the very next day, with coverage of the latest National Audit Office warning that “An increasing number of NHS bodies have not been able to break even,” as the NHS faces an ‘unprecedented’ challenge.
Second, even if there was any spare cash in the pot, with waiting lists stubbornly high and winter looming, and pay rises to cover, there are many much more important issues that need attention before NHS trusts can afford the luxury of considering how they might generate some revenue.
Third, the shortage of capital is if anything getting worse than the shortage of revenue funding, with a dozen RAAC-riddled hospitals posing various levels of threat to the safety of patients and staff and a growing £11.6 billion bill for backlog maintenance that should have been done but hasn’t because of the continued austerity.
Fourth, if trusts were looking to generate some income, as a UNISON pamphlet in 2018 argued, private patient units seem about the very worst way to do it, for two reasons.
The first is that the private sector has become so expensive it is failing to capitalise on the soaring waiting lists: numbers of self-pay operations have risen since 2019 levels, but have been more or less static or falling for two years. Numbers of people seeking private insurance have been growing, but these are unlikely to be from patients on NHS waiting lists (who by definition have a previously diagnosed condition they cannot insure for).
The second problem is that (with a few notorious exceptions) existing NHS private beds and PPUs are under-used. Obsessive secrecy over the full balance sheet of NHS private patient services conceals the strong likelihood that they not only yield little income, but in many cases run at a loss, draining resources from the hospitals’ main function – caring for NHS patients.
Back in 2009 an investigation by Sally Gainsbury, senior policy analyst at the Nuffield Trust, when a journalist for the Health Service Journal found that “up to 30 per cent of patients who pay to receive private treatment in NHS hospitals are charged less than their care costs the trust.”
A 2014 Business case produced for St George’s Hospital in London brought a degree of reality to bear in discussing the need to set a high target for the profit margin for its operations. It spelled out their approach quite clearly, and the aim: “to increase returns by focussing on higher margin private patient activity with minimum margins of 40% unless agreed at a lower rate for strategic reasons”
In July 2017 NHS Shared Business Services published a brief document setting out the potential business case for hiring in a prefabricated 16-bed Private Patient Unit. It itemised the key costs of running such a unit (bearing in mind that 16 beds is larger than most of NHS private patient facilities, so the actual numbers are not relevant).
Among the relevant headings for revenue costs are:
Ward pay (“inclusive of all Nursing wages from Ward Sister, Senior Staff Nurse and Healthcare Assistants to admin staff such as Ward Clerk and Housekeeper”)
Ward overheads non-pay (“essentials for the day to day functioning of the ward, but also include the luxuries that are typical of a Private Patient Standard facility. These include Drugs, Dressings, Medical Gases along with Newspapers, Telecommunications/WiFi, Food and Refreshments”)
Theatre costs (“calculated based on both pay and non-pay per Theatre hour (£304.70), then cross reference with the amount of time it takes per procedure”).
It’s reasonable to assume that some element of each of these costs will inevitably be incurred by any provision of private medical treatment, especially where this takes place in a dedicated PPU.
It is therefore quite possible – and necessary – for NHS trusts to make their own working estimates of what these costs are (even if the non-clinical staff spend only a fraction of their time on such patients and areas). Without such estimated costs, the calculation of a fee that will more than cover these costs is impossible – effectively reduced to guesswork.
However, there is no evidence to show that such costings are properly done by NHS trusts, some of which make it clear that provision of a PPU is mainly a way of trying to keep certain consultants in the building rather than miles away in private hospitals.
In March 2018 a national study by Dr Sarah Walpole for the Centre for Health in the Public Interest (CHPI) found many NHS hospitals had increased their overall income from private patients, but that there was still a “lack of proper accounting” for the income and expenditure involved in services for private patients. Worse still:
“Nine of the 41 trusts who provided data were making a loss on these services in “some or all of the years from 2010/11 to 2015/16…. one had lost a staggering £18m over the six-year period.”
On March 2 2018 UNISON Eastern Regional Head of Health Sasha Pearce wrote to 14 acute trusts, invoking the Freedom of Information Act, and asking them to answer seven questions on private patient activity:
- The number of private patients treated during 2017
- How many of these patients required treatment under anaesthetic
- What specialist services were involved in treating private patients
- Whether patients who stayed in hospital after surgery were accommodated on NHS or private wards
- How many medical and non-medical staff were involved in the provision of treatments (including cleaning, catering and other hotel services and administration)
- The whole cost of the treatment and hospital stay
- The amount billed to health insurers or to patients.
Ten out of the 13 trusts responding with data were unable or unwilling to show what the total costs were of delivering private treatment. Several trusts admitted that this information was simply “not collected” or “not available” (which might mean the same thing).
A few trusts gave deliberately evasive answers (“private patients are treated alongside NHS patients and costs are not directly attributable to them;” “the cost to our NHS trust should be zero, as all this is picked up privately”).
One trust chose to invoke “commercial confidentiality” to conceal both the costs and the amount billed. This secrecy reinforces concerns that the trust could knowingly or unwittingly be hiding a deficit, using a wall of silence to cover up a complete absence of financial scrutiny.
When specifically asked how many medical and non-medical staff were involved in the provision of private treatment, only three trusts offered any data: the other 11 trusts responded that the information was either not available or too complex and costly a job to uncover. This was true even of trusts which run separate private patient facilities, raising serious questions over the ability of such units to cover all their costs let alone deliver a surplus.
Hinchingbrooke Hospital had a dedicated private patient unit, the Mulberry Suite, which appeared to have accommodated just 425 inpatients in 2017, although 7 dedicated beds were available, giving a leisurely average of just 60 patients per bed per year, or just over 1 patient per bed per week!
The Trust’s own online advertising promoting the merits of the Mulberry Suite implied that it has its own “enhanced menu,” which presumably was freshly cooked and produced by its own catering team: “…Prior arrangement can be made for the patient to invite a guest to dine with them.”
“Accommodation only” offered patients who wished to have their surgery through the NHS but then pay for one of the rooms, with en-suite facilities, Sky-television, open visiting, free car-parking, daily newspaper, access to £5 of telephone calls and an enhanced menu, at £325 per day.
So were all of the costs covered by the figures in the FoI response? Perhaps the trust answered that question by closing the ward in 2019.
However, the James Paget Hospital’s Charnwood Suite is still open for paying customers. Yet the trust’s reply to the FoI did not reveal how many staff make up the “small professional team”, how much the unit costs to run, or how much was invoiced to the 306 patients who received treatment in the eight single en-suite rooms. For patients it must have been a rather eerie experience, since an average of just 6 patients per week were rattling around in a unit with 8 beds, most of which must have been empty most of the time.
The best advice for an NHS hospital seeking to maximise its income now must be to take back the PPUs and fill the beds with NHS patients who will be paid for at the NHS tariff, and use any enhanced catering or other facilities to raise the standard of the food served to NHS patients.
Of course, this would not involve any income generation for lawyers specialising in commercial healthcare, but it would be a much more rational use of NHS resources.
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