With elective care waiting lists at a record high of over 6 million, hospitals are working flat out to make a meaningful impact, with hospital trusts having to find ways of getting more work out of a workforce exhausted from the pandemic. The situation has given private companies a way into the heart of the NHS – its hospitals – in the form of insourcing.

Insourcing – inviting a private business to carry out work on the trust’s premises – is now a rapidly growing way for private healthcare to generate revenue from the NHS.

In the past the word ‘insourcing’ has been used to describe taking back in-house a service that has been outsourced, however NHS England, NHS Improvement, and the Department of Health and Social Care describe insourcing as:

where an NHS organisation subcontracts medical services/procedures. It differs to locum supply in that the full end to end service is provided, not just staff. The supplier uses the NHS organisation’s premises and equipment to deliver these services, however remote consultations are also available.

The idea is that these companies conduct medical procedures, such as surgery and diagnostics, in NHS premises in downtimes, primarily the weekend, when the NHS is not using the premises. The staff they employ are generally full-time NHS employees who work on their rest days.

A national framework agreement is in place with NHS Shared Business Services listing 18 companies. These companies have already gone through a competitive tendering procedure to be put on the list and can be used by trusts without additional contract tendering. The framework began back in 2018 and runs until September 2022. However, trusts are also using companies that are not listed on this framework.

The popularity of this approach has increased over the past few years and with any extra money for the NHS being funnelled into reducing the elective care waiting list, it is likely to keep on increasing.

The healthcare market analysts Mansfield Advisors have noted that the NHS insourcing market is one of the fastest growing markets in private healthcare, in the 2019 financial year it was worth £44m, by FY2021 it had reached £95m, and is predicted to rise to £139m in FY2022 and £295m in FY2024.

Companies active in the area and listed on the NHS SBS framework include Totally Healthcare, Eden Clinical Services, Gutcare, The Endoscopy Group, Medinet, and Alliance Health. Services being carried out by these companies include dermatology, general surgery, endoscopy, radiology, and a range of diagnostics for neurology and cardiology.

The companies perform services for less than the NHS tariff, often at 20% less. The reason they can is that the private companies don’t have the fixed costs of their own hospital. This makes the process of insourcing highly attractive to the trusts, which are desperately trying to get more done within budget constraints.

The popularity of insourcing with trusts also relates to how insourcing falls outside existing mechanisms for regulating staff labour. There is a cap on how much trusts can spend on agency workers and rates can only be increased beyond the cap to fill a shift if there is a patient safety issue, and it may be difficult to show there is an issue for routine elective care procedures.

Trusts can employ bank staff as they are not subject to a price cap, but this could be expensive for the trusts as they may find themselves paying significantly more, particularly for nurses and allied health professionals.

It begs the question, if staffing is such an issue within the NHS, where do the insourcing companies find their staff. The companies recruit full time NHS employees who work for the insourcing companies on their rest days, often Saturday and Sunday. The companies recruit from a larger pool of staff across a number of trusts – a team working for an insourcing company at one trust is likely to consist of employees of several different trusts. 

The attraction for consultants of working for an insourcing company on rest days is that the pension tax threshold is not an issue. Consultants may not be willing to work extra bank shifts however much they may be paid as earning money from bank shifts increases the likelihood of both breaching the pension tax threshold and increasing the amount of tax payable by making automatic pension contributions. 

Unfortunately, until changes are made to the pension situation this will limit the number of consultants willing to work overtime within the NHS with the knock on effect of increasing the popularity of insourcing companies as the only way to get extra procedures carried out. 

Are things likely to change any time soon? Speaking at the Nuffield Trust’s virtual annual conference 2022 Amanda Pritchard, CEO of NHS England, said that NHSE leaders were actively “working with government” on making pension arrangements more attractive in a bid to support the NHS workforce. 

There have been calls for changes in the pension situation for some time. But in February 2021 the government announced it was going to ignore proposals in a 2019 consultation designed to make it easier for consultants to work extra shifts in the NHS, as it felt the changes it had made in the March 2020 Budget had resolved the issue of clinicians being discouraged to take extra shifts. 

But the pension issue has not been resolved and consultants do not want to do extra NHS hours. So for now, private companies will continue to find lucrative work within hospital trusts as they attempt to reduce their waiting lists.

There are already signs that private companies are trying to cheat the system leading to issues with workforce availability. In January 2022, NHS England and NHS Improvement had to send out guidance after it became aware that several staffing agencies were approaching NHS trusts offering insourcing solutions that were just providing staff at an escalated rate of pay.

These insourcing solutions have included “the provision of individuals or teams of clinical and medical staff who are paid at an escalated rate above the NHS England and NHS Improvement price caps” and who are engaged through a staffing agency not on the insourcing framework.

The use of escalated pay rates attracts workers from elsewhere in the NHS, which in turn reduces the supply of agency workers available to fill shifts in the trust and wider health system. It also has “a ripple effect on general agency rates, as it raises the pay expectations of agency workers, and forces other departments and trusts to increase their rates to attract their workers back.” 

It would be good to think that if the NHS pension issue is sorted out, then there would be no need for insourcing. If the companies can find NHS staff to run an operating theatre or carry out diagnostics on a weekend, then the NHS should be able to do this as well. If the companies can recruit staff from across trusts to get a team together, then the NHS should be able to do this as well. This would remove yet another opportunity for private companies to profit from the NHS.

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