Analysis from John Lister 

The massive 25% leap in NHS spending on private providers in 2020-21 appears to have been followed by a 10% reduction according to the most recent Department of Health and Social Care Annual Report.

A year ago the previous DHSC report showed spending on “independent sector providers” increased from £9.7bn in 2019/20 to £12.1bn in 2020/21 (up 25.6%). A major factor in this was the massive contract signed in 2020 for a big increase in numbers of NHS patients to be treated in private hospitals, although as we subsequently discovered relatively little of this capacity was actually used.

And while further “framework contracts” with private hospitals appeared to indicate that this higher level of spending was likely to continue for some time, the latest figures suggest that NHS trusts and commissioners have pulled back as much work as they can, rather than see precious NHS funds flow out to private providers.

In terms of elective work, the government’s strategy still rests heavily on the use of private hospitals to tackle waiting lists, but their limited bed capacity and the competing demand from private patients leaves little room for NHS patients, which may be another factor in these figures.

2021/22 saw spending on private providers fall back from the £12.1bn peak to £10.9bn, and spending on private sector fall as a share of total spending, from 7% to 6%.

There is of course a long-running debate about how accurate these figures in the DHSC annual reports may be on the real level of spending on private sector contracts: some analysts argue the private sector share could be three of four times higher, depending on how we define for example GPs and primary care services. 

But what is clear from the latest report is that while NHS spending on services from local authorities has remained at the higher level seen in 2020/21, spending on private providers has not continued the rapid upward trajectory indicated a year ago, and spending on non-profit and voluntary sector, which increased by over 9% in 2020/21 has now fallen by 4%.

Perhaps the most significant fall, given the current concerns over the impact on the NHS of large waiting lists and long delays, has been in NHS income from private patients, which was down to £540m in 2021/22, a 20% drop from the pre-pandemic level of £671m in 2019/20.

Research from the Centre for Health and the Public Interest (CHPI) showed last year that the five largest NHS providers of private treatment (The Royal Marsden, Great Ormond Street, Imperial, Royal Brompton,  Moorfields Eye Hospital – all in London) generated a total of £327m in 2019/20 – 49% of the total. This suggests that in much of the country little or no income was generated by NHS private patient units: CHPI questions how many may be actually running at a loss.

CHPI note that in 2016 1,143 NHS hospital beds were set aside for private patients – equivalent to 1.1% of England’s 103,000 general and acute beds. But the recent figures show private patient income well below 1% of the NHS England £151bn budget (0.35%).

While the income is reported, the running costs (and thus profit margins) of the private patient units are a closely-guarded secret, especially for the Big Five: CHPI lost an appeal to the Information Tribunal for the Royal Marsden trust to be obliged to publish its profit margins.

Unless it can be proved otherwise it seems safe to assume that the majority of NHS Private Patient Units run at a loss, or make only the most marginal contribution to the income of the parent trust, while diverting precious staff from their wider duties.

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