The Thatcher government began the drive to contract out ancillary services in NHS hospitals in the mid 1980s, devising more and more ways to compel reluctant health authorities and hospital bosses to award contracts to private companies under cutting the cost of existing services, regardless of the impact on quality.
Campaigners fought back then and ever since arguing that privatised services would sacrifice standards in the pursuit of profit. Academic studies in the early 2000s confirmed what many of us already knew.
But there has been relatively little focus on this until the publication recently of an important paper, Cheap and Dirty: The Effect of Contracting Out Cleaning on Efficiency and Effectiveness in Public Administration Review, the journal of the American Society for Public Administration. It is free to access.
It links contracting out to the fad for so-called “New Public Management” nostrums since the 1980s – and focuses on Britain, where it was implemented most energetically, and specifically the example of cleaning services in the English National Health Service
“By 2014, more than £100 billion of U.K. public services were being contracted out annually to the private sector. A number of high-profile cases have prompted a debate about the value for money that these contracts provide. Value for money comprises both the cost and the quality of the services.”
Using data from 2010–11 to 2013–14 for 130 National Health Service trusts, the study finds that private providers are “cheaper but dirtier than their in-house counterparts.”
The authors get it partly right when they argue that contracting out of public services, especially auxiliary services, “centres on the belief that it will lower costs and possibly increase quality.”
However while the rhetoric mentioned quality, the Thatcher government which pioneered this privatisation process was preoccupied above all with price, and kept changing the rules to ensure contracts went to the lowest bid. This has set the framework for subsequent contracting out. The study’s authors argue:
“Economic theory predicts that when quality is hard to measure … suppliers may reduce quality to maintain their own costs, as they are the residual claimant on any profit.”
As a result, they conclude: “Public service managers must be very careful when outsourcing services— even auxiliary services; some performance indicators should reflect aspects of the quality of the core service.”
Indeed they go further and warn that the very process of tendering the contract can result in damaging patient care:
“we present and test a new hypothesis that contracting out of ancillary services may also lower the quality of patients health outcomes even when the core service remains under public provision.”
They also bring a useful overview of the extent of privatisation of domestic services in the current period
“In 2010–11, a total of 39 percent of trusts were contracting out their cleaning services, while 59 percent used in-house teams. The remaining 2 percent had mixed modes of supply. The contracting-out rate increased to 41 percent in 2011–12 before falling to 37 percent in 2013–14.”
The authors finds evidence to prove a vital point:
“contracting out of health-care cleaning in the NHS from 2010–11 to 2013–14 was not associated with any quality improvement, after controlling for relevant health-care provider characteristics. On the contrary, this mode of supply resulted in lower cleaning standards as evaluated by patients and higher hospital-associated infection rates as indicated by MRSA rates.”
With NHS England busily trying to persuade the public that they want to get rid of the legislation that requires services to be put out to competitive tender, it’s worth remembering that trusts have continued to renew, retender and replicate the failings of privatisation 35 years after Thatcher first forced them into it.
It is a strong argument for bringing outsourced NHS services back in house.