Could Prime Minister Tony Blair’s plans to make the NHS “fit for the 21st century” prove more of an embarrassment than a bonus to the private medical sector? In general, independent hospitals have welcomed the “concordat” between public and private services. Under the scheme, vastly more NHS patients will be treated in Britain’s 211 private hospitals, which are currently reckoned to be only half full.
You don’t need to be an economist to recognise this as good news for the independents. But private hospital analyst William Fitzhugh is not so sanguine. He points to potentially disturbing long term consequences. “As far as the acute sector goes, the government wants to put more patients into private hospitals but on the other hand it wants to stop young consultants working there. I cannot quite reconcile the two,” he says.
Senior consultants will leave the NHS and “earn a fortune” working in booming private hospitals, predicts Fitzhugh, editor of the Fitzhugh Directory to the sector. Their fees will ramp up costs and with them PMI premiums, which through most of the 1990s increased by about 10 per cent a year. Then insurers and intermediaries will suffer as the PMI market contracts.
Health secretary Alan Milburn also foresees problems for the independent sector. He says: “Private healthcare will face difficulties in any case in the coming years. What the analysts say is that if the NHS tackles the issues of how consultants are employed, and waiting times come down, there will be an impact.”
Up to a point, Milburn must be right. Several surveys, supported by common sense, suggest NHS failings drive people towards the private healthcare market. But the sector’s worst fears will be realised only if Blair’s reform package bears fruit. Cynics claim the new medicine consists only of more staff and more money, most of which will be lost within an unreformed and inherently wasteful machine. And, of course, there is an eight-year timetable after which, theoretically, no patient will have to wait more than three months for an NHS operation.
As leading private sector analyst William Laing points out, it would be a mistake not to differentiate between the impact of the changes on hospitals and insurers. “The effects on the private sector depend on what you put under that heading,” he says. “For the insurer, it might not be such good news but for independent hospitals overall there should be some benefit. It depends on how much the public sector refers to the private sector – and that is going to vary considerably across the country.”
Under Blair’s plan, patients whose operations are cancelled may be offered private surgery. And under the proposed “concordat” between private and public sectors, health authorities will be able to buy series of operations from the independents. But this is not new. Under then prime minister Margaret Thatcher’s 1989 revamp, health authorities and GP fundholders could buy private care on behalf of NHS patients. The upshot was mixed, with some authorities block booking hundreds of procedures – for cataracts, say – while other authorities kept to the public sector tradition of excluding the profit-oriented independents.
Much the same is likely to happen under Blair’s plan because each authority will negotiate with local private units. Says Laing: “In some places the amount of additional work private hospitals pick up won’t be that great.”
What of fears that excluding junior consultants will stoke the medical fee spiral? Laing is relatively optimistic, pointing out that even if fees do rise they make up less than half the bill for private surgery, much of which is for “hotel” charges. He says: “As regards fees most doctors working in the private sector are already at the top of the pay scale anyway and are signed up to the Bupa Partnership, which limits fees.”
Health economists often say that hospital are like aircraft or hotels – they need bums on seats – and so running a hospital to near capacity brings down overall costs. So at least in theory, flourishing private hospitals could benefit the PMI patient.
Certainly, Bupa, which as both an insurer and a major hospital owner represents all aspects of private healthcare, is guardedly optimistic. “In general the concordat is pretty good news,” says spokesperson Suzanne Kelly. “We are already working with the public sector in several areas and it’s good to have a clear statement of where we are going. The benefit for us is that our hospitals can plan better. It is not so much the added capacity that the concordat is expected to bring but that we can plan around it.”
Blair proposes that newly qualified NHS consultants will be barred from private work for “perhaps” seven years. Says Kelly: “We don’t really know what ‘perhaps’ means – and we probably won’t know until the government has thrashed out an agreement with the British Medical Association. If the restriction turns out to be only a couple of years the effect on fees will be minimal but if it turns out to be the full seven years there could certainly be an impact on fees.”
Equally insurer PPP healthcare, which also has a stake in hospital bricks and mortar, welcomes the new spirit of co-operation. Spokesman Ben Faulkner believes any problems arising from the seven-year ban will be outweighed by “a concordat in which the public and private sectors work more closely together”.
Faulkner argues that, while consultants’ contracts are a matter for the profession and the Department of Health, allowing doctors to work in both sectors enhances the overall quality of care. “It enables senior doctors to play an important role in the development of younger doctors within the NHS as well as practise in the independent healthcare sector,” he says.
The 40-strong Nuffield Hospital chain also welcomes the NHS plan. Spokesman Ron Finlay claims a seven-year prohibition on newly qualified consultants will not have a great impact. “It takes years for doctors to build up a list of private patients and very often they are acquired by more senior consultants retiring and passing on and sharing out their list. Therefore, we would expect the impact to be limited.
“The important thing is that there are sufficient consultants to meet the demands of the NHS and the private sector. The government is taking useful steps to increase consultant numbers so we do not anticipate there will be undue pressure on availability of our resources.”
Finlay adds: “We feel very encouraged by the whole spirit of this paper. This is the first time that the government has so deliberately expressed not only a lack of any ideological objection to working with the private sector but on the contrary has expressed a positive desire to work more closely with the sector. That’s all very encouraging.”
As well as calling for greater use by NHS patients of private hospitals to relieve waiting lists, Blair’s scheme specifically requires that any cancelled operation must be carried out within a month. It will be up to the health authority to decide whether this should be done within the public service – effectively bumping another patient down the queue – or by booking a private operation. Currently, more than 60,000 NHS operations a year are cancelled. The Independent Healthcare Association reckons private units have the capacity to take on 165,000 additional NHS operations a year.
Finlay says: “In the short term, the main demand from the NHS is going to come from more waiting lists work. We do some of that now but it is not core business. It’s a pretty small proportion. I do not think we are going to be in such a position that our hospitals are so full we cannot meet some of this extra demand.”
Clearly, the outcome of negotiations between the BMA and health ministers on how long newly qualified consultants are barred from the private sector will have some impact on future PMI premiums. But, as the BMA points out, it is already in prolonged negotiation over other aspects of consultants’ contracts. And the doctors’ body says: “The proposed seven-year rule, or however long it turns out to be, is a change in the terms and conditions of contracts and that requires consultation with the profession.”
The one thing that is certain within this huge project of the NHS reforms is that these negotiations will drag on.