Over two months have passed since St Anthony’s hospital turned its back on BUPA’s Localcare and Healthfund network lists. At the time, the 96-year-old Surrey-based establishment said that it was not financially viable to rebate the 20 per cent that BUPA demanded.
Not long after, the Office of Fair Trading (OFT) delivered its long awaited report into network hospital lists and consultant partnerships. And, despite a barrage of negative press, the OFT concluded that BUPA, PPP and other insurers using the network option were quite within the parameters of fair competition. But while agreeing the establishment and development of network lists was a justifiable response to the rising costs of PMI, the OFT called for greater transparency surrounding the selection process.
But the findings were not enough to convince the network critics at St Anthony’s. “We simply can’t run at a 20 per cent margin,” pronounces a resolute Brian Clarke, chief executive, who feels networks are a fruitless strategy for today’s market. “The end of the twentieth century is beset with the sin of treating dissimilar situations similarly. Networks are the answer to a managed care system, a different one – the one in the States,” he explains. “I think that insurance companies in this country must better understand that we are all born into a managed care system – the NHS. GPs referrals are part of the managed care system as are health authorities.”
Clarke continues: “The whole attraction of an extra system is that you pay extra to get out of a managed system. At the moment, you do that but find yourself getting out of one managed system, straight into another one. The three pillars of private health are being undermined: the choice of who, the choice of where, and, I think increasingly, the choice of when.”
The OFT report agreed that network hospitals provided a valid solution to overcapacity of the private hospital sector. Over supply of spare beds has been the reason cited by insurers for developing lists and has become a largely accepted theory. Some, however, say otherwise.
Clarke argues that assuming the private sector suffers from overcapacity is a fundamental error.
According to the calculations of some health insurers, the average occupancy within the private sector is around 45 per cent. And empty rooms mean low revenues which ultimately cost anybody who has an interest in a hospital.
This, argue insurers using hospital lists, is the primary motivation for the promotion of networks. And with the PMI industry as static as is, providers are looking for ways of curtailing costs and many have viewed networks as an ideal opportunity.
To support his view, Clarke has produced compelling evidence that overcapacity is not as common in the independent sector as has been assumed. “We were able to show that occupancy could be anything from 52 per cent to 84 per cent. Now we, and many other hospitals like us, always quote occupancy in terms of the number of beds registered with the local health authority, not the number that are actually in use and available. Furthermore, if you have a’high-tech’ approach, you will not put a cardiac patient with acute myocardial infarction in the gynaecology ward just because that is where there is a spare bed.” Clarke blames traditional methods of ascertaining occupancy levels for these representations. By only including the patients in hospital at midnight, the method ignores any patients receiving day treatment as well as anyone who left hospital before midnight. “Day cases can account for between 30 and 50 per cent of patients,” confirms Clarke. “Furthermore, the business of linking the ebb and flow of patients according to the right ward and the right length of stay means that you need flexibility.”
Clarke uses the example of a patient due to enter the hospital in two days time for a six-day stay. “The bed for this patient can obviously not be given to a patient who needs a bed for three days. The bed could only be given to a day case. So in my opinion the keystone of the network philosophy, overcapacity, is flawed. Private health is about being able to receive treatment quickly and this means a certain amount of slack.”
And he adds: “It runs counter to any theory of economic understanding that I know of to say costs can be reduced by reducing competition and I see this as the greatest flaw of the OFT report. While it said it was reasonable for an insurance company to encourage hospitals to compete on price and quality, the OFT has investigated neither. It should look at the pricing schedules of all hospitals, from training to independent hospitals, to see what prices insurance companies are awarding them. Then it can be decided whether they are competing on price or not.”
According to Clarke, the solution is to calculate occupancy through bed availability in percentage terms and he claims that the results paint a very different picture. “We have chosen to talk in terms of bed availability now, and it is a different story” he says.
Clarke is not alone in his concerns about the network system. The sting in the tail of network hospital development was conspicuous last year after a number of hospital closures, including Bon Secours in Beaconsfield; St Vincents, Pinner; and Manor House in London. But while few independent hospitals have felt safe since, St Anthony’s is a rare example of an establishment willing to object to network list development. The hospital could not have made it clearer that certain constraints were unacceptable than when it opted out of BUPA’s Localcare and Healthfund lists.
So why did St.Anthony’s sign up to the network in the first place? “Our membership of the list did not turn out as we expected. When we were asked to join the Healthfund we were told we would be part of a quality hospital list and that the policy would be marketed all over the country,” he explains. “We were also reassured that the plan aimed to get new, rather than transferred, business, and that a cap would apply, so the 20 per cent rebate was not too much of a worry.”
“Then it became clear that there was a further requirement that we take Localcare in addition,” Clarke continues. “But it was implied that Localcare was a smaller policy and that Healthfund was the overriding one. The reality was that Localcare was the heavily marketed product. Consequently, we have had huge numbers of Localcare patients because the premiums are so attractive.”
According to Clarke, the amount of choice available through network-based plans is further constrained by the consultant partnership. “It may well be that someone does not want to be restricted to an insurance company’s choice of hospital and chooses to pay a bit more for their premium. But should a GP refer the patient to a partnership consultant, that consultant is required to admit the patient to a network hospital,” Clarke explains. “So it is difficult to escape and I believe that somebody who pays extra to have a greater choice should not find their choices restricted anyway.
And I am not sure how many patients are aware that BUPA gets a rebate.”
Clarke says his vociferousness on this issue is motivated by his belief in patient welfare. The hospital has a leading cardiac and breast centre, is developing an entire MRI wing and is an establishment valued by the local community. Like many charitable hospitals, St Anthony’s pre-dates the NHS and still retains some of the elements of the religious order by which it was established.
But such hospitals often find their voices drowned out by larger hospital chains which is why the Charitable Hospital Foundation (CHF) was formed. Established two and a half years ago as a communicative forum for independent sector, the CHF is chaired by Clarke. “It is a membership group so the action is taken through talking to and supporting one another,” he explains.
Asked if surviving members of the CHF are poised to follow St Anthony’s action against the network lists, Clarke says: “I think that the smaller CHF hospitals are just plain terrified and the reality is that you need to be of a certain size and strength to be heard.”
In terms of a resolution, Clarke is candid: “Medical insurance is now economically driven rather than benefit driven. Insurance companies should be concentrating more on the benefits of private healthcare than the cheapness. The fact that some have concentrated more on developing market share has devalued the perception of medical insurance.”
And he adds: “Those who still focus on the value of benefits are often the ones making profit. And I think that is very interesting.”