The NHS braces itself for privatisation
Private sector involvement in healthcare could more than double under government plans. Where does this leave the NHS?
There are, however, some areas where the government is not prepared to listen: the commitment to abolish primary care trusts, to transfer major powers to commission services to GPs, and the ambition to vastly increase the participation of the private and, in theory, voluntary sectors in providing health services. In future, the NHS will continue to be funded from taxation and (for the time being) will be free at the point of delivery, but the government will step back from running the service.
Private sector involvement in the NHS is not new. Dentistry, worth £2.1bn, opticians and pharmacies are already in the private sector. GPs themselves are effectively private contractors, accounting for £8bn, or almost 10% of the entire NHS budget. Under Labour, private involvement was extended via independent sector treatment centres (ISTCs), handling mainly non-emergency elective treatments, as a way to bring down waiting lists.
But the current proposals are much more bold. Plans are under way to further outsource central services, such as workforce development (total budget £5bn) and procurement management. Even NHS Direct (worth £146m) is in the firing line.
The shift to create more than 200 GP consortiums in England will generate further opportunities for private firms. Notably, this will be in the management of commissioning, worth £1bn. Firms such as Tribal, Humana, United Health and Aetna already offer referral management services that promise to help consortiums slash their costs by as much as 15% and turn savings into profits.
But what about core and non-core clinical services provided by NHS trusts and community health organisations? These could be harder to outsource. This is especially true of the most complex, unplanned hospital admissions that are costly and inherently difficult to plan for. The Department of Health's (DH) own statistics show these account for approximately £12.5bn of a total budget for "hospital and community services" of £51.5bn. But that still leaves £39bn that could potentially be subject to private sector competition.
All of this will not be privatised immediately. DH statistics show that just over £750m is contracted out to "non-NHS providers", spread across the full spectrum of planned NHS care, including elective inpatient services, day cases, mental health and outpatient services. Initially, it is in these areas where further encroachment by private firms might occur.
From available statistics, it is relatively straightforward to identify up to £25bn of NHS care that the private sector could be expected to bid for. This means that, whereas today about 31% of the frontline care budget (currently allocated to PCTs) of £80bn is held in private hands, in future that could rise to 64% or more.
This trend is surely cause for concern. The first wave of ISTCs, for example, were found to be 12% more expensive than the NHS when carrying out the same work. Available evidence suggests that, while the NHS is loved by the public, the service from GPs and dentists (essentially private contractors) leaves much to be desired – hardly a promising omen for the future.
What will become of those unplanned services requiring complex and expensive treatments where it will be hard for private firms to make a profit? Most likely, the government will be left to shoulder the burden. But will the resources left to manage them be sufficient to maintain clinical standards at the current level? Will prices also rise, forcing patients to pay more from their own pockets?
David Cameron has made a commitment that he will not place the NHS at risk. But increasingly this seems hard to reconcile with the plans to reorganise the service. All the signs are that taxpayers could end up paying more for less.
• Christopher McCabe is professor of health economics at the Leeds Institute of Health Sciences at the University of Leeds. Ian Kirkpatrick is professor of work and organisation at Leeds University Business School.