Social Enterprises

Ask anyone what is the greatest British institution and they will answer: the NHS.

Ask them to tell you what they they think embodies our NHS and they will say: our NHS hospitals.

Yet in 2014 those three letters N-H-S will be removed from the signs of every hospital in England, for good reason: they will no longer be part of the NHS.

The reason is section 4.21 of the NHS White Paper: 

"Our ambition is to create the largest and most vibrant social enterprise sector in the world. ... As all NHS trusts become foundation trusts, staff will have an opportunity to transform their organisations into employee-led social enterprises that they themselves control."

Rather than there being one organisation, the NHS, owning all hospitals, the White Paper policies will fragment the system into 250 separate, independent organisations. A social enterprise is not publicly owned, it is not publicly run. They are private companies with a "social purpose" and this typically means that they are not-for-profit. In fact the government says that they will be "employee-led" which effectively means management buyouts. Currently NHS management remuneration is approximately a third that of the private sector (NHS Confederation), so you can imagine that one of the first things that the board of a (former NHS) social enterprise hospital will do is give the board a huge pay rise and there will be nothing that you can do. If you complain about an NHS hospital to your local councillor ot MP they will be able to lobby the hospital management and make sure that changes are made: this is the advantage of public ownership. But if you complain to your councillor or MP about a (former NHS) social enterprise hospital they will shrug their shoulders and say "it is nothing to do with me". and of course it will not be, your complaint would be the same as making a complaint about someone being rude to you at Sainsburys or Tescos.

But the government, when it says "the largest social enterprise sector in the world" are admitting that this has not been carried out anywhere else in the world. They are admitting that it is an experiment: they are experimenting with our very lives!

A social enterprise hospital is not part of the NHS. This will have profound effects on staff in terms of pay and conditions, pensions, job mobility and training.

The Transfer of Undertakings (Protection of Employment) regulations - TUPE - will apply when a hospital becomes a social enterprise. This will transfer NHS employment T&C to the new business, including the right to continue to contribute to the NHS pension. But the regulations apply only to that one transfer. So if an employee moves to another hospital (as is common currently in the NHS) the employee will be moving from one business to another and treated as a new employee in the new business. This means that they will be employed under new conditions and will no longer be able to contribute to the NHS pension.Ultimately NHS T&C and the NHS pension will be phased out.

This is likely to have an important effect on job mobility since employees not wanting to lose the right to continue contributing to the NHS pension will be reluctant to change jobs. When it comes to pay bargaining, there will be no national pay rates. This will mean different hospitals will pay different rates and the result will inevitably mean that pay will not match inflation. And it will mean that the big teaching hospitals will be able to pay higher rates and attract the more able staff, whereas district general hospitals will pay far less and be unable to attract the best staff and the quality of treatments will suffer.

Currently NHS training is funded by central government (Multi-Profession Education and Training levy - MPET). This is around £6bn annually paid by the Department of Health to Strategic Health Authorities which pay for the training of doctors, nurses, scientific and admin staff. However, this payment from central government not only covers the training costs, but also the salary of the employee while training. For example, as a doctor learns more then progressively more of their salary is paid by the hospital. In two years of foundation training the Department of health will pay first 100% and then 50% of the doctor's salary, in the four years of specialty training the Department of Health will pay between 50% and 100% of the doctor's pay. The same is true for trainee nurses staff.

A social enterprise hospital is an independent business, the government will have no responsibility for the training of their staff (why should it? is the government responsible for the training of BAe's staff or GlaxoSmithKline's staff?). The White Paper is coy about this £6bn of training it simply says (4.33): 

"Healthcare employers and their staff will agree plans and funding for workforce development and training; their decisions will determine education commissioning plans."

Note that there is nothing in the White Paper that says that there will be continued funding MPET, it does say: 

"All providers of healthcare services will pay to meet the costs of education and training. Transparent funding flows for education and training will support the level playing field between providers."

It is estimated that it costs £350K to train a junior doctor. If there is no guaranteed funding from central government then this cost will be a huge burden on hospitals (£350k is about 60 hip replacements). If this cost is put on student doctors then it will dissuade students from lower income families to train to become a hospital doctor. Currently the BMA say that a medical student graduates with a debt of £37k (or £45k for a London university); that debt is a powerful force against lower-income students going to medical school, and consequently medicine is a predominately middle class profession. But imagine the effect of the student having to take out an additional loan of £350k to train as a hospital doctor. This will dissuade even middle class students, and we will return back to the days of Sir Lancelot Spratt where only the very richest could even think of becoming a hospital doctor. (And since the very richest do not have a monopoly on brains and ability, hospitals will inevitably be staffed by less able doctors.)

Social enterprises will have profound effects on patients too. At the moment you are treated within the NHS, so if you need more specialist care from another hospital you simply move to another part of the same organisation. When hospitals become social enterprises (and in Oliver Letwin's words "compete for patients") you will be regarded as a source of income, rather than a patient. So will a hospital be willing to lose a source of income to another competitor? No. Currently we give doctors our trust that their decisions will be made on a purely clinical basis. But in the future, every clinical decision will have a financial effect on the hospital: your doctor may be making a financial decision and not a clinical decision.

When a hospital becomes a social enterprise it will no longer be financially secure. The reason is that currently risk pooling is provided by the government. The government effectively says that there will be NHS hospital services in your area and if your local hospital goes into debt the government is there to provide interim financial support while the hospital is reconfigured. The Conservative government is removing this guarantee (the only service they will guarantee is A&E), they say that the market will make the provision, so if your local hospital does not have sufficient funding and it goes into debt, then the market is saying that a hospital is no needed in your area and so the hospital will close. The government are explicit about this in the White Paper section 1.22:

"We are very clear that there will be no bail-outs for organisations which overspend public budgets."

This is a sink or swim policy.

Hospitals also get risk pooling insurance through the NHS to pay for medical negligence and also for a wide range of non-clinical liabilities including personal injury sustained by visitors to NHS premises, to claims arising from breaches of the Human Rights Act, the Data Protection Act and the Defective Premises Act and also cover for defamation, professional negligence by employees and liabilities of directors. As a social enterprise a hospital will have to cover all of these itself through commercial insurance policies and an inevitable rise in costs.

The fact that the government no longer wants to provide risk pooling for the NHS shows that it is shirking its responsibility to its citizens.

So will these hospitals have a secure future? No. The so-called "ring fence" is a fiction, it was simply a ploy to deceive the electorate into believing that the NHS was safe in Cameron's hands: it is not.  The Kings Fund say that to be funded enough to provide the current service the NHS needs a year-on-year increase of 4% to 6% which is far more than the RPI increase that Lansley is promising.

The NHS has to make £20bn of efficiency savings by 2014. What this means is that there will be £20bn less money over those four years than is needed to provide the service. It is most definitely a cut, it may be smaller than the 25% cut that other public services are suffering, but when you consider that inflation in healthcare is twice CPI and that demands on the NHS increase every year as the population ages, just standing still with an annual inflation increase is difficult enough. To make £20bn of "efficiency savings" is nigh-on impossible.

This is in the face of a further cut in hospital funding when the government cuts the money paid to every hospital for each procedure (treatment, clinic appointment, operation), so that they are paid only the "best practice" or lowest rate. (Remember when we last had a "pay the lowest rate" policy? It was in the Thatcher years when they introduced "competitive tendering" in cleaning which resulted in filthy, unhygienic hospitals. Well Lansley wants that policy to be applied to clinical procedures too.)

Each hospital will be a separate business, and they will be expected to "compete for patients". This is not the spirit of co-operation and collaboration that we are used to in the NHS. But the government is serious about this. They even want to make hospitals subject to Competition Law (and why not? they will be real, private businesses). White Paper section 4.27 says:

"Monitor will have concurrent powers with the Office of Fair Trading to apply competition law to prevent anti-competitive behaviour"

This means that any other business (social enterprise, or private business) will be able to launch a legal case against your local hospital for being a monopoly provider. This is not an idle threat. In most cities you could argue that there is competition because the concentration of several hospitals merely means that you as a patient have a small extra distance to travel to use a competitor. But in rural areas this is not the case. There is typically just one hospital trust covering a large area and by necessity it is a monopoly. Your local hospital could provide an excellent service, but will still be subject to cases brought under competition laws. And once hospitals are subject to UK competition laws, they will be subject to EU competition laws, which means that cases can be brought against your local hospital being a monopoly supplier by an EU healthcare company.

The White Paper also says (4.28)

"[Monitor will] require monopoly providers to grant access to their facilities to third parties"

This means that private providers (or even other former NHS hospitals, now social enterprises) will be allowed access to your local hospital's facilities. As you walk the corridors of your local hospital you will see the uniforms of doctors and nurses of your hospital, as well as Serco, HCA, Spire, GHG and many others. You will also see private patients using the facilities in your local hospital, and inevitably they will go straight to the front of any queue. Even if your local hospital refuses to treat private patients (as my local hospital does and has pledge to continue to do) they will not have the choice because Monitor will force them to allow private providers to use their facilities.

Kingsley Manning, a partner in Tribal’s healthcare business says: 

"The opportunities for the sector may come when NHS trusts who have been told they must become foundation trusts fail. Then there will be a chance for the private sector to step in."

The private sector are simply waiting for (former NHS) hospitals to go into debt so that they can take them over. This is, of course, the whole purpose of the White paper.

All of this is concerning. The government intends for all hospitals to be taken out of public ownership, subject to vicious cuts in funding and left open to the predatory actions of the private sector. Thankfully, UNISON is spearheading a campaign against social enterprises. Currently it is community health services that are under threat, but in the future it will be every hospital. If you value the NHS then you should fight to keep your NHS hospital public.