Private Patient Income Cap

NHS hospitals treat private patients. When Parliament were discussing the bill to create Foundation Trusts there was a rebellion from Labour MPs and so the Labour government agreed to place a cap on how much private income an NHS acute hospital can receive from private income (Private Patient Income or PPI). This cap was arbitrary: FTs were limited to the percentage of their income that came from private work in 2003.

When a trust is authorised as an FT it must agree not to exceed this cap. If it does, then the FT is in breach of its authorisation and can be de-authorised and return to being an NHS Trust. Mental health FTs are covered by different rules: the Health Act 2009 says that the proportion of income derived from private patients is capped to the greater of either the private income in 2003, or 1.5%. For example, in 2010/11 two FTs were in breach of their PPI cap: Basildon and Thurrock University Hospitals NHS Foundation Trust and Liverpool Women's NHS Foundation Trust. Monitor has agreed an action plan with these trusts.

So what is "private patient income"? This does not necessarily mean private patients because it includes services. So if an FT provides some pathology services to a private hospital that income counts as part of the PPI. In addition, according to Monitor's compliance rules, FTs can form partnerships with the private sector companies, and this has resulted in several FTs creating Private Patient Units (PPUs). An example of this is The Christie in Manchester which provides The Christie Clinic in partnership with HCA International. HCA (the parent company) is the largest for-profit healthcare company in the US. It also has the dubious distinction of paying the largest fraud settlement in US history when, in 2002, it paid more than $2 billion in civil law suits.

In 2010/11 FTs generated £252m income from private patients, from a total income of £26,867m (ie 1.1% up from 1.0% in 2009/10; figures from Monitor). This implies that FTs generate very little from private patients. However, there are some anomalies that bump up the PPI from FTs:

The Royal Marsden	30.7%
Royal Brompton and Harefield	14.4%
Moorfields Eye Hospital	13.7%
University College London Hospitals	6.6%
Papworth Hospital	6.1%
Guy's & St Thomas'	3.0%

The Health Bill that is just about to go to the House of Lords abolishes NHS Trusts, so the threat of d-authorisation will be pointless: all NHS Trusts will have to become FTs. The Bill also revokes the PPI cap. This means that Foundation Trusts will be no limit to how much income the trust will be able to generate from private patients.


So who are the private patients? Some patients will be foreigners travelling to the UK although as I have pointed out before, Deloitte does not mention the UK as a destination for US healthcare tourism. Moorfields Eye Hospital even has a hospital in Dubai. Approximately 20% of all healthcare spend in the UK is on private treatments so clearly there are people who prefer to pay for treatment that they could get on the NHS.

The supporters of the Bill say that private patients will bring in more money into FTs and this will provide a subsidy to NHS patients. However, PPI is unlikely to make a difference in most trusts because the income will be low. the downside of private patients is that it reinforces a two-tier NHS. A private patient will not want to be on an NHS waiting list, nor wait in a queue in a waiting room, nor have the same accommodation as an NHS patient. If they had money to give away and still wanted to be treated the same as an NHS patient, they would simply make a charity donation to the hospital. No, private patients want to get something for their money and that something is to jump queues and get better accommodation.

The following is a tweet from Dave West from HSJ, reporting from the Lib Dem conference.

What this says is that Shirley Williams is suggesting that the PPI cap should not be removed, instead it should be altered. She is suggesting that the arbitrary cap set at the level of PPI a trust generated in 2003 should be changed so that a trust cannot generate more than 50% of its income from PPI.

This is a typical pointless Lib Dem fudge. This PPI cap will have no effect on the majority of FTs. In 2010/11 FTs income was £27bn it is extremely unlikely that there is £13bn cash sloshing around in patients' pockets to pay for private treatment in NHS hospitals, so the 50% cap will only affect a few hospitals, and most likely the six listed above. Is it likely that The Royal Marsden will increase its PPI from 30.6% to 49.9%? There's very little chance of that. So the proposed amendment will have little effect at all.

I have never rated Baroness Williams as being capable of making the Health Bill better, and this suggestion reinforces my opinion. The Baroness could suggest an arbitrary cap of, for example, 30% (or maybe even lower, say 10%). This would give a clear indication that NHS Foundation Trusts should concentrate on NHS work. A lower cap, forcing the few outliers to divest themselves of some of their private patients, will give a clear signal. Setting the PPI cap at 50% basically says that the Baroness likes the idea of a two tier system where the same hospital treats patients differently depending on whether they are able to pay.

The Baroness could even suggest something cleverer and still stick to Lib Dem principles of equity. For example, the PPI cap could be in two parts: treating patients and providing services (for example pathology). The PPI on patient income could be set low (say 5% or 10%) to give a clear message that the NHS is about equity, and restrict the formation of a two-tier system; but the services PPI could be set high to encourage FTs to generate income from private hospitals other than from patients. The rules will have to be strict that services for NHS patients take precedence. If the intention is for NHS hospitals to be innovative, then they should use patent laws and licence private hospitals (but not NHS hospitals, there should be some benefits to be "in the NHS family") to use the techniques they developed and this income could come under the "services PPI".

UPDATE:
Andy Cowper at Health Policy Insight reports Simon Hughes interviewed by Andrew Neil on BBC2's Daily Politics saying that 

"there's a lot of work still to do on the Bill ... it's by no means over ... there are three of four significant things still to be done ... we need to absolutely tie down that private work in any NHS hospital cannot become the dominant activity or the driver"

(my emphasis). This is the 50% PPI cap being trailed. If a hospital does less private work than 50% of its income, then it cannot be "dominant", right?