NHS Reform A Goldmine for Surgeons?

Last week was a bit of a disappointment for opponents of the Health and Social Care Bill. Opposition was clearly growing as the BMA, RCN and RCM all announced all-out opposition to the Bill and it was hoped that the Royal Colleges (who are professional membership organisations) would also announce their opposition. Initially it seemed that this would be the case when a draft agreement was leaked early in the week, however, after what appears to be a huge amount of lobbying from Lansley, their opposition crumbled. Now the rather weak response from many of the colleges and faculties are to ballot members and fellows, which is simply a delaying tactic.

The most ire was generated by the Royal College of Surgeons being consistently in favour of the Bill: they didn't need a telephone call from Lansley to be prompted in offering their support. The response from many who oppose the Bill is that surgeons are the most likely to benefit personally from the new fragmented and privately provided NHS. I honestly don't know if this is the reason why the RCS refuse to oppose the Bill, but if it is, they are wrong. The Bill will not deliver a goldmine of easy pickings for surgeons.

The consensus is that two parts of the policy: the raising the Private Patient Income cap on Foundation Trusts (FTs) and the so-called Any Qualified Provider (AQP) policy will be beneficial to surgeons. The thinking is that the raising of the PPI cap will allow more private work to be carried out in NHS hospitals - presumably with surgeons acting as independent contractors earning private rates. Further, AQP is expected to bring in more private providers to do NHS work (so-called "choice") and the government expects groups of clinicians - like surgeons - to form mutuals or partnerships and offer themselves in competition to NHS hospitals. The conventional thinking is that these two policies will make surgeons very rich. I suspect that this is wildly optimistic.

It is clear that the RCS are in favour of AQP. In response to the NHS White Paper they said (January 2011):

In terms of providers, we believe a level playing field should exist, meaning all providers supporting the entire range of clinical standards of modern surgery, including education and training and making outcomes available to aid the profession and patient choice.

So basically they are licking their lips on the thought of the extra opportunities of their members to work for private providers.

I think they are wrong. To explain why, I first need to remind the reader of a home-truth. I don't particularly like to quote Mr Byrne but it is important here: there's no money left. This applies both to the public sector - the NHS - and to the private sector. Austerity is upon us and that means no one can get rich.

The major problem is that private healthcare is in dire straits and there have been a series of bad indicators over the last few weeks. In general terms, Private Medical Insurance (PMI) is still in recession. A large proportion of PMI is provided as an employer benefit and in times of recession this is an extra - and largely unnecessary - expense that will be the first to be dropped as profits are squeezed. When there is a successful NHS (as there is) I am sure that over the last year many employers have come to the conclusion that PMI is an employee benefit they cannot afford.

At the same time self-pay has slightly increased, but this is a small part of private hospital income. In addition, in general terms, the economy is tanking. This will affect self-pay as people fall back on the free-at-the-point-of-use NHS (which they have already paid for) so that they have the money to pay their mortgages. And at some point in the future the Bank of England will raise base interest rates. This is unlikely to happen before the next election since the last thing the government needs is huge numbers of repossessions just before an election and they will make it known to the "independent" Bank that it will be in non-one's interest. However, interest rates can only go up. More money spent on the mortgage means less money to pay for things that you don't need to pay for (including PMI and self-pay). Private healthcare will suffer, and so will the surgeons who rely on this income.

The Competition Commission is now looking at private healthcare and the likelihood (going on the OFT interim report from last year) is that they'll recommend a shake up which will cut costs to patients and the profits of the providers. Surgeons may find that their private practices will no longer be profitable.

Health Service Journal this week reported on the most recent Laing's Healthcare Market Review that in 2010 income by private healthcare dropped by 1.5% the first time there has been a drop in the thirty years that Laing and Buisson have been providing the report. This shows the effect of falling PMI. The report also says that a quarter of the income of private acute care providers was paid for by the NHS, illustrating how dependent the private sector is on the public purse. As the NHS seeks savings, this figure can only go down, and that will mean less for surgeons.

It is significant that Laing and Buisson say that private hospitals have "higher average costs than NHS hospitals. They typically take on patients at the lower NHS prices when they have unused capacity" and that "many independent hospitals are likely to struggle to maintain profitability at NHS tariff unless they can significantly rationalise their cost base". The cost base is, of course, mostly the money paid to surgeons.

All of this indicates that there is unlikely to be a huge shift to private hospitals through the AQP policy. private hospitals will not put themselves on the list of AQP providers if they think they cannot make a profit on the NHS tariff. The RCS may be keen on the idea of AQP, but it is looking like it is unlikely to make private providers (and hence their independent contractors, the surgeons) much money.

There is another issue. At a time when credit was cheap and plentiful everyone over borrowed, and that includes the private hospital groups. The country's largest private provider, GHG, has created a Southern Cross-like problem for itself (similar, but with some differences) by restructuring as an opco-propco with a £1.65bn debt that needs to be re-financed in the next 8 months. The next 8 months. If there is a Euro-crisis and a paralysis of the finance markets will they be able to do this? Surgeons should think twice about relying on private practice income.

The government's policy on QIPP (the £20bn "efficiency savings") seems to be more about squeezing tariff (the fixed price list providers are paid for about half of treatments) than about anything else. In April 2011the government cut tariff by 1.5%, in April 2012 they will cut it again, by "at least" 1.5%. This means a lot less money for both FTs and AQPs. If a surgeon moonlights for an AQP provider they'll find that the cut in tariff will affect their pay packet. Indeed, in the current climate surgeons will probably find an NHS salary much safer than their likelihood of making a fortune in the private sector. But even that is not guaranteed since FTs may find that they cannot afford to provide some operations.

FTs and private providers will be chasing after an ever decreasing and inadequate pot of NHS money, and they will squeeze their staff costs. Further, as the economy nose dives, there'll be less money in patients' pockets to pay for private treatment. Both of these mean that there simply isn't the money available to fill the surgeons' pockets.

Then there is another issue. The original plan for Foundation Trusts was to allow them to write their own employment contracts. Only one FT - Southend - has done this so far and they have eventually decided to go back to the national deal. The current government is very keen on local agreements and is encouraging FTs in this direction, but this could be bad for the surgeons. In a meeting that I attended recently an FT chief executive said that he wanted to change his consultant contracts to prevent them from "moonlighting". This makes sense, because if we are going to have a competitive market with AQP competing with FTs why would a chief executive want his employees working for the opposition? Surgeons beware: you may well find that soon you will be given the option of giving up your private practice or give up your NHS job. This will be a direct consequence of government policy.

When you add all of this: failing economy, failing private providers, the Competition Commission about to shake up the private healthcare market, the Byrne aphorism of no money left and cuts in tariff, the scope for anyone to making money is seriously reduced and the risks of the reforms are too high. Consultant surgeons have a very comfortable deal with the NHS at the moment, and any reform (under the Byrne aphorism) will be far less comfortable for them. It is better for them to keep the status quo, so perhaps someone could explain this to them and get them to join the opposition to the Bill?