NHS Privatisation

There are two main aspects to the privatisation of the NHS. On the one hand there are the private, profit-making companies like Serco, Care UK and Virgin, who are contracted to deliver NHS services and make a profit that will be passed onto shareholders. This website is not about that aspect of privatisation. On the other hand there are NHS organisations behaving like private companies and carrying out treatments for fee-paying patients. This website is about this second aspect: private patients within the NHS.

The original 1946 NHS Act had provision for consultants to carry out their private practice in NHS hospitals. The Act was controversial and contained several compromises to persuade doctors to work for the new NHS. The numbers of private patients in NHS hospitals has waxed and waned with government policies and the economic situation. When the New Labour government brought in legislation to establish Foundation Trusts - autonomous NHS providers that are run like businesses – there was a lot of unrest on the Labour backbenches that the Act would be a massive expansion of the numbers of private patients. To assuage this backbench unrest, the government at that time created Section 44 of the 2006 NHS Act. This section said that:

the proportion of the total income of an NHS foundation trust … in any financial year derived from private charges is not greater than the proportion of the total income of the NHS trust derived from such charges in [2003]

The proportion of private patient income to the total patient income in 2003 is regarded as the private patient income cap and a Foundation Trust cannot exceed this proportion in any subsequent year. This cap is quite arbitrary. It includes the income from actual physical, in-the-flesh, patients, but it also includes income from other services like providing pathology or income from intellectual property. If an FT rents part of its site (for example, accommodation for nurses) then the money contributed to the private patient income even though no private patients were involved. This section of the Act, designed to restrict Foundation Trusts from offering a two tiered service, was clumsily applied. The 2009 NHS Act added a section specifically for private patients in mental health trusts. Section 33 said:

in the case of a mental health foundation trust designated under subsection (2A), that proportion or 1.5% if greater.

This section says that the minimum private patient income cap for a mental health provider was 1.5%. So even if the mental health provider had no private patient income in 2003, its private patient income cap is still 1.5%. For acute FTs the minimum cap was still 0%. The average percentage of private patient income for all FTs was 2% in 2011/12. Like all averages, this figure hides the wide range of income. Twenty eight FTs had no private income during this period, and 89 trusts (62%) had a private patient income less than £1m. A few trusts had very large incomes, as shown in the following table.

Foundation Trust	Private Patient Income (£000)
The Royal Marsden NHS Foundation Trust	51,144
Royal Brompton & Harefield NHS Foundation Trust	29,117
Great Ormond Street Hospital for Children NHS Foundation Trust	28,157
Guys and St Thomas NHS Foundation Trust	23,081
Royal Free London NHS Foundation Trust	19,224
Moorfields Eye Hospital NHS Foundation Trust	18,682
University College London Hospitals NHS Foundation Trust	18,006
Kings College Hospital NHS Foundation Trust	16,882
Chelsea and Westminster Hospital NHS Foundation Trust	11,264
The Christie NHS Foundation Trust	10,708

The Health and Social Care Act 2012 (HSCA) repealed sections 44 and 33. During the passage of the Act there were the same arguments about private care in NHS hospitals that there were during the passage of the 2006 Act. To try and reassure Lib Dem peers, the Coalition government came up with Section 164. Like the Section 44 before it, this section was also a fudge:

An NHS foundation trust does not fulfil its principal purpose unless, in each financial year, its total income from the provision of goods and services for the purposes of the health service in England is greater than its total income from the provision of goods and services for any other purposes.

This is usually quoted as the “49% rule” and is interpreted (wrongly) that 49% of the patients treated by a Foundation Trust can be private patients. This assumption ignores the fact that because it is far more expensive to treat a private patient the income from a private patient will be far more than from an equivalent NHS patient, so a Foundation Trust will need to treat fewer private patients to bring in the same income. However, this section is wider than Section 44 because the wording says that the majority of a Foundation Trust’s income must be from the NHS. This implies that the other income is from non-NHS sources rather than the more specific private patients.

Foundation Trusts are interpreting non-NHS income quite widely. The money that comes from car parking charges literally comes out of the pockets of patients (and not from the NHS) so is regarded as being part of the “49% rule”. If a trust delivers services (like speech therapy) to a local authority, the income does not come from the NHS and so is part of the “49% rule”. A Foundation Trusts does a lot of partnership working with social care and voluntary groups, and any income from this is treated as non-NHS income and hence part of the “49% rule”. In practice, it is extremely unlikely that 49% of the patients a Foundation Trust treats will be private patients.

The Health and Social Care Act has had a significant effect on Foundation Trusts. Analysis of the Forward Plans (the plan for the next three years) of the 144 Foundation Trusts that existed in June 2012, shows that 58 trusts (40%) intend to increase their private patient income. 

The new “business-like” aspect of Foundation Trusts mean that trusts are now creating private companies. Some are professional, serious businesses, like Kings Health Partners or Moorfields Dubai hospital. Others are comically amateur, like the private hair removal service at The Rotherham hospital. What is clear, however, is that such private enterprises distract from the core business of a Foundation Trust, that is, treating NHS patients. Section 164 of the HSCA supposedly addresses this:

An NHS foundation trust which proposes to increase by 5% or more the proportion of its total income in any financial year attributable to activities other than the provision of goods and services for the purposes of the health service in England may implement the proposal only if more than half of the members of the council of governors of the trust voting approve its implementation.

However, when you consider that the average proportion of private income is 2% for all Foundation Trusts, an increase of 5% is so large that it is unlikely to ever occur. This part of the Act will never be invoked.

The main private business that Foundation Trusts do is via private patient units (PPU). There are 43 foundation trusts with a PPU and these are usually just a few rooms (five or ten). The Forward Plans of Foundation Trusts show that 12 trusts intend to open a PPU. Every trust says that their PPU will provide income to the trust. However, closer reading of accounts and annual reports give a different picture. Although PPUs provide an income, the accounts do not give the expenditure of the unit and so we do not know the net profit or loss of providing a PPU. Trusts say that income from PPUs benefit NHS patients, but there is little evidence of this, and there is some evidence that private patients are detrimental to NHS patients. Indeed, most PPUs advertise the fact that private patients have full access (indeed, often better access) to NHS facilities. More telling is the occasional comment from trusts that the PPU was established to meet the demand from consultants. The HSCA is likely to increase this demand, consultants knowing that there are few impediments are demanding that their NHS trust allow them to conduct their private practice on trust premises.

Foundation Trusts also get income from charities. About a third (49) of trusts have charity income so small that they are listed as zero in their accounts. Nine tenths (129) of trusts have charity incomes less than £1m. However, there are a few trusts with significant charity incomes:

Foundation Trust	Charity Income (£000)
The Royal Marsden NHS Foundation Trust	31,790
Guys and St Thomas NHS Foundation Trust	12,667
Great Ormond Street Hospital for Children NHS Foundation Trust	9,334
University College London Hospitals NHS Foundation Trust	8,308
The Christie NHS Foundation Trust	6,697
University Hospitals Birmingham NHS Foundation Trust	3,334
Moorfields Eye Hospital NHS Foundation Trust	2,854
Blackpool Teaching Hospitals NHS Foundation Trust	2,357
Kings College Hospital NHS Foundation Trust	1,648
Gloucestershire Hospitals NHS Foundation Trust	1,569

It is apparent that there is a correlation between private patient income and charity income. In particular, trusts treating a lot of cancer patients (Royal Marsden, Guy’s) get a lot of income from cancer charities. The Royal Marsden has a huge income from private and charity sources and while it is clear that private patients benefit from the trust’s charity income (they have access to the Cyberknife facility bought with charity funds) it is unclear what benefits NHS patients have from the trust treating private patients.

One of the most business-like trust is The Christie, a specialist cancer FT in Manchester. The Christie has a joint venture company with HCA to treat private patients. The trust has used this company to hide its private patient income by listing the profit from the joint venture as its private patient income rather than the actual income from the private patients.

The Christie is one of two FTs that have been chosen to host a Proton Beam Therapy Unit (the other is University College London). These units are extremely expensive to establish, costing up to £150m. The government have rejected private funding of these units, so the capital costs will be met by taxpayers. A single unit can treat 750 patients and two units running at full capacity will only just meet the demand for all UK NHS patients (including 5% of patients for research). However, The Christie are currently building a private clinic specifically so that private patients can use the proton beam unit, even though there is no spare capacity for them. This raises the question of who will take precedence when the unit is running at full capacity: a private patient or an NHS patient.

It is clear that the passage of the Health and Social Care Act will increase the numbers of private patients treated by NHS hospitals: 58 trusts say they will increase their private patient income, and 12 say they will create a private patient unit. Annual reports and reports on trust websites show that these patients are more likely to benefit from NHS facilities than NHS patients will benefit from the income from these patients. Further, several FTs state that the reason for establishing a private patient unit is to benefit their consultants rather than NHS patients. NHS privatisation is controversial, and this report shows how the privatisation will occur from within.

About the Report

The report is a result of the analysis of the Annual Reports and Forward Plans of the 144 Foundation Trusts that existed in June 2012. The report lists the trusts' current private patient provision and plans to increase the numbers of private patients in the future. The web version of the report includes a selection of trust profiles, each one listing the private patient provision for that trust obtained from the Annual Report, Forward Plan and Board papers.

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