Labour's Plans for Private Patients

Labour has said relatively little about what they plan to do about private patients in NHS hospitals should they win the next election. HSJ reports:

"The repeal bill would also cut the cap on the amount foundation trusts can earn on private work from 49 per cent of their total turnover to 'single figures', [Burnham] said"

This statement is factually wrong repeating misinformation that has emanated since the Health and Social Care Act was passed. The inaccurate figures are political and are used to spur the faithful. But worse, the promise simply says that Burnham will preserve the status quo.

What the Act Really Says

First, the misinformation. Section 164(1) of the Health and Social Care Act (HSCA) 2012 says:

"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."

The "health service in England" is the government's new name for the English NHS. (You can see why Andy Burnham is so keen on "restoring the N in the NHS".) The issue is the other statement "services for any other purposes" because this does not specifically mention private patients.

This section says quite clearly that the NHS income of an FT must be greater than its non-NHS income. So the "49%" figure often quoted is too low, the amount of non-NHS income can be 50% minus £1. Secondly, nowhere does it mention private patients or "private work", it says "for any other purposes". The HSCA repeals section 44 of the NHS Act 2006 which specifically restricted "private charges" which were defined as:

"charges imposed in respect of goods and services provided to patients other than patients being provided with goods and services for the purposes of the health service."

The problem with the less restrictive definition in the 2012 Act is that it widens the income that are included in the so-called "49%", so parking charges, charges for public health work that the trust does (public health is now a local authority, not an NHS, responsibility), income from things like rent from nurses in hospital residential blocks, or services provided for the third sector (like, say, palliative care consultants seconded to a hospice) are all included.

The 2006 Act definition also had its problems. People often took it to mean private patient charges, but that is  not what the Act says. Section 44 declarations included things like income from patents the trust holds or rent on buildings they own but don't have an immediate need for. This is not the spirit of the law, which was to restrict private patients, and one could argue that rent on surplus property is a beneficial thing.

Further, some trusts used this ambiguity in the definition of "private charges" to their advantage, for example, The Christie rather than listing their private patient income in their Section 44 declaration they listed the profit they made from private patients (or more accurately, their share of the profit since their private patients were treated by a joint venture with HCA). Again, this does not follow the spirit of the law.

The Christie listing the profit from treating private patients indicates that the patients bring in more money than the hospital spends on them. Most trusts give the private patient income in their Section 44 declaration and no indication of the expenditure on those patients, so there is no indication whether the hospital makes a profit on private patients. Indeed, the hospital could easily make a loss because many hospitals have private patient units not to generate income, but because their consultants demand the ability to have their private practice in the hospital and trusts grant this privilege as a workforce concession.

Single Figures

The following table lists the trusts with the largest private patient income (2011/12) and the proportion of total income that came from private patients.

Foundation Trust	Private Patient Income (£000)	% income
The Royal Marsden NHS Foundation Trust	51,144	22%
Royal Brompton & Harefield NHS Foundation Trust	29,117	14.4%
Great Ormond Street Hospital for Children NHS Foundation Trust	28,157	9.8%
Guys and St Thomas NHS Foundation Trust	23,081	3%
Royal Free London NHS Foundation Trust	19,224	6.4%
Moorfields Eye Hospital NHS Foundation Trust	18,682	14.5%
University College London Hospitals NHS Foundation Trust	18,006	2.6%
Kings College Hospital NHS Foundation Trust	16,882	2.6%
Chelsea and Westminster Hospital NHS Foundation Trust	11,264	3.7%
The Christie NHS Foundation Trust	10,708	9.1%

In fact, only three trusts generate more than "single figures" in private patient income: Royal Marsden, Royal Brompton & Harefield and Moorfields. So every other trust will be unaffected by Burnham's "single figures" approach to private patient income. That is, for all but three trusts he intends on preserving the status quo.

According to Monitor, in financial year 2012/13 the aggregated figure for private patient income for all Foundation Trusts was £358m out of a total income of £38.9bn (or £34.7bn if you include only patient activity). This means that on average FTs had private patient income of 1%. So Burnham's "single figures" seems to indicate that Foundation Trusts are currently well below his limit and hence most FTs could significantly increase the number of private patients.

If Burnham imposes a "single figures" restriction that raises the question of what the three trusts mentioned above will do. Most likely they will fudge the issue (like The Christie and GOSH have done) by restructuring and treating their private patient units as separate businesses and then listing the profit of these separate companies as their private patient income. The profit will be considerably less than the income, and so they could easily meet the "single figures" criteria.

As I said, Burnham intends to preserve the status quo.

What is the Question?

The problem with Burnham's statement is that he's not telling us what he is trying to solve. There have been a lot of ignorant noise about "half of patients in NHS hospitals can be private patients" which ignores completely that there could never be enough private patients to fill half of all English NHS hospitals. Burnham was simply responding to the ignorant noise, which is no help at all. So let's try to determine the problem he's trying to solve.

Privatisation of Services in NHS Hospitals

This is a legitimate issue. NHS hospitals are crap at providing private healthcare. Private healthcare is essentially performing elective treatment in a plush five star setting. The NHS does not do plush five star settings. Further, the NHS does the difficult healthcare - emergency care - very well, and it usually prioritises the difficult cases over the easy cases because its ethos is to give care according to clinical need. Combined, this means that the NHS really is not geared up to deliver healthcare for those with money to throw away. Consequently, many NHS hospitals hand over their private patient units (PPU) to private healthcare companies. (They are often described as "joint ventures" but in actuality they are just handing the service to a private company.) If an NHS hospital wants its private patient unit to be run well and generate a profit, it is usually a good idea to hand the PPU over to a private company so that the NHS hospital can do what it does well: treating NHS patients.

The problem is that this is privatising a service: the service is being run by a non-NHS provider, and since PPUs are often within an NHS hospital (the best ones are - if your treatment goes wrong you'll want to be a trolley ride to ITU) this means private providers are within an NHS hospital.

Private Health Services

Some people are ideologically opposed to anyone paying for healthcare. The problem with this approach is that about 20% of healthcare spend in this country is on "private healthcare" and has been for a couple of decades, so taking this ideological approach is a bit futile. (To be fair, that 20% is mostly services, and over-the-counter medicines, from pharmacies, but it also includes opticians who are almost completely private, and dentists where a large proportion of their care is private.)

We have a mixed market economy and getting the right balance between the private and public sector is important. Currently there is no need for people to pay for private care, the NHS provides care that is needed clinically, and does so to a high quality. People who pay for private care are spending money unnecessarily. Should we stop people from wasting their money like this, if it does them no harm? It really seems to be at the more dimwitted end of class warfare to deny people the opportunity to waste their money on things that neither give themselves an advantage nor harms anyone else.

Private Patients Using NHS Facilities

The Government's argument for NHS hospitals taking on private patients is that they are considered another income stream. The government claims (often excessively) that private patients are subsidising NHS treatments. In fact, there is more evidence that the opposite is the case. NHS hospitals can, and do afford expensive equipment: there are accepted, and cost effective ways to fund such equipment and if there is a clinical need, the NHS will provide the service (for example, MRI machines were introduced into NHS hospitals years before they appeared in private hospitals).

The two most expensive medical machines that will be installed in this country are the two Proton Beam Therapy Units being installed at UCL Hospital and The Christie. These machines cost £125m each and a Department of Health study showed that the private sector had no interest whatsoever in providing these services. There was a need for these facilities and a cost effective solution (Public Dividend Capital, essentially a government capital investment on which the trusts pay an annual 3% "dividend").

The problem when a private patient is treated in an NHS hospital is that they will be treated with the expensive equipment that the NHS paid for. The fee from those private patients are relatively tiny compared to the cost of the equipment and are insignificant contributions to funding them. However, such high cost pieces of equipment are usually scarce resources, so a private patient will take the place that a NHS patient could have used. Further, since private patients are healthcare consumers they will demand (quite rightly, they are paying) more time than an NHS patient, and will usually be pushed to the front of the queue. This is the two tier NHS.

It is frankly throwing in the towel when it comes to the NHS being a public service, to argue that the only way that a trust can get capital investment is by accepting that a private company builds a private patient unit. Further, it is accepting that the NHS is, and should be, a second rate service.

Two Tier NHS

The most important issue is that private patient units could lead to a two tier NHS: one version for those who can pay, another version for those who don't. This goes against the founding principle of the NHS which is that care is according to clinical need and not ability to pay. The command paper (Cnd 6761) that introduced the NHS, started with this paragraph:

The Bill provides for the establishment of a comprehensive health service in England and Wales. A further Bill to provide for Scotland will be introduced later. All the service, or any part of it, is to be available to everyone in England and Wales. The Bill imposes no limitation on availability – eg,. limitations on financial means, age, sex, employment or vocation, area of residence or insurance qualification.

Since NHS care is free at the point of delivery, it means that when people pay for care in an NHS hospital, they are paying for something more than the NHS patient will get (otherwise, why would they pay?). Often private patients think they will get care quicker than NHS patients (and jump the queue), and sometimes they think they will get more choice (for example women who demand Caesarian Sections for non-medical reasons). Usually all that private patients get is a single room and restaurant quality food; in other words they are paying for five star hotel services.

Illness is a great leveller: we are all vulnerable and dependent when we are ill. How can we justify that some people are able to get better care just because they are wealthy? Do they have posh illnesses?

What is the Answer?

Burnham's answer is to bring private patient incomes "down to single figures" but, as mentioned above, over all, private patient income is just 1% with just three trusts having more than "single figures" private patient income. So Burnham's "solution" is to maintain the status quo. There are other solutions, some more effective than others.

Leave it up to FT Governors

This is the "cop-out" solution, just as the current Coalition government hides behind "localism" as a way of shirking its responsibilities, leaving a decision about private patient income to governors is simply passing the buck. Let's be clear about this, governors are voluntary. They are not paid. Although they are supposed to represent the community, memberships of Foundation Trusts are a fraction of the community the FT serves and only a fraction of the membership actually votes for governors. They are also low profile and have little interaction with the community. (Ask yourself when was the last time you saw an FT governor quoted in a local newspaper, and compare that to local councillors.)

The suggestion is that an FT Board, with high paid and experienced managers, will present a proposal to treat private patients to the governors, a council of inexperienced, unpaid volunteers. This is not a fair contest. At the moment, the purpose of governors is to ensure good governance, that is, to ensure that decisions made by the board were carried out in a fully informed and exemplary way. The governors are not (with a few exceptions*) supposed to challenge the actual decision, only how the decision was made. this is an important point because governors are about governance, they do not have any management role and do not run the hospital.

There is another issue with this suggestion: it is essentially one-way. While it may be possible for a Council of Governors to change their constitution to remove existing private patients, it is very unlikely that this will ever happen since management will argue that they have invested in private patient facilities and governors are making a decision that could have a financial effect on the trust. Such an action will also be a managerial decision and governors do not, and should not, be involved in the management of the trust. For this reason, giving governors the responsibility of putting their policy on private patients in their constitution is a one-way process towards the trust treat private patients.

A suggestion of allowing governors to decide is passing the buck to inexperienced volunteers, and it is a de facto approval that all trusts should always have private patients. This is sanctioning a two tier NHS.

[* The main exception to this statement is that governors can define "significant transactions" which will require a majority vote of governors. Such transactions could be a merger with another trust, or an expenditure, or seeking a loan, over a certain limit. The main point is that governors determine what these transactions are.]

Ban all Private Patients in NHS Hospitals

Andy Burnham could simply say that NHS hospitals should only treat NHS patients. There are several issues to this. The main one is that NHS hospitals have often invested money into private patient units and switching from higher income generating private patients to tariff NHS patients would make it more difficult for those trusts to realise their investment. While it would be a huge publicity coup to show NHS patients using plush private patient units, to enable such a policy the government would have to provide some kind of subsidy. This will never happen.

The other main issue is the effect on consultants. Consultants are used to being allowed to have a private practice, and some trusts have a private patient unit as a way of ensuring that their consultants are on site. This is good employee relations and it ensures that NHS patients can be seen quickly even when a consultant is treating a private patient. If a private patient unit was closed in an NHS hospital consultants would run their private practices elsewhere, with the possibility of making them less accessible to the NHS hospital. While the NHS consultant contract continues to allow consultants to moonlight, this problem will persist.

Change Consultant Contracts

We have had 65 years of the NHS allowing its most highly trained employees to moonlight for their competition. And it is their competition because these days private hospitals are encouraged to do NHS work and the government are overseeing rationing that is pushing patients towards private hospitals and self-pay. In most industries, workers are employed on exclusive contracts, with dismissal (and litigation) if they work for the competition. Even zero-hour contracts have exclusivity rules. NHS consultants have a very outdated privilege that no other employee enjoys.

While it would be too difficult to change all consultants' contracts to make them work exclusively for the NHS, it could be done for new consultants. Consultants could be given the choice: the opportunity to work with demanding caseloads, inspired teams, to do research and help shape the country's health service; or to do private work. The NHS will attract the best doctors, those with a vocation.

Inversely Link Private Patient Activity to NHS Waiting Times

Banning private patients, or changing consultant contracts are controversial solutions, a more innovative solution is to link private patient activity to NHS waiting times.

The current 18 week Referral To Treatment waiting time target (against which all trusts are performance managed) is a political one. In 1997 the average waiting time for elective treatment was 18 months, so the incoming Labour government pledged to lower that to 18 weeks. There was a lot of politics in changing months to weeks, but there is nothing special about 18 weeks (four and half months). In Denmark, for example, the waiting time target is 4 weeks. The RTT target should be inversely related to the relative number of private patients with the 18 week RTT target applying only to hospitals with no private patients. If a trust wishes to raise the number of private patients its RTT target will be reduced.

It is intolerable that an NHS hospital can make an NHS patient wait while allowing private patients to pay to jump the queue: if there is capacity to treat private patients then NHS patients should not wait. If private patients are such a gold mine (and I am not convinced that private patient income actually covers the cost of the care they receive) then an FT would have an incentive to reduce NHS waiting times to give them the privilege of treating private patients (or conversely, if their waiting times rises, a trust will be restricted in how many private patients they can treat and this will provide the extra capacity to treat more NHS patients and an incentive to reduce waiting times).

Concluding Remarks

The problem that Andy Burnham should solve is move towards a two tier system, where patients can jump the queue, or receive better care by paying for it. It is the numbers of private patients, not the size of private income that is the problem.

The ultimate solution to this problem is to ban all private patients in NHS hospitals, but this may be too much to achieve. At the very least an incoming Labour government should change consultant contracts so that newly appointed consultants will have to work exclusively for the NHS. Over a long period of time this will reduce the numbers of private patients as demand from consultants for private patients will fall. In the meantime, a new Labour government could use private patients as a lever to improve NHS care by linking the number of private patients the trust can treat to the Referral To Treatment target: if the trust treats more private patients, its RTT target is reduced.