Private patients and the Efford Bill

The Efford Bill is a good start into reversing the damage that is the Health and Social Care Act (the Act that "senior Tories" who couldn't be bothered to listen to experts now describe as gobbledegook). However, as you would expect with such a short bill there are few details. In this post I will cover one issue: NHS trust providing private services.

Private Patients and Foundation Trusts

The 2006 NHS Act has a section to restrict the income from private patients that a Foundation Trust (FT) can generate s44:

(1) An authorisation may restrict the provision, for purposes other than those of the health service in England, of goods and services by an NHS foundation trust.
(2) The power must be exercised, in particular, with a view to securing that the proportion of the total income of an NHS foundation trust which was an NHS 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 the base financial year.
(3) "Base financial year" means the first financial year throughout which the body corporate was an NHS trust or, if it was an NHS trust throughout the financial year ending with 31st March 2003, that year.

This says that the income from private patients as a proportion of the total income of a Foundation Trust must not be higher than the proportion in the financial year 2002/03. If an FT generates a higher proportion it will be in breach of its "terms of authorisation" and this may result in regulatory action (most likely a look of stern disapproval from Monitor).

The section also implies that an NHS Trust which intends to apply to become a Foundation Trust must make sure that its private income generation was proportionally the same as it was in 2002/03 financial year. Since the then government said that every NHS Trust had to become a Foundation Trust this section was more influential on aspirant NHS Trusts than on authorised FTs (GOSH authorisation as an FT was delayed by several years because of its rampant private business). However, the rule was easily circumvented since the section involves income and not numbers of patients, and trusts came up with clever dodges like joint ventures (The Christie) or moving the private work to a charity (GOSH) so that the income to the NHS Trust was the profit of the joint venture company (or the surplus of the charity, donated to the trust) rather than the revenue for private patient treatment. Although the regulator, Monitor, took action against such dodges, the action was closer to a stern look of disapproval than to actual action that would reduce private patient activity.

Although every NHS Trust "had" to become a Foundation Trust, there was no rigid timetable and no sanctions against NHS trusts that failed to become an FT, and so, in practice, NHS Trusts with large incomes from private patients just generated more private business. There were lots of criticism of section 44, particularly in the case of patents. If a trust creates a new device, drug or treatment and decided to create a worldwide patent, the income from licencing under this patient (even if it does not involve UK patients) was still considered part of the private patient income. Furthermore, the omission of the numbers of private patients in the law meant that a trust could treat lots of private patients but charge them small amounts and still meet the s44 criteria.

Health and Social Care Act

The Health and Social Care Act (HSCA) repealed section 44 and replaced it with a more lax restriction. The Tories hoped that repealing this section would result in Foundation Trusts creating private businesses, but this has not happened, certainly not at the rate that the Tories hoped for.

Section 164 of the HSCA replaced the old s44 with this section:

(2A) 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 says that NHS income of a Foundation Trust (again, omitting NHS Trusts) must be more than the income from its non-NHS services. It is erroneously quoted as "49% private patients" for two reasons. First the non-NHS income can be more than 49%: it can be 50% less £1. (Does this matter? Yes it does. A small NHS trust will have an income of £200m so the 1% difference between 49% and 50% is £2m, and £2m is not a small amount of money.) The second reason this is not a "49% private patient income" rule is that the section does not mention private patients, it says "total income from the provision of goods and services for any other purposes". That is, any income other than income from Clinical Commissioning Groups (CCGs) or from NHS England. This "any other purposes" includes local authorities, charities and even car parking charges (paid by NHS patients). So a trust that has no private patients will have a non-NHS income under this section, potentially an income of many millions. Yet again, our law makers have made a bad law.

Neither s44 of the NHS Act, nor the new section created by s164 of the HSCA covered NHS Trusts. It is clear that about a third of NHS trusts will never become Foundation Trusts, which means that those third will know that the private patient income restriction does not apply to them in practice. Further, both sections have downsides, covering services other than private patients.

Efford Bill

The Efford Bill has two clauses that cover private patient income: clause 7 covers private patients in Foundation Trusts and clause 8 covers NHS Trusts. In effect, they say the same thing (and hence finally applies private patient income restrictions on NHS Trusts): The following is from clause 7:

(3) An NHS foundation trust shall ensure that its total income from the provision of goods and services for provision of services provided to individuals for or in connection with the prevention, diagnosis or treatment of illness otherwise than for the health services or for which charges are made by the trust is not greater than either—
(a) such percentage of its total income from the provision of goods and services in connection with the prevention, diagnosis or treatment of illness as the Secretary of State shall direct; or
(b) such higher percentage as shall be determined by the Secretary of State for an individual NHS foundation trust.

This says that there will be a private patient income cap, and it will either be a universal cap or it will be set on an individual trust basis. This does not say what that proportion will be, so a Tory Secretary of State can set the cap to 50% to get the same effect as the HSCA. Allowing the Secretary of State to set individual caps is a sop to the rampant privatisers in trusts like Royal Marsden or GOSH who have built up their private businesses to be significant proportions of the trusts' income.

The phrasing of the clauses "for which charges are made by the trust" implies private patients, however, it still covers income, not the actual services or numbers of private patients.

Two Tier NHS

The main reason for restricting private patients is to prevent the creation of a two tier NHS, where NHS patients in an NHS hospital will get second rate services compared to private patients. The Efford Bill clauses do not address this issue.

There are two basic principles that need to be met to prevent the creation of a two tier system:

1. The treatment of private patients do not adversely affect the treatment of NHS patients
2. Private services must not be subsidised by the trust from NHS income.

The first principle says that NHS patients should not see the quality of their treatment deteriorates when the trust treats private patients. "Quality" is a broad term, and it could cover things like private patients not having to wait their turn at an outpatients clinic, so the NHS patients have to wait longer, or the re-scheduling of NHS patients treatment because a private patient has chosen to be treated at that time. However, I think the best metric is waiting times, indeed, I think that waiting times are so important that this is effectively a subclause to principle 1:

1. a) A trust will not be allowed to treat private patients in a speciality where it is not meeting the 18 week referral to treatment target for NHS patients.

The 18 week referral to treatment target (RTT) is a guarantee to NHS patients. A common cause for patients to pay for private treatment is that they are waiting too long. A trust that wants to have private patients (and there are many reasons why they will want this, other than income) there is an incentive to have long waiting lists, so NHS patients have to suffer so that the trust can increase the numbers of private patients.

The second principle says that a trust's private income must be calculated in a business like way, and that there should be no overt or covert subsidies. An example of overt subsidies are diagnostics. If a private patient has a MRI scan that patient should be charged a commercial rate for the scan, they should not be charged the NHS tariff rate which is typically lower than commercial rates.

Covert subsidies are more nuanced. For example, every NHS trust treats emergency patients and so have intensive care units (ICU) able to treat the most ill of patients. Private hospitals typically do not have ICUs, or if they have a unit it is a low level unit. This means that if something untoward happens the private hospital calls 999 and the patient suddenly becomes an NHS patient. Private patients in an NHS hospital have the reassurance that the skills and equipment to handle emergency patients are on site, and indeed, this is often a marketing point for the trust's private patient unit. However an ICU is not cost free, the unit is paid by emergency tariffs and capital charges are paid from the trust's general income. The unit exists for every patient treated by the trust since potentially every patient may need it, and hence the payment for every patient will include a contribution to pay for the ICU. Similarly, private patients should contribute to the funding of the facility, if they don't then that is a covert subsidy.

Amending the Efford Bill

The Efford Bill should have sections to address the principles given above. On an annual basis, an NHS Trust or Foundation Trust must meet the two principles. In the case of NHS Trusts there should be an annual declaration from the trust board that the two principles have been met. In the case of a Foundation Trust the trust's Council of Governors should provide this declaration. In both cases, the declaration will typically come from the trust's auditors who will have a duty to inspect the trust's private patient business.

Meeting the RTT target is so important that on a quarterly basis achievement the RTT target should be evaluated and if the target is not met the trust should only be allowed to treat private patients in the failing speciality following quarter if the trust can give credible assurances that it will meet the target in that quarter.

There are two more changes that should be made to the Efford Bill as described in the next section.

Reasons for Private Income

The usual reason given by trusts for treating private patients is that it provides extra income for the trust (hence why principle 2, above, is important). However, the income from private patients is rarely large (not every trust has a thriving private patient business like GOSH). Using private patients to subsidise NHS treatments has several issues, not least because few private patients like to be treated like a cash cow to subsidise NHS treatments. If NHS tariff is too small to cover the cost of the treatment the solution is to increase tariff, not to subsidise NHS treatments by other activity.

To address this issue the Efford Bill should have a section that says that NHS patients must be taxpayers funded. At the beginning of the bill is a section that says that NHS treatment should be free at the point of use (a version of this section has appeared in NHS Acts since the 1946 Act):

(4) The services provided as part of the health service in England must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed.

The mention of charges here refers to the co-pay that exists in the NHS: dental charges, prescription charges, charges for devices like wigs etc. While such charges are abhorrent it is unlikely that they will be removed. There should be an additional clause that says that notwithstanding the income from the charges mentioned in section 1(4) NHS treatments should be funded wholly by the taxpayer. This will remove the excuse that many trust's give that they have to have a private business to subsidise NHS patients. It also puts an onus on Monitor and NHS England, who set the NHS tariff, to ensure that tariff covers the costs of treatment.

The main reason for private patients is HR. Consultants are currently able to do private work even though they are contracted to an NHS organisation. Private patient units in NHS hospitals mean that the consultants do not have to go offsite to run their private business. In all other sectors of the economy this would be called moonlighting and would be disallowed. So to remove this incentive there is a need to change the consultant contract so that they can only work for the NHS organisation that they are contracted to. I doubt if such a change will ever happen, so an alternative would be to say that all income from private patients treated in an NHS organisation should be treated as income of the trust. This will ensure that the consultant is still an NHS consultant regardless of whether the patient is private or NHS. The intention of this rule will be to persuade consultants to treat their private patients in a private hospital, and hence prevent the creation of a two tier NHS.