Select Committee on Health Minutes of Evidence

Memorandum by The Department of Health



  The Government welcomes the opportunity of this Inquiry to set out its policy on the use of the private sector within the NHS. There is a long history of private sector involvement in the NHS throughout its fifty year history, but the use of the private sector has often been ad hoc. This memorandum describes the principles which in the Government's view should provide a coherent, strategic guide to the use of the private (and voluntary) sector within the NHS. The memorandum discusses in detail the progress of the Private Finance Initiative and the criticisms most often made of it, outlines work in progress on the new Public-Private Partnership NHS Lift, reviews the impact of the Concordat with the Private and Voluntary Health Care Provider Sector, sets out work on the development of Diagnostic and Treatment Centres and highlights the new Care Agreement between the Government, NHS, local government and independent housing, health and social care sectors. There are a number of other areas where the Government is exploring the potential for public private partnerships as set out in the NHS Plan. These include modernisation of pathology services, provision of radiology equipment, decontamination of hospital equipment, IT and administrative services.


  1.  The NHS has always made use of the private and voluntary sector where that use has made sense. For example, the voluntary sector provides a large range of services for mentally ill people and those suffering from learning disabilities. Community pharmacy services are provided exclusively by private sector organisations or individuals.

  2.  The NHS now has considerable experience of, and expertise in, working with the private sector on capital ventures, ranging from building and maintaining large hospitals to relatively small schemes.

  3.  NHS partnerships with the private sector are not new. However, the NHS remains overwhelmingly a public sector provider of clinical services to the general public. Private and voluntary sector experience and expertise has contributed to the development of services over the years, without undermining the fundamental nature of the NHS. This will continue to be the case.

  4.  In seeking to involve the private and voluntary sector in the implementation of the NHS Plan the Government has no intention of replacing or privatising the NHS. What the Government does wish to do is to continue to use the skills and experience of the private sector, where they are relevant, to drive forward its policies; to use those skills and experience in a more systematic way than has previously been the case; and to recognise the role they can play in the local health economy. Crucially, shortages of capacity in the NHS call for a more systematic approach to utilising private sector finance, capacity and skills to maximise the NHS care available to NHS patients.

  5.  The Secretary of State for Health made the position clear in his speech to the NHS Confederation in July this year:

    "Some have said our proposals are too opaque. I say we have taken a hard look at where the private sector can help. First, using spare capacity in the private sector, such as in private hospitals, to perform operations on NHS patients. Second, getting private sector management to run some of the new stand-alone surgery centres our Manifesto commits us to building and which will specialise in precisely those procedures where private hospitals have some expertise. Third, extending PFI beyond the hospital sector where it has already helped deliver the biggest hospital building programme the NHS has ever seen into new PPPs in primary care, social services and the provision of equipment. And fourth using private sector management expertise such as in the provision of IT systems.

    "It is around these four activities that we will forge a new relationship between the NHS and the private sector. This is not privatisation—the taking of services out of the NHS. It is bringing into the NHS private sector help in those areas where it has a track record and where there are benefits for patients. The private sector will help but the NHS is—and will remain—Britain's dominant health care provider."

  6.  These points were reiterated by Ministers in a number of other contexts.

  7.  From this it follows that the Government will use the private and voluntary sector where there is a track record of achievement or where there are clear potential gains from spreading approaches and principles which have worked in one area to another.

  8.  There are four essential tests which need to be applied to any proposed partnerships with the private sector:

    —  is it in the interests of patients?;

    —  is it consistent with the local (and national) strategies for the NHS and its development?;

    —  is it value for money?; and

    —  is it consistent with public sector values, including that treatment is determined by clinical need and that staff are treated fairly?


  9.  This needs to be the main factor in consideration of any partnership arrangements involving service provision. Put simply, the issue is whether the intended partnership will enable patients to be provided with a more convenient or faster service of equivalent or higher quality than would otherwise have been the case. Partnerships involving support services which give better value for money in terms of cost and/or quality are also indirectly in patients' interests.


  10.  Here the question is whether the partnership will help to secure the longer term development of the NHS locally in line with the national strategy for modernising the NHS (for example a primary care premises development undertaken through NHS Lift) and/or whether it can be properly integrated with other services so that seamless care can be provided. NHS bodies considering partnerships also have to take account of the staffing implications of the proposal, both over the short and long term in respect of terms and conditions of employment and recruitment and retention. There is little point in for example a Trust entering into a partnership arrangement if this will result in increased pressure on what may already be a tight labour market for staff with particular skills. These points are discussed in more detail below.


  11.  The NHS clearly needs to be able to justify and demonstrate that any partnership arrangements, including PFI schemes, will provide better value for money compared with existing arrangements or other practicable alternatives. There can be several supporting factors to consider under the general heading of value for money. There needs to be a clear process for establishing value for money, most usually through a competitive process. Transaction costs need to be reasonable and matched by equivalent efficiency or other clear gains by way of service improvements. Contracts need to be clear and incorporate outcome measures and quality standards and the NHS needs to have sufficient knowledge and information about its own provision and the service being provided to enable it to make appropriate judgements about the proposed arrangements, and to monitor any resulting contract. It is also important that the right balance is struck between, on the one hand, giving a private provider sufficient time to demonstrate better performance through changes in working practices and culture, and, on the other, avoiding creating long-term monopolies for service provision.


  12.  Partnerships with the private sector can only be undertaken where the ethos and values which underpin the NHS can be transferred. Principal among these values are that treatment will be determined by clinical need, not what is most advantageous financially to the private sector partner; that the rights of patients must be fully protected; and that staff are treated fairly.

  13.  The Government is aware that there are a number of concerns as well as criticism of private sector involvement in the provision of NHS services, whether that involvement concerns providing services, or capital through PFI arrangements. Such concerns and criticism usually rely on the following arguments:

    —  the NHS can [and does] provide all the services necessary to the same or a higher standard;

    —  money taken as profit would be spent on patient care if the NHS was providing the service;

    —  the arrangements will be to the detriment of the staff involved and possibly also to the-long term interest of NHS human resources policies;

    —  treating NHS patients in the private sector might add to waiting lists as the same consultants will generally be operating in the NHS and the private sector. More time in the private sector will mean less time in the NHS.

  14.  "The NHS can [and does] provide all the services necessary to the same or higher standard". This view fails to recognise a number of points:

    —  The NHS has the ability to provide services and activities but it does not have sole expertise. The private sector has a proven track record of, for example, delivering large capital schemes to budget and maintaining them thereafter, providing elective surgery facilities, and managing financial and IT support services. In some cases the experience may be greater or more focussed than that of the NHS. The areas identified for public private partnerships by the Secretary of State in his NHS Confederation speech all draw on such expertise. It would not be sensible to ignore this where there could be benefits to the NHS and patients by drawing on it.

    —  The private sector can provide additional capacity to that which is available through direct NHS provision. It makes little sense for patients to wait for treatment in an NHS hospital if it can be provided through the NHS in a private or voluntary hospital at reasonable cost more quickly than would otherwise have been the case. This is not a substitute to the development of NHS-provided services. It is complementary to that.

    —  Some services are already being provided for the NHS by private and voluntary providers. It would not make sense to switch to direct provision of services for dogmatic reasons where they are already being provided to a suitable standard through appropriate contracts.

    —  Any contract must provide for appropriate quality standards. This is clearly of critical importance for patients. It was a point reiterated in the Concordat signed with private and voluntary sector providers last autumn. Contracts between the NHS and other providers must reflect this. Services provided by the independent sector on behalf of the NHS will also be subject to inspection by the Commission for Health Improvement, just as any other NHS service would be. These arrangements will also be reinforced through the National Care Standards Commission and the set of standards which will be applied to private and voluntary sector providers across all their activities.

  15.  "Money taken as profit would be spent on patient care if the NHS was providing the service". This assumes that in any given circumstance the NHS would provide the service at the same or greater level of efficiency and to the same or greater level of quality. This is a point which needs to be tested in any longer term partnership. It is one of the fundamental tests applied to all PFI schemes where a PFI procurement needs to demonstrate that it is superior to public capital provision. In any case the idea that the NHS and profits are incompatible is simply not true. The NHS has for example always relied on the private sector to build hospitals. Nearly all medicines and devices are supplied by private, profit-making companies. NHS prescriptions are largely dispensed by privately owned pharmacies, large and small, but this is not, by itself, a reason for assuming that the NHS could take over this function and run it more effectively.

  16.  "The arrangements will be to the detriment of the staff involved and possibly also to the long-term interest of NHS human resources policies". It is certainly not always true that private sector terms and conditions are necessarily worse than those applying within the NHS. That said, the Government recognises that there are several potentially contentious points here including:

    —  Whether the terms and conditions of employment and employment practices will be comparable to staff in the private sector.

    —  The private sector and the NHS may be recruiting from the same pool of skilled staff and that increasing capacity in the private sector, even if it is to provide NHS services, will result in pressure on that pool which will be to the disadvantage of the service and patients overall. It may also be to the particular disadvantage of the NHS if the private sector can offer preferential employment arrangements (the "poaching" argument).

    —  Different employment arrangements may be a barrier to staff moving between jobs for training or experience.

  17.  The Government has taken these points into account in formulating its approach to the private sector involvement in delivering of NHS services. It believes that there are three broad circumstances to consider:

    —  Partnerships involving use of existing additional capacity.

    —  Establishment of "new" capacity/services for the NHS.

    —  Partnerships involving mainly existing services and existing staff.

  18.  Partnerships involving use of existing additional capacity. An example of this arrangement is elective care purchased under the Concordat. In this case the service is already being provided independently of the NHS and no significant staffing issues arise. Health service bodies however need to take care that in making use of the additional capacity the provider will not draw unacceptably on staff, particularly clinicians, who may be working both for the NHS and in the private sector.

  19.  Establishment of a new service or additional capacity. The issue here is one of degree rather than dogmatic principle. A new service may be established which has relatively little impact on overall NHS staff and therefore does not raise strategic human resource questions. No staff transfers are involved, or those that do are small scale and involve staff who have a real choice over transferring or not. The NHS needs to be clear that staff employment arrangements will be consistent with the public service ethos outlined above but there is no overriding reason for direct employment. Examples here would be satellite renal units which are operated by the private sector under contract from the NHS, or local intermediate care facilities.

  20.  However, in some circumstances a new service may be a very significant component of the local NHS and have significant impact on overall NHS staffing and raise strategic human resource questions relating to recruitment training and retention of key skills within the service. It may also involve substantial numbers of existing staff, although new staff may also be recruited. In these circumstances it is in the interests of the NHS that staff are employed under NHS terms and conditions, although the private sector partner may be responsible for the management of the service. Relevant considerations are whether staff may be rotating between units; training, career and educational development, which may be more easily received through continuous NHS employment; and avoiding conflicts which may arise over recruitment and retention of key specialised staff. NHS employment of staff may also help to avoid the creation of a longer term monopoly by reducing entry and exit barriers to potential managers of the service.

  21.  Partnerships involving mainly existing services and existing staff. Attention has focussed on two groups of staff, clinical staff and facilities management staff under PFI arrangements.

Clinical Staff

  22.  The Government considers that clinical services are likely to continue mostly to be provided by NHS trusts so the question of transfer of existing clinical staff will rarely arise. Where it may, the same considerations apply as set out above in relation to the establishment of a new service or additional capacity. The Government is also committed to ensuring that, if transfers are involved, staff are properly consulted and, wherever possible, have a choice of whether they transfer or not and that existing terms and conditions of employment are fully protected under the TUPE, and that pension rights are broadly comparable with accrued rights being protected. All these considerations and points also apply to clinical support staff. Here the Government has already indicated that it intends to explore private sector involvement in the modernisation of pathology.

Facilities Management Staff Under PFI Arrangements

  23.  Under existing PFI schemes there are two categories of support staff, "hard" and "soft" facility management staff. The first group is involved in maintaining the fabric of a building and grounds over the lifetime of a contract (for example plumbers, carpenters, electrical engineers, grounds maintenance, etc). The second refers to ancillary staff such as cleaners, porters, catering and domestic staff, delivering what are sometimes referred to as "hotel services". "Hard" facilities management staff must transfer to the private sector company responsible for managing the facility as upkeep of the building is a key part of maintaining the asset for which the contractor is responsible. "Soft" facility management staff are no longer automatically required to transfer as well: sometimes they are included within PFI schemes, sometimes not. The decision whether or not to transfer support staff has been made on value for money grounds.

  24.  However, should staff have to transfer under a PFI deal, the Government has introduced a series of measures to protect their rights. Ministers will not approve a PFI scheme unless the terms and conditions of service of transferred staff are protected by the Transfer of Undertakings (Protection Employment) Regulations 1981 (TUPE). Further, Ministers will not approve a PFI scheme unless NHS staff are offered broadly comparable pension terms by the new employer at primary and subsequent contracting rounds, and the new pension scheme allows staff to move their accrued credits into that scheme on a fully protected basis.

  25.  In addition to these existing measures, the Government's Manifesto at this election in 2001 contained a new commitment that:

    "PFI should not be delivered at the expense of the pay and conditions of the staff employed in these schemes. We will seek ways in which, within the framework of PFI management, support staff could remain part of the NHS team".

To honour this commitment we are exploring how it could operate in 3 pilot schemes at Stoke Mandeville, Roehampton and Havering. The pilots are for soft facility management staff to retain all their NHS employment terms, but be managed by the private sector.

  26.  Treating patients in the private sector might add to waiting lists. The Concordat makes it quite clear that the NHS should access spare capacity. An example would be contracting with a private hospital to use spare slots in an operating list, when the theatre would be staffed in any case. See para 18 above.


  27.  The rationale for using independent providers is that it can be, in certain circumstances, a good use of NHS resources which delivers a good deal for patients. The Government therefore does believe the private and voluntary sector has a role to play in helping the NHS deliver the challenging policy agenda set out in the NHS Plan. That said, as far as the delivery of services is concerned the Government expects directly provided NHS services to remain the main provider to the vast majority of NHS patients. Where the private sector can provide skills and expertise which will deliver benefits to patients the Government will encourage the NHS to use it, but not at the expense of de-skilling the NHS or worsening the conditions of NHS employees. Where new approaches to using the private or voluntary sector are concerned, it will evaluate the approach before it is spread more widely. The extent of the evaluation will be determined by the degree to which there is direct and comparable experience on which to draw in other sectors of the NHS or elsewhere in the public sector.


  28.  Before this Government came to power no PFI hospital deals were signed. The Government committed itself in its 1997 manifesto to partnership with the private sector in order to overcome problems with the PFI and develop new forms of public/private partnership that worked better and protected the interests of the NHS. This commitment to PFI and Public Private Partnerships was reconfirmed in the Government's 2001 manifesto.

  29.  The key objective of a PFI scheme is to put in place the infrastructure necessary to ensure the delivery of high quality public services in cases where this is value for money for the NHS and the taxpayer. The essence of PFI is that the public sector body defines its needs in terms of "outputs", ie the nature and level of the service required, and invites private sector bidders to present their solutions to meet these service needs. This allows the private sector to make the fullest possible use of its experience and skills in order to bring innovative solutions to the needs of the health service. It is important to bear in mind one simple fact about PFI—under it, PFI hospitals are NHS hospitals, treating NHS patients according to NHS principles. It is simply a new means of procuring assets and services.

Delivering Better Performance

  30.  The structure of PFI deals ensures a clearer focus on the respective responsibilities and strengths of both the public and private sector. In health this means the public sector delivering high quality clinical services leaving private sector to bring in innovation, management skills and financing to manage the infrastructure.

  31.  The structural benefits of PFI contracts are:

    (i)  PFI transfers the risk of time- and cost-overruns to the private sector, who are only paid once the facility is operating to the required standard. Publicly funded projects were often subject to delays and cost increases, and required extra capital to repair defects (Guy's Hospital Phase 3 cost rose by over 300% and suffered a 3 year delay; St Mary's Isle of Wight is costing the NHS £20m to put right defects);

    (ii)  PFI payments are fixed in real terms over the life of the contract, so they can be stringently assessed for affordability and value for money, and make planning easier for Trusts and commissioners;

    (iii)  Under PFI the annual payments to the private sector partner are linked to performance and quality standards which is not possible under the conventional public capital funding route, thereby delivering value for money to the NHS and ultimately the taxpayer. The private sector is therefore committed to providing well-maintained hospital premises over the life of the contracts.

  32.  One of the key criteria outlined for using the private sector in para 29 above is the value for money test. Schemes cannot proceed unless it can be demonstrated that they are affordable and value for money at every stage. The PFI is only used in cases where a final appraisal in a Full Business Case (FBC) demonstrates that the PFI option is affordable to the NHS, meets NHS service needs, and offers value for money when compared to the publicly funded alternative, called the Public Sector Comparator (PSC). The PSC should represent the best estimate of the cost to the public sector of meeting the output specification on which the PFI option is based.

  33.  The value for money is assessed through applying Discounted Cash Flow (DCF) analysis to assess the relative economic costs of the PSC and PFI investment options to the public sector as a whole. It is a means of expressing within a single criterion (Net Present Costs) the total cost implications of developments when summed over a given appraisal period (60 years for a hospital building) and discounted to reflect public sector time preference. By applying a public sector discount rate (currently 6 per cent and set by HMT) to anticipated future cash flows, the "present cost" of investment can be assessed and compared with alternative uses of public money. Using this technique the full economic costs of NHS investments can be assessed and aggregated to reflect the total expected property, capital and revenue cost of each investment option.


  34.  The Government has always been open about the fact that savings on health projects to date have been lower compared to other sectors, but there are still real savings which can be ploughed back into frontline patient services. The nature and scope of services also vary: prisons for example, are quite different from hospitals.

  35.  The value for money test under PFI is a genuine test. It so happens that the current model of PFI has proved itself the better value for money option for delivering the large acute hospital projects as well as a growing number of medium and smaller scale community and mental health schemes. However, despite this success PFI projects which have no prospect of delivering value for money solutions have been halted. Such schemes are reviewed by the Regional Offices or considered for funding from public capital budgets and other sources. Although nationally contracts have been signed on 23 major PFI schemes which are now either open or under construction, a further four (Rochdale, Berks and Battle, Sheffield (Stonegrove), Guy's and St Thomas') failed the value for money test under the PFI and are now being built using public capital and other sources.


Major Schemes

  36.  64 major PFI hospital development schemes have been approved since May 1997 in England. Of these:

    —  8 are now completed and operational. Cumberland Infirmary in Carlisle, took its first patients in April 2000; Dartford & Gravesham and South Buckinghamshire in September and October respectively. Greenwich became operational in March 2001, Calderdale and North Durham in May. Norfolk and Norwich takes its first patients in October 2001, whilst South Manchester opened in July this year.

    —  a further 15 have reached financial close and are under construction: five are due to open in 2002; 8 in 2003, one in 2004 and UCLH will open in two phases, 2005 and 2008.

The first major non-acute scheme reached financial close in March 2000; this was the £47 million mental health scheme at Leeds Community and Mental Health Teaching NHS Trust.

Other Schemes

  37.  PFI is also successfully delivering a wide range of medium sized community and mental health facilities, as well as smaller scale specialist projects such as heat and power plants, staff residences, and information technology systems. Over 50 schemes between £1 - £25 million have now reached financial close or are further advanced. These schemes in total are worth over £200 million.

  38.  In the mental health sector considerable progress has now been made, although progress was slow at first. Schemes at Black Country (£6 million), Lancaster (£6.5 million), Oxleas (Kent) (£20.3 million), Sussex Weald and Downs NHS Trust (Chichester) (£17 million) and North Staffordshire Combined Healthcare NHS Trust (£19 million) all reached financial close in 1998 and 1999. Oxleas and Sussex Weald and Downs are now operational. North Birmingham Mental Health NHS Trust (£18 million), Newham Community Health NHS Trust (£12 million) and Cornwall Healthcare NHS Trust (Bodmin Hospital, £10 million) reached financial close in August, September and October 2000 respectively. Essex & Herts Community Hospital (£10.4 million) reached financial close in May 2001. Most will become operational in 2001-02. Several others are still proceeding towards Full Business Case approval and financial close.

  39.  The smaller schemes also include community hospitals, several of which are now open including a £3.7 million scheme at Dawlish in Devon which opened in July 2000 and a £3 million community hospital and primary care centre at the Friary Centre near Richmond, Yorkshire, which has been open for a few months. There are also a number of joint schemes between health and social services, including the £4 million health centre at Sedgley, West Midlands which will open next year.


(i)  Bed numbers

  40.  There have been complaints that PFI schemes result in fewer beds for patients. The number of beds at any new hospital is determined by clinicians and NHS managers before a decision is taken on whether it should be built using public capital or under the PFI. Service planning for all earlier NHS PFI schemes which are now being built or are operational, such as Carlisle, was conducted several years ago and before the National Beds Inquiry (NBI), set up by this Government in 1998 because of concerns that reductions in hospital beds had gone too far. Carlisle therefore used the same indicators and factors which have driven decreases in bed numbers at public capital funded schemes over the last 30-40 years—long before PFI came on the scene.

  41.  In the light of the NBI the Government reviewed all schemes over £10 million nearing approval stage or further advanced (under construction or completed)—both PFI and publicly funded—to examine the balance between in-patient general and acute beds and the planned provision of intermediate care services. This review confirmed an overall loss of general and acute beds but found that this has been more than compensated for by the planned increase in intermediate care provisions in line with the Department of Health's winter planning guidelines.

  42.  The Department of Health published guidance on implementing the NHS Plan bed rises in February 2001. This will assist local health economies to ensure they have the right number and mix of beds in place; Regional Offices are producing plans implementing this. Additional general and acute beds might be required at some of these earlier PFI schemes, as they might be at some recent publicly funded schemes, but this is something the Government is prepared for. The key point is that PFI is flexible to cope with changes in requirements throughout the contract period, as shown by the recent addition of 144 beds at Norfolk & Norwich even though the contract was signed in January 1998.

  43.  Following the NBI report, the 29 new schemes announced in February 2001 will be explicitly required to consider a "whole health economy approach" with one private sector consortium responsible for redevelopments across the acute, intermediate and primary care sectors. Taken together, the 29 new schemes will increase NHS bed numbers by 2,900. These will be increases in both acute and intermediate care beds, contributing to the targets in the NHS Plan.

(iii)  Cost of Advisers

  44.  The Government has been quite open about the fact that £52 million has been spent on advisers on the first 18 major PFI schemes. The costs on these early PFI schemes were high as the PFI market was being developed and there were delays to the schemes caused by the incompetence of the previous administration.

  45.  However, of the £45 million spent on the first 15 of these schemes £18 million was spent before May 1997—and nothing was built. Since May 1997 the Government has spent £27 million delivering these 15 new schemes, which amounts to 2.2 per cent of the total cost. Advisers' costs must be kept in perspective: 2 per cent is what the Government spends on specialist building, healthcare and financial advisers under the traditional route.

  46.  The Government is now standardising the PFI procurement process by introducing standard guidance, contracts, payment mechanisms and specifications with the specific aim of reducing the time and cost of future procurements.


  47.  Considerable progress has been made in improving the NHS estate using the PFI model. But PFI is only a procurement tool, not an end in itself. It is and will only be used in cases where it offers value for money to the taxpayer and the NHS. It will continue to be used alongside public capital to meet health service needs. The Government's success with the PFI and the increase in public capital expenditure—since 1997-98 this will have risen by over 50 per cent in real terms to over £2.3 billion by 2001-02—has enabled it to start the largest hospital building programme in the history of the NHS. Sixty four major PFI hospital projects worth over £7.5 billion have been given the go ahead under this Government at the same time as 4 publicly funded schemes worth £172 million.


  48.  A large element of the current primary care estate is not suitable for the provision of modern healthcare. Survey data (collected by District Valuers) indicates that only around 40 per cent of premises are purpose built and fewer than 5 per cent of premises are co-located with a pharmacy (and around the same proportion are co-located with social services). Practices renting from private landlords, in particular, are often very small and rundown and only one in three of these is in a good state of repair. These premises are often located in deprived areas, where health care needs are greatest. Many primary care premises have traditionally been built and provided by the private sector.

  49.  The NHS Plan states that "the NHS will enter into a new public private partnership within a new equity stake company—the NHS Local Improvement Finance Trust (NHS LIFT)—to improve primary care premises in England. The priority will be investment in those parts of the country—such as inner cities—where primary care premises are in most need of expansion".

  50.  The NHS Plan included the following commitments:

    —  Up to £1 billion will be invested in primary care facilities;

    —  Up to 3,000 family doctors' premises will be substantially refurbished or replaced by 2004;

    —  500 one-stop primary care centres by 2004.

The Plan states that "new one-stop primary care centres will include GPs, dentists, opticians, health visitors, pharmacists and social workers".

  51.  The Department of Health has now established a joint venture company with Partnerships UK (PUK) to help develop the NHS LIFT initiative. This joint venture company will provide expert advice and support to local LIFT developments. It will also invest in the local LIFTs. The Department is investing £195 million up to 2003-04 into this initiative.

  52.  Secretary of State announced the first six areas to benefit from the NHS LIFT approach in February 2001. The six areas prioritised were all HAZ areas with relatively high levels of unmet need:

    —  Barnsley

    —  Camden & Islington

    —  East London

    —  Manchester Salford & Trafford

    —  Newcastle and North Tyneside

    —  Sandwell

  53.  The Department plans to select a second tranche by the end of 2001 and a third tranche in May 2002. Local LIFT companies will own and lease premises to GPs (as well as dentists, chemists, local authorities, private sector tenants, etc). The Government intends that LIFTs will offer more flexible lease terms as well as landlord repairing and insuring leases. A private sector partner will be identified through a competitive procurement exercise and then a Joint Venture (JV) will be established between local health economy bodies (including possibly GPs, dentists, etc), the national joint venture company and the private sector partner. The local JV—the LIFT—will have a long-term partnering agreement to deliver investment and services in local care facilities.

  54.  A prospectus explaining the benefits of the LIFT approach was distributed to all NHS bodies as well as the private sector at the end of June. In July four regional presentations were made to increase awareness. These events attracted around 800 delegates. A communications strategy for NHS LIFT is currently being finalised.

For the Benefit of Patients: A Concordat with the Private and Voluntary Health Care Provider Sector

  55.  The NHS Plan promised a new national framework between the NHS and the private and voluntary sector highlighting three particular areas for co-operative working:

    (i)  elective care—eg NHS doctors and nurses using the operating theatres and facilities in private hospitals, or the NHS buying certain services;

    (ii)  critical care—providing for the NHS and the private sector to be able to transfer patients to and from each other whenever clinically appropriate;

    (iii)  intermediate care—involving the private and voluntary sector in developing and making available facilities to support the Government's strategy for better preventative and rehabilitation services.

  56.  The Concordat was published in October 2000 by the Secretary of State for Health and the Independent Healthcare Association, representing the voluntary and private healthcare sector. The Concordat confirmed the Government's view that there should be no ideological bar to involving the private and voluntary sector in the delivery of high quality healthcare. It also highlighted the need to engage the independent sector in capacity planning, staffing needs and service development at a local level.


(i)  Elective Care

  57.  The priority thus far has been to ensure that the Concordat with the private sector has effectively "bedded in." The evidence is that local health economies have utilised available private sector capacity to supplement NHS elective capacity at times when that capacity is under particular strain. Although there may be pockets of local resistance to using the private sector, in general there is no indication of widespread rejection of the principles at the heart of the Concordat by the NHS.

  58.  There is evidence of some regional differentiation in the number of procedures undertaken on behalf of the NHS with a higher number of procedures undertaken in the North West than the South East for example. However it must be borne in mind at all times that the Concordat is a framework document encouraging commissioners locally to determine on the basis of need, costs and quality the extent to which they utilise "available" private sector capacity. The volume of capacity available in different parts of the country will vary, and local management must determine whether utilising the private sector is the most appropriate way to provide patient care when the NHS is working at peak loading. £20 million was made available last Winter to provide additional support for elective care during winter through Concordat arrangements. This funded over 10,500 elective cases in the private sector.

  59.  As far as waiting times are concerned, the Concordat has given NHS Trusts the ability to use additional capacity to treat patients within timescales that are appropriate to their clinical need. For instance, where inpatients have been waiting for a long period of time, NHS Trusts have the option to treat these patients in the private sector before they come close to the maximum waiting time deadline. The private sector has also been used in some Trusts to help clear large backlogs of patients on the waiting list in order to create the "headroom" to redesign service delivery in ways that enable waiting times to be managed more effectively from that point on.

  60.  The challenge remains to put use of private sector capacity on a planned footing. Some health authorities have made particular progress on this front, but overall the picture is still generally one of "spot" purchasing to maintain maximum flexibility. The Department of Health is currently surveying health economies to establish the volume of activity undertaken by the private sector in the first half of this year, and planned use of private sector capacity in the latter part of the year. The Department is also exploring with the NHS and the private sector whether local arrangements would be assisted by having a nationally agreed contracting framework available for local use.

(ii)  Critical Care

  61.  Additional NHS critical care capacity provided over last winter and good local management of pressures negated the need to utilise the private sector to the extent that was originally envisaged. The private sector continues to discuss with the Intensive Care Society the exact nature of the capacity that they are able to provide, capacity that is predominantly located in the South East of England.

(iii)  Intermediate Care

  62.  The Department of Health has issued guidance to commissioners and providers on the range of intermediate care services to be developed and has emphasised the role that the independent sector can play in meeting these needs, working in partnership with the statutory sector. As an annex to that guidance, the Department has made available a series of model contracts. These are designed to help commissioners to engage more effectively with independent sector partners and to move away from short-term "spot purchasing" towards longer term service agreements.

  63.  Statutory sector planners and commissioners have also been asked to ensure that independent sector representatives are actively involved in whole system capacity planning. The aim is to ensure that the potential contribution of the independent sector is properly explored and that capacity is built up to provide patients with the appropriate range of services.

  64.  As part of last year's winter planning activity, teams of "change agents", including independent sector representatives, were set up in each health region to stimulate the development of intermediate care in general and effective engagement with the independent sector in particular. Following the publication of the National Service Framework for Older People, which included standards and milestones for the development of intermediate care, Local Implementation Teams have been set up around the country. Approximately 50 per cent of these teams now include independent sector representatives, giving further evidence of the networks which are being established locally.

Information Needs

  65.  Comprehensive monitoring of the implementation of the Concordat requires management information and a common clinical minimum data set to be developed and agreed between the Department of Health and the private sector. It is essential to account properly for the services that commissioners procure from the private sector and to avoid the risk that government statistics understate NHS activity. Direct comparisons between the quality of care provided in the NHS and the private sector will enable the NHS to make fully-informed decisions on where care is best delivered and assure patients and the public that care is of a high quality no matter where it is delivered. The Department of Health is taking forward longer-term work on developing an appropriate data set. In the shorter-term, as already noted above, the Department is surveying health economies to establish the volume and costs of activity undertaken by the private sector in the first half of this year, and planned use of private sector capacity in the latter part of the year. The Government is also examining the scope for developing a national framework for purchasing private care for NHS patients (see para 60 above); part of any contract would include a specification of the data set which the private provider would have to provide.


  66.  The NHS Plan commits the NHS to the development of Diagnostic and Treatment Centres (DTCs) to increase the number of elective operations which can be treated on a single day or with a short stay. These Centres will separate routine hospital surgery from hospital emergency work so they can concentrate on getting the waiting times down. The NHS in partnership with the private sector will deliver at least 29 centres by 2004. The locations which have been identified are set out in Appendix I. These are all part of the NHS Capital programme, either PFI or publicly funded. Some are part of a larger scheme.

  67.  The Department with the NHS locally will also explore the potential for private sector management of some of the sites. In these facilities clinical staff will be NHS employees for the reasons set out above in paras 16-25. The key point, however, is not whether the centres are publicly or privately managed but that they provide prompt efficient high quality care. To assist in this and to learn the lessons from earlier models, the Department proposes to establish a development programme through the Modernisation Agency similar to that undertaken in other areas.

  68.  As part of the development, Ministers intend to establish four centres in London and the South East by the end of next year in order to provide extra capacity for elective care and ease waiting list pressures. One of these centres will be at the Middlesex Hospital in central London following the purchase of the National Heart Hospital. The other three, as well as potential private sector partners, will be identified early in the New Year.

  69.  In addition it is possible that private providers might seek to build and staff their DTCs "at risk". In these circumstances the local NHS would be able to use the facilities in the same way as for other services covered by the Concordat.


  70.  On 9 October the Government announced a new agreement, entitled Building Capacity and Partnership in Care, between the Government, NHS, local government and independent housing, health and social care sectors. This agreement, which is backed by £300 million over two years, aims to encourage a more strategic approach to capacity planning and purchasing through local partnerships between the statutory and independent sectors, with the goal of ensuring that people receive the right care in the right place at the right time.

  71.  The agreement was developed in consultation with a number of organisations, including the Local Government Association, the Association of Directors of Social Services, the NHS Confederation, the National Care Homes Association, the Independent Healthcare Association and the Anchor Trust.

  72.  The new money will go directly to local authorities to help them support people in their own homes or care homes. The extra funding will ensure that by April next year 1,000 more people are able to be moved from hospital beds, thus improving their care and also freeing up space for others. But funding will be contingent upon local authorities demonstrating that they are working effectively with the independent sector.


  73.  The Government is committed to the NHS as the bedrock of high quality healthcare, delivered on the basis of need, not ability to pay. That does not mean that the healthcare delivery system should be monolithic and alternative providers completely excluded. As explained above, the private and voluntary sector has long been involved in the delivery of NHS care. Where there is gain for patients and the criteria set out above can be met, then the Government believes the independent sector (by which we mean the voluntary as well as private sector) should be welcomed into the planning and provision of healthcare over the long-term as well as the short-term.

Department of Health

October 2001

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