Memorandum by The Department of Health
THE ROLE OF THE PRIVATE SECTOR IN THE NHS
(PSI)
INTRODUCTION
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.
THE PRINCIPLES
UNDERLYING THE
USE OF
THE PRIVATE
AND VOLUNTARY
SECTOR
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?
INTERESTS OF
PATIENTS
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.
CONSISTENCY WITH
LOCAL STRATEGY
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.
VALUE FOR
MONEY
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.
PUBLIC SECTOR
VALUES
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.
SUMMARY
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.
THE PRIVATE
FINANCE INITIATIVE
(PFI)
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.
VALUE FOR
MONEY IN
THE HEALTH
SECTOR
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.
PFI: THE RECORD
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.
KEY CONCERNS
(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.
SUMMARY
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.
NHS LIFT
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:
— Manchester Salford & Trafford
— Newcastle and North Tyneside
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.
PROGRESS
(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.
DIAGNOSTIC AND
TREATMENT CENTRES
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.
NEW CARE
AGREEMENT: BUILDING
CAPACITY AND
PARTNERSHIP IN
CARE
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.
CONCLUSION
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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