Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)



  Chairman: Colleagues, can I welcome you to this first session of our inquiry into the role of the private sector in the NHS and I once again thank you, Secretary of State, and your team for coming along. Can I also put on record our thanks to your Department for their very helpful written evidence? As this is a new inquiry, I suggest that there should be one or two declarations of interest that we need to make before we start. I will begin by saying I am a member of UNISON. My constituency in the Labour Party has a constituency agreement with UNISON and UNISON did make a donation to my constituency party at the last general election.

  Mr Naysmith: My constituency has a constituency agreement with the GMB and we were given a donation to run our general election campaign.

  Julia Drown: I am a UNISON and a TGWU member and UNISON has a development plan with my constituency. I cannot remember whether they made a specific donation to the election.

  John Austin: I am a member of MSF.

  Andy Burnham: I too am a member of UNISON and the TGWU.

  Jim Dowd: I am a member of MSF and GMB.


  1. Can I begin by asking our witnesses to introduce themselves to the Committee?
  (Mr Milburn) Alan Milburn, Secretary of State for Health.
  (Mr Coates) Peter Coates, Department of Health Private Finance Unit.
  (Mr Macpherson) I am Nicholas Macpherson from the Public Services Directorate in the Treasury.
  (Mr McKeon) Andy McKeon, head of Medicines, Pharmacy and Industry Group.

  2. Mr Macpherson, what does your role entail?
  (Mr Macpherson) I run the Public Services Directorate in the Treasury, whose main aim in life is to improve the value for money of the public services year by year.

Mr Burns

  3. Secretary of State, what forecasts have you made of future activity levels under the Concordat?
  (Mr Milburn) Let me begin with where we are now.

  4. No; that is my next question.
  (Mr Milburn) It depends on what we decide to do in policy terms but there are five areas that we are considering developing. As you are aware, prior to the Concordat and prior to the Private Finance Initiative, the relationships between the NHS and the private sector, although they are quite longstanding, were pretty ad hoc in most cases. We do not think that has been particularly to the benefit of NHS patients. In the course of the last few years, we have the Private Finance Initiative going in hospitals now which is of benefit to patients and the Concordat is good also because it is providing extra care for NHS patients.

  5. That is a different view to your predecessor, is it not?
  (Mr Milburn) May I come to the five points? You rightly asked where we were going in the future.

  6. I asked what your forecasts were of activity levels.
  (Mr Milburn) I will come to that. Our big problem today is that we are short of capacity in the health care system. There is extra money going in from the public purse to address these shortages, whether of staff or buildings, but we need extra help too. We made a start with the Concordat and the PFI but perhaps I can come to the five areas where we plan to take this further. First, tomorrow, I will be announcing that we expect to make up to £40 million available to the NHS to buy treatment for NHS patients in private sector hospitals over the course of the coming months. That is double the £20 million we put in this time last year.

  7. On a technicality, am I right in thinking you have just broken your own embargo on that announcement?
  (Mr Milburn) I felt it might be of benefit to the Committee if I told you. You would be pretty unhappy with me if you read it in tomorrow morning's newspapers. Usually, people complain about things being announced on the Today programme.

  8. Absolutely but given that you have known for some time that you were coming here this afternoon why, according to your words just now, have you got a press release out which I suspect is probably embargoed for a minute past midnight? Why did you not just announce it now rather than embargo it?
  (Mr Milburn) Because there are other aspects to the press release. I do not know if you have a copy of it but you should not have because it is restricted to the press. I will send you a copy tomorrow and you can read all the other interesting things that are in it. Secondly, we have started work on what we are calling a national framework agreement to build longer term relationships between the National Health Service and the private sector with a view to doubling the number of NHS patients treated in private hospitals to 100,000 a year from next year. Thirdly, we are exploring the possibility of contracts under which part of or indeed even entire private hospitals would become NHS providers of services for a number of years. Fourthly, we will consider approaches from private sector providers to build privately owned diagnostic treatment centres which will perform operations purely on NHS patients. Fifthly, we are exploring whether private sector providers in mainland Europe who have spare capacity available could treat NHS patients there, although my very strong preference is for those private providers to establish their services here with their own staff, to provide treatment for NHS patients at home rather than those patients having to travel abroad. On all these five points we are in active discussion at the moment. There is no blank cheque and we have to be assured that we not only get good value for money for the taxpayer but we are also assured of the highest standards of care clinically for patients. However, I think these plans do amount to a pretty big expansion in the relationship between the NHS and the private sector that I believe will bring benefit to NHS patients. There is one important caveat to all of this. In the second half of this financial year, right now, the private sector will undertake around 1.5 per cent of the total number of operations that are undertaken on NHS patients. The NHS is the dominant provider of care for patients in the United Kingdom. Nonetheless, what we know is that the private sector can make a significant contribution in particular to guaranteeing shorter waiting times for NHS treatment for NHS patients.

  9. Factually, what is the level of activity that has taken place under the Concordat to date?
  (Mr Milburn) There are two separate but related things. First of all, the number of operations that have been bought with the so-called Concordat money. We put in £20 million last year at around this time, in November when we launched the Concordat. It bought around 10,000 operations in total. The build up was slow through November and December and peaked in March. I want to come to the reasons for that. In total, we estimate that currently somewhere between 50,000 - maybe up to 60,000 - operations a year are undertaken at the expense of the National Health Service on NHS patients, so treatment for free but in private sector facilities. As a matter of perspective on all of this, the private sector in this country currently has around 10,000 beds in its hospitals. The National Health Service has around 136,000 beds.

Julia Drown

  10. How was that £20 million distributed across the country? Was it according to where people had relationships with private sector partners or according to need?
  (Mr Milburn) I cannot quite remember the methodology but it was not according to the relationship. The relationships are pretty uneven. Incidentally, we have just had completed a survey of National Health Service providers and NHS hospitals to see how they are using the relationship with the private sector to benefit NHS patients.

  11. Could you give us a note?
  (Mr Milburn) We are analysing at the moment and we will gladly pass that on to you. It is uneven according to specialty and it is also uneven geographically. I suspect that is for a number of reasons.

  12. The relationship is uneven or the allocation is uneven?
  (Mr Milburn) The relationship is uneven and the spend therefore is uneven. My sense is that in some parts of the service there is broadly some ideological concern about contracting with the private sector. Elsewhere, there are suspicions probably on all sides. Thirdly, there are uneven relationships that have been developed over a period of years. If we are going to make this thing work and if we are going to expand the capacity that is genuinely available to the NHS patient we have to put that relationship on a more mature footing.


  13. In your evidence the Department refers to four essential tests which need to be applied to any proposed partnerships with the private sector. What steps have you taken to evaluate whether the existing Concordats at local level meet all those tests?
  (Mr Milburn) The local relationships thus far under the Concordat arrangements have not been subject to the extent of monitoring that we will want to see in the future. For example, there are some issues about the price differentials that are being paid by the NHS to different private sector providers or even probably to the same private sector provider. Basically, there are three firms who dominate around 60 per cent of the market as far as the private sector is concerned in this country. BUPA is one; BMI and I guess GHG is the biggest general health care group. We are getting anecdotal evidence back and that is one of the things that we need to substantiate as a consequence of our analysis of this survey. Different prices are being charged in different places. We have to make sure that we get decent value for money for the taxpayer. What we will move to over time is a situation where, as you know, we are able now to publish this information on an annual basis, to assess what the costs of carrying out different procedures are in different NHS hospitals. We publish these NHS reference costs on an annual basis. If you look at the price of a hip operation or the price of a heart operation, it might be cheaper in Wakefield than it is in Darlington, for example. Maybe there are some good reasons for that but my guess is that there are some bad ones too. It is quite important in our arsenal to make sure that we get decent value for money from within the National Health Service. In future, if we are going to have a longer term relationship with the private sector, where the NHS is not just contracting on a spot purchase basis - i.e., there is a problem with the waiting lists and we decide that we are going to pay a premium rate to deal with that for a month. We do not always get the best value for money. One of the reasons that we are taking the steps that I set out earlier in answer to Mr Burns is to make sure that not only do we have a longer term relationship but we get fair value for money. My own view is that if we enter in particular into longer term contracts what we will be able to do is get better value for money for the NHS and for the taxpayer. One of the ways that we will seek to do that is probably by using NHS reference costs as a benchmark for the sort of prices that we would expect local NHS hospitals to pay when they contract with the private sector hospitals.

  14. Can I ask a couple of practical questions about the tests and what appears to be happening, certainly in my part of the country? You will recall that when we undertook our inquiry into NHS consultants' contracts we received some evidence suggesting that there was a correlation in certain areas between the lengthy waiting lists of certain consultants and their involvement in private practice. There were suggestions that there were interesting connections here. How do you defend a situation where the patients who are waiting to see a particular consultant in the NHS are subsequently referred through the Concordat to a private hospital and then see the same consultant in that private hospital that they were hoping to see on the NHS waiting list? I can give you an example. I spoke last week to a gentleman in my area whose mother had had this experience in Leeds. She had been waiting for some considerable time. She was an elderly lady. She was told she was going to be referred to Roundhay Hall Private Hospital, and she was amazed to find that she was seen by the consultant that she had been waiting a long time to see on the NHS. It does not seem to add up to me that this arrangement has been made in an effort to improve things. I would have thought it would make more sense for that consultant to see the lady in the NHS and to spend more time on his NHS work.
  (Mr Milburn) If that could happen, that would be a sensible thing to do but virtually every hospital in the country is running pretty hot right now. Across the National Health Service, the acute hospitals are running at an occupancy rate of between 89 and 90 per cent on average for beds. I wish there was a lot of spare capacity in the NHS, because it would make all of this so much easier.

  15. This is because of consultant time, not bed occupancy. She was seeing the same doctor.
  (Mr Milburn) I understand that but it is entirely possible that, having seen the consultant, the problem was not the consultant time. The problem was the lack of a bed, the lack of an operating theatre and the length of time that your constituent was going to have to spend on the waiting list. What we are trying to do here is a very simple thing. I think we all accept - I think this is a matter of agreement in Parliament - that the biggest problem we have across the health care system, not just in England but I guess in the rest of the United Kingdom as a whole, is the capacity shortage. We have to find a way of expanding capacity. If there is spare marginal capacity available in an NHS hospital and we can treat NHS patients there, that is what we should do.

  16. You are slightly dodging the question.
  (Mr Milburn) No, I am not.

  17. It is not about capacity; it is about accessing advice from a consultant. In your essential tests, you talk about one of them being that any proposed partnerships with the private sector are consistent with the local and national strategies of the NHS and its development. I do not understand how that kind of situation is consistent with your, in my view, very welcome efforts to try and obtain consultants to work full time in the National Health Service when they first qualify, for the first seven years. That, to me, is exactly the way we should be going, but this lady's experience of the Concordat seems to me entirely contradictory to that strategy.
  (Mr Milburn) I do not think it is, with respect, because what we are trying to do in both cases with the Concordat and incidentally with the extra investment going into the National Health Service and with our proposals around the consultant contract that we are in negotiations with the BMA about right now is exactly the same thing. That is about expanding the capacity that is available to NHS patients. I can see how people could get to that conclusion but I think it is the wrong conclusion because at the moment a consultant qualifies and a lot of consultants incidentally have whole time contracts working purely for the National Health Service—in fact the majority do - and most consultants are doing a really good job in the NHS and over-fulfilling their contractual obligations to the NHS. Where there is a choice that consultants make between spending their time operating privately on privately paid for patients, not NHS patients, the consequence of that is that it is denying care to NHS patients. My primary interest is if people want to pay for their own care that is fine. If people want to take out private health insurance, that is fine too but what I believe in is a system that is there for free and available to all. What I want to do is expand its capacity. The reason that we are making the proposal around restricting access to private sector work—i.e., to privately paid for patients for up to the first seven years of a newly qualified consultant's career—is precisely to expand the availability of their time, their effort, their skills for the benefit of NHS patients. What the Concordat does with the private sector is expand the capacity that is available to NHS patients. It just so happens that that part of the capacity might exist in a BUPA hospital or a GHG hospital rather than an NHS hospital. In the end, what counts from the patients' point of view is the quality of care that they receive and how timely is the manner in which they receive it. My guess is, although I would be interested in seeing the details of the case you refer to, that the consequence of going through the Concordat is that the person you referred to is getting faster treatment than if they had to wait on a long NHS waiting list.

  18. Would you accept that that person was not unreasonably concerned, having waited for a long period of time on the NHS, to be told she was going to a private hospital under the Concordat and then she had seen the same consultant who was earning in his private time within that private hospital? It seems to me not to quite add up. I can understand her concerns. Would you accept as well that these hard working consultants who commit themselves full time to the NHS resent very much the way in which they believe the government is now rewarding those consultants who spend a lot of time in the private sector by pushing NHS patients through the Concordat into their private work?
  (Mr Milburn) No, I do not accept that either. I would be interested to see the details of the case that you refer to but my guess is that the person may have been concerned about seeing the consultant wearing two hats, operating in an NHS hospital and still operating on that NHS patient, providing treatment for free according to clinical need in a private sector hospital, but I bet they were pleased with the quality of care that she got and the fact that they had to wait less time than they would otherwise have had to. That is where we have to get to, with respect. We have to get to a position, in my view, where what counts is the patient's interests.

  19. I am obviously concerned with patients' interests. Can I raise an issue that I wrote to you about in respect of the essential tests that your evidence refers to? The fourth essential test is that any proposed partnership with the private sector is consistent with public sector values, including the treatment as determined by clinical need.> You will recall I asked a question in July and subsequently wrote to you about my concerns over how we ensure clinical priorities where we have the situation that I illustrated to you. We have in Yorkshire an arrangement whereby a number of health authorities are, through the Concordat, purchasing operations at Thornbury Hospital in Sheffield, which is a BMI hospital. My concern on this was how do we ensure, where you have a series of streams of different patients, that the clinical priority for those patients is accorded on the basis of their needs? The consultants are based in the NHS in Sheffield, working in the Thornbury Hospital. They are performing operations on their own private patients and on their NHS patients in Sheffield and on at least two sets of NHS patients from Leeds and Calderdale or Kirklees under the Concordat. You wrote to me indicating that a reasonable degree of consonance had been secured between waiting times and clinical priority had not been compromised, but I have looked at the protocols and there is no mention of any clinical priority as far as I can see. How do we cross-prioritise, with a large group like this, to ensure that within the Concordat the patients who most need help are treated first? As far as I can see, with this arrangement in Yorkshire, that is not happening.
  (Mr Milburn) I think that is a very reasonable point, if I may say so. That is why we have to get to a different longer term position to the one we have now. The Concordat is now being used by NHS hospitals to bail out their immediate problems. It means people get treated more quickly and that is a good thing. I do not have a problem with that at all. The more people we can treat more quickly, the better the National Health Service will be for patients. However, what is self-evident from the figures under the Concordat is that there is a headlong rush now, under the current arrangements, to spot purchase to ensure that the National Health Service locally gets to the position it needs to get to by the end of the financial year, so you suddenly have a big whoosh of cases going into the private sector in March and then it dips back down again in April. This is a problem across the National Health Service as well because the National Health Service follows precisely that seasonal pattern, where it starts very slowly in April; it tends to build up by the autumn; it dips again in the winter and you have a mad rush through February and March to get through the maximum number of cases. What we have to do in NHS hospitals is to even that pattern out and that we would get an optimum use of resources amongst doctors, nurses, staff and facilities. Where I want to get to with the Concordat is this: rather than just doing spot purchasing - i.e., the NHS being bailed out by a local private sector hospital - I want the primary care trust who commission the care and the independent private sector providers sitting down together, working out a longer term relationship that plans the treatment, plans the care, not just over a period of months but potentially over a period of a number of years, providing of course that the NHS gets a good deal on cost and gets the appropriate clinical standards. That way, it seems to me, you begin to address precisely some of the clinical priority issues that you have alluded to. If you have a longer term relationship, you can plan the case mix that will be looked after in the private sector. It is worth bearing in mind that the private sector tends to have skills in particular specialisms. It is very good at doing cataracts, hips and knees. It does less cancer. It does some heart operations but nowhere near as many as the National Health Service. We have to get to a position where we are taking optimum advantage on a longer term basis with the private sector of the skills and expertise that it has. We can only do that if we are prepared to get out of short term purchasing and into longer term agreements.

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