Value for Money of Concordat activity
34. Another of the Secretary of State's key tests
for extending the role of the private sector was whether this
activity constituted value for money. We sought to ascertain the
extent to which this had been achieved. The Secretary of State
told us that one way of establishing the extent to which value
for money was being achieved would be to use NHS reference costs
as a benchmark.[50] However,
the severe limitations of proceeding on this basis, at least at
present, were exposed by Mr Auld of General Healthcare Group:
"There is a suggestion that we should be
pricing with reference to what are called the Reference Costs
of the National Health Service, and that is a table of costs,
a range of costs by procedure. If you take hip replacements, at
one end of the range of costs there are some hospitals in the
NHS who say they are charging of the order of £10,000 for
a hip replacement and, believe it or not, at the other end of
the range are hospitals who say that they are charging £800
for a hip replacement ... You cannot buy the prosthesis and the
cement for that, far less the theatre time, the cost of employing
the doctors, the nurses and all the others."[51]
The Secretary of State accepted that it was "impossible"
to believe that an NHS hospital could carry out a hip replacement
for £800 and that the disparity in the range of figures caused
him to be "slightly concerned". More credence, he felt,
could be placed in the inter-quartile range of reference costs,
which offered much less startling discrepancies.[52]
35. We asked the Secretary of State why there were
such widely differing costs for episodes of treatment under the
Concordat, with the average cost in the North West being £2000
and in the North and Yorkshire, £3000.[53]
He acknowledged that "differential" prices were being
negotiated with private sector providers both in different parts
of the country and even within the same areas, with "some
hospitals ... negotiating better deals than others". He felt
that the best way to ensure value for money was to bring greater
"standardisation" to the process.[54]
36. Some evidence does point to the NHS getting good
value for money in respect of some of the work it has commissioned
from the private and voluntary sector. In the first year of the
Concordat, South East region was allocated £5.1 million for
use in the private sector. Some 3,326 patients across the region
were removed from waiting lists during the first three months
of 2001, a third of these from the East Surrey area.[55]
The results from East Surrey have been analysed and they suggest
that "prices were comparable to, and sometimes cheaper than,
the NHS" with the average cost per treatment being £1,120.
The following table illustrates some of the procedures undertaken
and compares the price paid under the East Surrey project with
both the NHS reference cost and typical private sector prices:
Examples of procedural prices compared across NHS and private sector
|
Speciality | OPCS code
| Procedure | East Surrey
HA project
(£)
| NHS
Reference
Cost (£)
| Private Provider (£) |
|
Trauma & Orthopaedics
| W371
W819
T521
W879
W792
A651
| Hip replacement
Sub-acromial decompression
Fasciectomy
Arthroscopy+treatment
Arthroscopy
Bunlonectomy
Carpal tunnel
| 5,466
1,770
1,400
1,300
848
900
690
| 4,608
1,498
1,796
1,208
832
713
795
| 6,097-8,500
2,500-2,700
2,335
1,815-2,500
1,135-2,200
1,430-2,300
1,355-2,300
| ** |
Ophthalmology | C712
| Phaco-emulsification with lens
| 900 | 1,065
| 2,260-2,604 | **
|
ENT | F343
E031
| Excision of tonsils
Septum of nose
| 975
975 | 2,390
1,275
| 1,550-1,700
1,525-1,600
| |
General surgery | T209
L851
| Primary hernia repair
Ligation of varicose vein
| 1,200
1,030 | 1,329
1,174
| 1,705-1,800
1,800-2,180
| |
Source: Project Bids to SERO, NHS Reference Costs 2000, ** Good Hospital Guide and local private hospitals[56]
|
37. Thus, for seven out of 12 procedures
the East Surrey project actually achieved prices below NHS reference
costs, and in all cases the prices were well below the rates for
self-funded private patients. The factors underlying this, according
to the project leaders, were a reduction in 'did not attend' rates
(0.3% compared with 8% in the NHS);[57]
and higher consultant productivity as a consequence of financial
incentives, smaller units encouraging greater team work, seamless
operational and administrative processes and the use of more dependable
equipment.[58] BUPA's
suggestion that its own survey of NHS commissioners had reported
that "74 per cent thought that BUPA provided good value for
money and high quality care" offers further support for the
idea that Concordat activity can represent good value for money.[59]
In contrast to this encouraging analysis is the assertion of the
NHS Consultants' Association: "Information so far suggests
that the use of the private sector is almost invariably more expensive
than providing services within the NHS".[60]
The Socialist Health Association acknowledged the evidence from
East Surrey, but believed that a move to longer-term arrangements
might ultimately weaken the NHS by reducing the pool of staff
available to it so that the NHS might become dependent on the
independent provider which could in due course charge more.[61]
38. The results of the East Surrey survey of the
costs of Concordat activity are encouraging, but given the very
wide regional variations in the costs of work carried out under
the Concordat, we find it hard to see how the public can be confident
it is always getting value for money. Moreover NHS reference costs,
which are themselves subject to wide variation, are not yet an
appropriate means of judging value for money. We believe that
the Audit Commission should urgently review a representative sample
of this activity to assess value for money. We also believe that
the Department should take urgent steps to improve the methodology
underlying NHS reference costs so that they can eventually act
as a meaningful benchmark.
39. We are also concerned that independent providers
may sell activity to the NHS with a view to establishing a dependence
on their services which would then put them in a position to increase
prices to the NHS in the future. We have received no assurance
that if there is to be a longer term relationship with the private
sector then contract prices with the NHS will be protected in
the longer term. Where spot purchasing is taking place, for example
to reduce waiting lists, in general we would expect the prices
to be below relevant NHS reference costs as the NHS should be
able to use its bargaining power to pay not much more than marginal
cost for this activity. We recommend that the Audit Commission
is given a right of access to independent sector providers of
NHS healthcare, and that "open book accounting" principles
should operate in respect of these providers.
40. We further recommend that the Government introduces
guidelines on the basis of which all NHS trusts will be required
to develop explicit, publicly available protocols setting out
the principles governing their use of the independent sector.
The interoperation of public
and private healthcare: regulatory and training issues
41. The Government's policy of encouraging greater
interaction between private and public sectors led us to ask the
Secretary of State whether the time had not now come to bring
the independent sector into the same regulatory framework as the
public sector. The Secretary of State told us that this was an
issue that needed to be looked at. He pointed out that the Commission
for Health Improvement (CHI) and the National Care Standards Commission
(NCSC), which will regulate the independent sector from April,
were empowered, under section 9 of the Care Standards Act 2000,
to work jointly, and were able to subcontract staff from one organization
to another. He also argued that CHI was empowered to follow the
NHS patient whether treated in the public or independent sector.[62]
The Department drew attention to other differences between CHI
and the NCSC: unlike CHI, the NCSC is a regulatory body which
registers care providers; the NCSC is mainly concerned with social
care services, with the consequence that health care services
represent only a small proportion of its activity; and in many
of the health care settings covered by the NCSC (for example those
dealing with cosmetic surgery) no NHS patients will be treated.[63]
42. Since our inquiry began the Government has issued
its reply to the public inquiry into children's heart surgery
at the Bristol Royal Infirmary 1984-95, chaired by Sir Ian Kennedy.
The Kennedy Report called for closer inter-operation between CHI
and the NCSC and in its reply the Government seemed to accept
the force of this argument, asserting:
"In the short-term, a strengthened inspection
role for CHI working within the Social Services Inspectorate and
National Care Standards Commission as appropriate [is needed to]
give the public an independent assurance that each provider of
NHS services has proper quality assurance and quality improvement
in place. We will take further steps to rationalise the number
of bodies inspecting and regulating health and social care."[64]
43. We note that the Government plans to make
regulations so that the Commission for Health Improvement may
exercise the National Care Standards Commission's function of
inspection in relation to independent hospitals.[65]
We would be very concerned if such arrangements resulted in a
diminution of health care skills in the regulation and inspection
of nursing and health care services provided to people accommodated
in social care settings - including those of care homes in which
nursing care is provided.
44. Our predecessor Committee voiced reservations
about levels of cover, facilities and staff qualifications at
some independent sector hospitals in its report The Regulation
of Private and other Independent Healthcare. It argued in
favour of greater interaction between private and public sector
regulators in order to ensure that patients treated in the private
and voluntary sector were not placed at undue risk. A question
the Department will need to consider is what the impact on public
confidence in the Concordat would be if an NHS patient suffered
a serious adverse clinical incident in a private hospital.
45. Our predecessor Committee's report into the
Regulation of Private and other Independent Healthcare drew attention
to some of the difficulties caused by separate arrangements for
the regulation and accountability of the public and independent
sectors. Ever greater degrees of transfer between the two sectors
place even greater question marks over the sustainability of separate
regimes. In the light of the Government's reply to the Kennedy
report and the Secretary of State's argument that CHI and the
Care Standards Commission have been developing powers to share
their work, we recommend that the Government produces a common
regulatory framework as a matter of urgency.
46. It is clear to us that the major providers in
the independent sector would welcome a common regulatory framework.
But a more mature understanding of the mutual inter-dependence
of public and independent sectors perhaps also entails wider shared
responsibility. Training clinical staff places a considerable
burden on public expenditure. So we asked Mr Hassell of the IHA
whether he felt that there was a case for a training levy being
placed on the private sector. He asserted that the independent
sector already participated in training: for example, the sector
took about 2000 clinical placements from the training system and
was working to take more.[66]
However, we believe there is a case for the independent sector
taking on more of the burden of training staff and call on the
Department to consider imposing a levy on the independent sector
towards the training, including first qualification, of some health
professionals.
11 For the Benefit of Patients: A Concordat with
the Private and Voluntary Health Care Provider Sector, para
1.1. Back
12
Concordat, para 2.10. The principles governing the relationship
between the statutory and independent social care, health care
and housing sectors were set out in the Department of Health document
Building Capacity and Partnership in Care, October 2001. Back
13
NHS Plan, para 11.9. Back
14
NHS Plan, para 11.10. Back
15
NHS Plan, para 11.15. Back
16
Q6. Back
17
Ev 214; Q829. Back
18
Ev 275. Back
19
Q9. Back
20
Ev 224. According to DH HES data, 6,468,404 operations were
performed by the NHS last year. Of these, 15% were classed as
'emergency', giving a total of approximately 5,498,143 'non-emergency'
operations. However, there are procedures that go beyond strictly
'elective' as they include maternity procedures as well. The other
figure given in these tables is for 'Waiting list' surgery (approximately
4,075,095 operations) but again this is not a true figure for
all elective surgery as it does not include what DH classifies
as 'planned' surgery (where there is a wait for surgery but this
is due to medical or social reasons rather than capacity). Back
21
Q21; Q15. Back
22
Q14; Q34. The figures for optimum capacity, according to the
Secretary of State, were derived from work the Department had
commissioned from York University. The Department referenced
this to an article from A Bagust et al, in the BMJ 1999,
vol. 319, pp. 155-58. However, this article gives a figure of
85% not 82%. Back
23
Q20; Ev 287. Back
24
Ev 296. Back
25
Consultants on maximum part-time contracts receive 10/11 of the
full NHS salary and are not subject to a limit on their private
earnings. They are expected to work for the NHS for a minimum
of 10 notional half days (3.5 hours each). Back
26
See Third Report of the Health Committee, Consultants' Contracts,
Session 1999-2000, (HC586), para 1. Back
27
Ev 210. Back
28
Ev 295. Back
29
Ev 367. Back
30
Ev 52. Back
31
Ev 338. Back
32
Q971. Back
33
Ev 284. Back
34
Q19. Back
35
Karen Bryson, Elin Williams and Cathy Bell, "Public Pain,
Private Gain", Health Service Journal, 6 September
2001, p.25. Back
36
Q1021. Back
37
Q28. Back
38
Ev 277. Back
39
We are aware that there are many consultants who undertake considerable
private work while more than fulfilling their full commitments
to the NHS. Back
40
Q973. Back
41
Q973. Back
42
See Third Report of the Health Committee, Consultants' Contracts,
Session 1999-2000, (HC 586), para 23; The Government Response
to the Health Select Committee's Third Report on Consultants'
Contracts, Cm 4930, p.7. Back
43
Our predecessor Committee wrote: "While causation and proof
are hard to establish beyond doubt in this matter, a number of
facts are not disputed. The first is the correlation noted in
the Department's evidence between those specialties with the longest
waiting lists, and those which produce the most lucrative earnings
for consultants in the private sector. The second is the finding
of the Audit Commission in 1995 that "the 25% of consultants
who do the most private work carry out less NHS work than their
colleagues" (HC586, para 56). Back
44
The requirement for consultant appraisal was introduced in December
2000. See www.doh.gov.uk/consultantscontract.htm. Back
45
Ev 275. Back
46
Q998. Back
47
Q998. Back
48
Ev 217-18. Back
49
Q19. Back
50
Q13. Back
51
Q882. Back
52
Q1015. Back
53
There are even greater disparities between regions: the cost
for Trent was just over £500. Back
54
Q999. Back
55
Health Service Journal, 6 September 2001, pp. 24-26. Back
56
Health Service Journal, 6 September 2001, p.26. Back
57
Direct telephone contact with patients established that 118
patients no longer needed or wanted surgical treatment. Back
58
Health Service Journal, 6 September 2001, p.26. Back
59
Ev 284. Back
60
Ev 367. Back
61
Ev 328. Back
62
Q35. Back
63
Ev 275. Back
64
Learning from Bristol: The Department of Health's Response
to the Report of the Public Inquiry into Children's Heart Surgery
at the Bristol Royal Infirmary 1984-1995, January 2002, Cm
5363, p.3. Back
65
Official Report, House of Lords, 18 March 2002, col. 1203. Back
66
Q871. Back