Supplementary evidence by the NHS Confederation
FOLLOW UP TO ORAL EVIDENCE THURSDAY 6 DECEMBER
Q95 How prepared is the private sector to
absorb flexibility considerations for the long term future?
There are significant costs in developing designs
which are very flexible and the current system would tend to place
these with the consortia. This provides a significant disincentive
in a system that relies on competitive bidding. The risks that
are associated with future changes to the building as a consequence
of changes in health care are held by the NHS which presumably
further reduces the incentive to the developers to incorporate
flexibility. There are limits to the extent to which flexibility
can be built into health care buildings but our impression is
that more could be done and this is an area that would repay further
thought and investment.
The situation is worsened by the poor state,
internationally, of thinking about the future pattern of health
care and in particular almost complete silence on what role hospitals
will play. The Department of Health has started some work in this
area under Mr WearmouthHead of NHS Estates and the CNO.
This is very welcome but the need is very urgent and it would
have been helpful if this work has started some years ago.
How has some of the risk transfer not been particularly
The process used to establish what the risks
of a project are, and how they should be valued, has varied considerably
from one project to another. Different projects have used very
different assumptions, without necessarily testing those assumptions
through rigorous analysis and proper scrutiny. This increases
the danger that risks are under-valued, over-valued, or even excluded
from the analysis completely. For example, it is questionable
whether all the risk involved in hospital construction has been
given sufficient emphasis and value in risk transfer negotiations.
It has been argued that by far the bigger part of the risk involved
in building a hospital is to do with trying to anticipate the
future demands on the building over its life. Yet this risk, which
stays with the public sector, does not feature prominently in
the analysis behind many projects.
Conversely, some risks may be less significant
than the value accorded to them in some projects might suggest.
For example, as recent events on the railways have shown, when
a vital public service is at stake, the project cannot be allowed
to fail and the public sector effectively acts as guarantor of
last resort. The risk being borne by the private sector is therefore
arguably less than was first thought, a trend reflected in the
fact that money markets are increasingly willing to lend to consortia
at lower rates.
Given that risk is often the deciding factor
in the value-for-money analysis, the process used to identify
it and establish its value needs to be as rigorous and robust
as possible. In England the NHS Executive has set out a process
involving risk assessment techniques such as probability analysis
and the weighting and scoring of non-quantifiable factors. It
has also recommended that the whole set of assumptions should
be subject to sensitivity analysis to test their robustness. Universal
compliance with this guidance would help ensure that the data
informing the key negotiations on risk transfer is complete, accurate
How can PFI be made more accountable and more
obvious to the public?
The public need to be reassured that:
good value for money has been obtained;
the ethos of the NHS has not been
the solution developed is fit for
Areas where greater transparency is particularly
necessary are: the assumptions being used to estimate and value
risk (see above); the criteria which form part of the value for
money assessment; and the public sector comparator. Sharing this
information with key stakeholders such as patient groups and unions
as early as possible in the process will help to increase accountability
and to bolster public confidence that spending decisions are founded
on thorough and robust evidence.
Public sector bodies planning new projects could
also play a part in ensuring that public debate about PFI is well-informed.
In the current climate, it is very difficult to disentangle factors
relating to planning from those relating to procurement methods.
For example, opponents of a PFI project may argue that a reduction
in bed numbers at a planned hospital has been caused by PFI. However,
in keeping with Audit Commission guidance that planning should
precede procurement, the truth should be that a decision on bed
numbers is made before the question of whether to use traditional
procurement or PFI is even considered. If public sector bodies
were to put more emphasis on publicising their planning and involving
the communities they serve, it may help to separate out planning
from procurement issues and lead to a more informed public debate
Interested in the Future Hospital Network. What
has come out of the work so far?
The Future Hospital Network is still in its
start-up phase having begun in October 2002. In the four months
since then, the network has been defining its work programme focused
on supporting work that will ensure that new hospitals are fit
for the future through a seminar programme and other shared learning.
This work programme is covering:
defining new models of care;
developing the PPP partnership working;
changing workforce needs;
implications of ITC for workforce
developing output specifications;
identifying how buildings should
be designed to meet future needs.
The Network covers 27 hospital trusts at all
stages in developing new hospital facilities in England, Scotland
and Northern Ireland.
Q935-937 Has the Confederation considered
that if the health care system in this country increasingly becomes
a mixed economy of provision, even though public funded, there
is an argument that it then comes within the remit of the WTO?
(This is an issue that was raised by Alyson Pollock in her oral
There has in fact been a mixed economy in the
NHS for a long time especially in primary care, mental health
and learning disabilities. Professor Pollock has suggested that
this brings health service provision within the remit of the WTO.
There are some concerns that some very aggressive USA health care
providers could start trying to operate in Europe and that their
style of operation would be detrimental to health care systems.
This is the concern of the Mexican and Canadian governments which
is why we understand there has been some discussion of health
services by the WTO. For the WTO rules to cover health care the
Department of Health would need to agree that health was an internationally
tradable service. Whilst opening the provider side to competition
in the UK automatically means that it is open to firms in EU members
it is not clear that this is the same as declaring health as an
internationally tradable service. If health services were to come
under the remit of WTO there would be a need for significant negotiation
of the terms for this. Interestingly although the government has
talked about increased plurality there has not to our knowledge
been any formal notification of firms in other EU countries. The
view of our expert advisor is that this position is probably untenable
if not actually illegal.
30 January 2002