Examination of Witnesses (Questions 231-239)
8 DECEMBER 2004
RT HON
JOHN REID
MP, MR RICHARD
DOUGLAS AND
MR JOHN
BACON
Q231 Chairman: Good morning, colleagues,
and can I welcome you, Secretary of State, and your colleagues
once again. We are very grateful for your willingness to come
before the Committee again after we had to curtail the last meeting.
Could I ask you to briefly introduce yourselves and your colleagues
to the Committee?
Dr Reid: Thank you, Chairman.
John Reid, Secretary of State for Health. I used to add "for
the time being" to all these things, but I have now been
there an extraordinary length of time in my career. I am accompanied
by John Bacon and Richard Douglas.
Q232 Chairman: Thank you very much. We
have a number of areas to cover in a relatively short time, so
I have asked my colleagues to be brief in their questions and
we would be grateful for reasonably brief responses. When you
came here for the first session just over a year ago I recall
asking you about the issue of the amount of work being put into
the independent sector. We talked about the costs and the figure
that you gave us for the average cost per item purchased was around
40%, or 43%, as I recall, above the NHS cost, and I know you talked
about reducing the costs, etcetera. We understand from the figures
that you have given us on this year's inquiry that in 2002-03
around £30 million more was spent in the private sector than
the equivalent cost of purchasing within the NHS. That is according
to your figures. Would you accept that?
Dr Reid: I would check against
it, I would not argue against it at .2 or .23. Certainly the spot
price that we were paying was between 40 and 50% more in the independent
sector, and I think I said to you the last time we were here that,
although I expected the bulk purchase that I am now making to
pay a little more in the first instance, it would be hugely reduced
from a 40 to a 50% premium, otherwise I would not be doing it.
Q233 Chairman: I think the figure you
have given us was around £30 million. One of the questions
that I asked when your officials were before us a few weeks ago
was about the impact upon NHS consultant activity of the use of
the private sector bearing in mind that the vast majority of consultants
working within the private sector, albeit treating NHS patients,
also work within the NHS, and I asked what the impact was in terms
of the consultants working on both sides of the fence. The answer
we got from the Department was, "We have no information about
the cost of NHS patients being treated in the private sector by
the same consultant who would have treated them in the NHS."
I find that a bit surprising, if we are talking, as you are—and
I will come on to this in a moment or two—about increasing
the use of the independent sector, that there has not been any
valuation done as to the impact upon the workload of NHS consultants
by them being increasingly within the private sector, albeit treating
NHS patients. Can you shed any light on why the Department cannot
give that information?
Dr Reid: I will try and shed light
on some of those aspects. First of all, I do not think it is true
to say that the purchases we are making in bulk form in the independent
the sector are necessarily using the same consultants who are
working for the NHS.
Q234 Chairman: Not all—I appreciate
that—but some are?
Dr Reid: Not even most of them.
Most of them in the early stages of the independent sector purchases
have actually been won by organisations which come from South
Africa, United States, clinics in Germany and so on. Let me take
one step back. What we do know is that the premiums that consultants
have traditionally got for working in the private sector in this
country, the money they have got—and I will stand corrected
on this—is around 50% above the highest in the world, so
it is 50% above what the best surgeons anywhere else in the world
were getting. That is a function of two things. One is the huge
demand for private care created by high waiting lists and the
other is short supply. We do not have the consultants here because
in maintaining quality the Royal Colleges have kept them at a
relatively small number compared to the demand. We have effectively
shifted that market position by increasing the supply of consultants,
bringing them in from abroad and decreasing the demand by bringing
down the waiting lists. So in terms of the actual market position
of a consultant now, the balance of power has shifted towards
the National Health Service as commissioners rather than the other
way around.
Q235 Chairman: Can I be clear? What you
are saying is that the bulk of the work done in the private sector
will be done by the independent sector treatment centres by consultants
who are not working within the NHS?
Dr Reid: Thus far the contracts
have been won. The contracts, in the first instance—again
I will stand corrected—have been won largely by organisations
who are not British private providers. After that happened two
particular private providers of operations, Nuffield and Capio,
came to us and said, "We would like a share of this",
and our response was, "We put this out to tender and you
have not been able to provide the quality at the price. You certainly
can do quality, but not at the price that we have been able to
get on the international market." I think one of the reasons
they came to us was because they had not won the contracts; the
supply of the bulk purchases were going to people outside. We
therefore said to Capio and Nuffield that we would purchase from
them provided they could do it at or near the NHS tariff, which
they had never been able to do before, we would purchase from
them about 20,000 each. They can only produce it at that tariff
if they are paying consultants a much lower price than they were
traditionally paying consultants. So what I am saying is that
the dynamic of this, Chairman, has been to increase the supply
of consultants by the award of contracts on the basis of merit
to organisations outside of Britain, which meant they brought
in extra consultants. That changed the market position by reducing
the demand, i.e. bringing down waiting time, and increasing the
supply. That, in response, had the British companies then coming
to us, because some of them, like Bupa, are reconfiguring in view
of the changing market and saying to us that they could produce
a more efficient price for the same quality. In other words, coincidentally,
we are bringing efficiency to the private sector as well as driving
up efficiency in the public sector. If somebody was to say, "We
are going to get rid of this bulk purchase", even though
it is going to push down costs in the private sector and say to
any individual in Britain, "You go and pay any price to any
private sector, we will subsidise it by 50%", not only would
it be an unfair system, it would be grossly inefficient because
it would allow anybody to charge anything in the private sector
again.
Q236 Chairman: What I want to establish,
bearing in mind that your officials have not been able to answer
my original question, is at what point will you be able to say
what proportion of the work in the private sector is being done
by people who also work in the NHS; because at the moment you
cannot say that. You have said that you think the numbers of consultants
working in those sectors treating their own patients is very metered.
My experience in my own area is to the contrary.
Dr Reid: I am not saying that,
Chairman. The number of British born and bred consultants working
in the private sector in this country has always been proportionately
high. It has always been that. If you went to a consultant and
you found out you had an 18-month wait and somebody whispered
in your ear, "But you can get it in 18 days if you go private",
you went private and you got the same consultants who would be
treating you in the NHS. That has always been the case. Secondly,
the consultant has, in general, been able to charge a premium
that is not only bigger than the NHS premium but 50% above anyone
else in the world, including Sweden and the US. What I am saying
to you is that we have changed that dynamic, because that position—I
will not call it a monopoly position—that very strong market
position is what creates a huge demand for services and a short
supply of the services. We are now beginning to change that, and
the result initially was by bringing in an extra supply. It did
not mean that everybody who worked in the private sector in Britain
was coming from abroad any more than it meant that everyone who
was producing in the independent sector in operation with the
NHS came from abroad, but it did significantly shift the balance,
and therefore I fully expect, as this continues, the waiting lists
coming down will continue to move the market in favour of the
National Health Service.
Q237 Chairman: I understand the point
you are making. What I am trying to get at—I think you know
what I am trying to get at—is the impact on the NHS of the
increased use of the independent sector. You have issued guidance
saying every PCT should have at least one independent sector provider
on its menu of four or five choices for prime hospital care for
five of the ten most common procedures. That is by 2008 up to
15% of procedures paid for by purchasers would be purchased from—
Dr Reid: Yes.
Q238 Chairman: Can I just finish the
point. If that is the case, regardless of the point about independent
sector treatment centres, I cannot see how you can do that without
using the NHS consultant work force that is still currently working
in the NHS and how that can take place without impacting upon
the NHS work?
Dr Reid: If the NHS consultant
is working in another hospital that is providing care free at
the point of need for patients in this country, and doing it at
the NHS price, it is largely immaterial.
Q239 Chairman: It is not?
Dr Reid: It is largely immaterial.
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