Select Committee on Health Minutes of Evidence


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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