Examination of Witnesses (Questions 260-279)
8 DECEMBER 2004
RT HON
JOHN REID
MP, MR RICHARD
DOUGLAS AND
MR JOHN
BACON
Q260 Dr Taylor: That will go for high
risk hip-replacements as opposed to low risk hip-replacements?
Dr Reid: Yes.
Q261 Mr Jones: Would you agree with the
description, Minister, that what we started off with was a system
in which there were two providers of good care—one private
sector and the National Health Service—and there was one
work force which operated a closed-shop which both sectors employed.
What you have now introduced is a third area of provider, an independent
provider within the National Health Service, and broken the closed-shop
because you have brought in people from outside the closed-shop?
Dr Reid: I would not demur from
that description. We are going through a huge process of change
where we are encouraging people within the NHS to break down artificial
demarcations—that is a process we have seen before in many
other industries—in order to get better value for the patient
and, at the same time, outside, as well as inside, the NHS we
are using the power of the NHS in purchasing to break what some
people would previously describe as a monopoly cartel or a closed-shop
caused by a tight control of supply and an encouragement for huge
demand.
Q262 Mr Jones: The Chairman has been
asking you repeated questions about the effect of the new sector
upon the existing old National Health Service provider and purchaser
sector. What has been the effect upon the private sector? When
independent treatment centres have been brought in, what has been
the effect upon the number of patients opting to go private and
the costs of the private sector?
Dr Reid: For the first few years
of this Government there is no question that the number of people
opting to go private was increasing by hundreds of thousands,
as it happens, as constantly pointed out by Mr Burns and others.
That is because there is a lead time on this. Not all of those
were rich people at all. Many of them went private, taking mortgages
on their house and taking out loans, because of the lack of quality
and the huge amount of time they had to wait, they and their loved
ones, in the NHS. As we give people better quality and faster
access in the NHS I fully expect that not only will we be changing
the market conditions which allow better value from the NHS, from
the private sector, the independent sector, but the independent
sector itself, two things will happen in it, the first is that
many people who felt compelled to go will no longer feel compelled
to go; they will come back to the National Health Service. Secondly,
as a result of that, plus the bulk purchasing, the private sector
itself will respond by becoming more inefficient, reducing the
prices they pay to consultants, and so on.
Q263 Mr Jones: You have not got any figures
with you today?
Dr Reid: We are only about a year
and a half into this process, but I am absolutely sure that this
is the unmistakable trend, because two thing happen. Firstly,
they are offering to us operations at a price that two years ago
they said were impossible; secondly, as patients drift back to
the NHS, for the first time ever you will have noticed huge and
heavy campaigns on television and, indeed, in leaflets from private
health insurers and private hospitals in areas because they are
competing for that business. I understand that. Therefore, they
will not only become more efficient in terms of more prices to
the NHS but to patients themselves. They will offer a better quality
independent health deal, if you like, and then, when they do that
with the NHS and direct to patients, then the private health insurers
will say to the private providers, as they have done, "If
you can provide these operations at that price for the NHS, why
can you not provide them for us?" What I am saying is that
we are driving efficiency in the independent sector as well as
in the public sector. My final comment is this. I have asked Mr
Burns and his colleagues to reflect on whether or not the plans
they have will not unleash greater inefficiency in the independent
sector as well as in the public sector. You may not agree with
that, but I think there is at least—
Mr Burns: We are parting company now.
Q264 Chairman: Thank goodness for that.
Dr Reid: I understand that, but
I think there is a prima facie case for saying that if
you are not buying in bulk and using your market power in the
way we are, buying several tens of thousands of operations and
pushing the price down, but rather there is an incentive to those
10,000 individuals, "Go and buy at your own price anywhere
you like and we will subsidise half of it", the result cannot
but be that everybody's charges go up in the private sector.
Mr Burns: We are not saying that either.
That is a misrepresentation the Secretary of State keeps trying
to put on the record. He knows very well that is not what we are
saying.
Mr Jones: I do not want to tempt Simon
to defend the market.
Mr Burns: Proclaim not defend.
Q265 Mr Jones: In the papers that we
have got there is a great deal of concern about the traditional
hospitals losing custom, and Caroline Dove from NHS Elect has
given us a number of figures. She says that central Middlesex
centres 3,000 spare slots, Ravenscourt Park has 4,000 spare, Kidderminster
has 2,000 spare, Weston-Super-Mare seems to be the only centre
working with no significant spare capacity. You argue that maybe
the total levels of spare capacity are wrong, but, even if those
figures of spare capacity are rather less than that, my constituents
sit waiting for operations for three years and more. If you have
got huge levels of spare capacity, have you offered this spare
capacity to the Welsh National Health Service, because there are
people there who need it, and it would seem that it would also
solve part of the problem that Richard Taylor and David Hinchliffe
have been complaining about?
Dr Reid: First of all, I say the
obvious, Chairman, and that is that I am not responsible for the
Welsh Health Service.
Q266 Mr Jones: No, but I asked a question—
Dr Reid: I understand that and
I am going to answer it, but just in case anybody is reading this
record and may not understand that I am not responsible for the
Welsh centres, I am not. That is the first thing. The second thing
is that the level of spare capacity in the NHS in England, for
which I am responsible, is as outlined by NHS Elect. They have
identified about 9,000 places, I think. That is out of seven million
treatments a year. Let us put it in perspective. That is out of
seven million treatments in and out of the secondary sector of
the NHS.
Q267 Dr Taylor: That is only four treatment
centres out of about 30?
Dr Reid: Yes, but let me just
go through my logic on this. It is out of seven million treatments.
Secondly, it is not the case that the optimum level of a treatment
centre or a hospital is operating to 100% capacity. I have made
that point already.
Q268 Mr Jones: Minister, I have acknowledged
all your caveats in my question. I said you have got spare capacity;
have you offered it to Wales?
Dr Reid: No, because I am coming
to the point. What I am questioning is whether it is all spare
capacity? It is only spare capacity if you assume that you have
to work to 100% of your present potential capacity. That is the
point I am making, Jon. The final point is if there is an element
of it that is truly spare, then there are people waiting in England
longer than I want them to wait; there are people still waiting
in England. There is nobody waiting now, except a handful, more
than nine months for the end part of the journey. By next year
it will be six months and by 2008 it will be an average of 10
weeks, without hidden waits, from beginning to end. I still regard
that as longer than you ought to wait. It is my job to make this
more efficient for the people of England and, as the payment by
results comes in, there is a degree of extra capacity over use
which is necessary not only for the optimum functioning of a hospital
or treatment centre, all things considered, but also to give a
maximum flexibility to patients and to drive the system in a way
that is bringing down the waiting lists in England. If I start
taking that capacity out and saying, "Let's put it elsewhere",
outside the English system for which I am responsible, the driving
forces that have brought down the waiting list in England, which
I was prepared to countenance and people elsewhere are not prepared
to countenance, would be removed from the system. It would be
obvious from the discussion the Chairman and I had at the beginning
that none of these things are done without controversy and the
proof of the pudding is in the eating. Why would I want to go
through all the controversy and then say, "And the benefits
of this will not be given to the constituents of those in England",
with whom I am arguing"? Scotland and Wales will make their
own decisions—I have no problem about that because this
is the nature of devolution—but I am afraid that my task
charged by the Government is to make sure that those who are waiting
long in England get quicker access to services.
Q269 Mr Bradley: I am still grappling
a little with how the funding of the independent centres will
work, and I apologise if to a degree you have already answered
this question. Let me take my own area, Greater Manchester, as
an example and the new surgical treatment centre which will open
early next year. My understanding is that a block contract has
been agreed—and this is South Africa, to take the point
about new consultants coming in—through the Strategic Health
Authority for a sum of money. Is it a requirement of each individual
primary care trust within Greater Manchester to contribute to
the funding of that block contract regardless of their current
referral pattern and purchases and regardless of whether they
have capacity within their budgets to make that contribution?
By that I mean do they have to top-slice their budgets into the
new treatment centre to ensure that the income matches the contract
regardless of maybe their patients' wishes about where they want
to be referred within the acute sector? What is the relationship
between the two? Is it that each individual PCT makes that decision,
or how, as a collective, do the PCTs in Greater Manchester arrive
at the sum of money that is required to match the block contracts
being set up through the Strategic Health Authority?
Dr Reid: If I have unsuccessfully
explained this, Mr Bradley, I would ask the Finance Director to
do it, or perhaps John Bacon. Let me say before he does—and
it is important that all of us understand what is going on here
in the big picture—we are driving things from the centre
because we need to transform the NHS in a huge number of ways—targets,
all sorts of things, including some of these central purchases—at
the same time as we are changing the system, so that by 2008 we
will not have to drive everything from the centre. We do many
things at the moment (for instance targets) which are centrally
directed in order to get the machine, if you like, moving through
its transformation in the full knowledge that the way in which
we do things by 2008 will not be through central directives and
targets in the way we have done in the past but through patient
choice. That is a general dynamic, those two things are going
simultaneously and the central control diktat is giving way gradually
to a system with payment by results, extended patient choice,
transferability of records and all the rest of it, so that by
2008 we will be moving in a direction where, when you look back,
you will see it hugely different from now. That applies to everything.
Let me in that context ask John to comment on central purchasing
versus local autonomy.
Mr Bacon: The way in which we
approached this was to ask the Strategic Health Authority—in
your case Greater Manchester—to work with their PCTs to
establish the amount of capacity they wanted to acquire from the
private sector. Your members will know that that was not without
its difficulties. We have had some local squabbles about how much
that should be, but the way we are proceeding now is against an
agreement between the health authority, the PCTs and ourselves
as to what that volume of activity should be. The cost of that
is principally met by the local PCTs, but where we are paying
a higher rate tariff—because we have to do that to help
market entry and to encourage new players to come into that market—there
is a small premium; nowhere near as much as we would be paying
on the spot market, but a premium above the NHS tariff. We are
subsidising that from the centre. The cost to the local PCTs is
the same as if it was an NHS tariff price. There is a second initiative,
which we call our supplementary orthopaedics initiative, which
has bought 75,000 episodes across the country, where the centre
(ie the Department) is paying the full cost of that to meet very
long waiting lists for orthopaedics. As the Secretary of State
has said, as this matures we would expect, firstly, the price
of the private sector to come in at NHS tariffs, so there would
be no need to subsidise.
Dr Reid: The premium is only the
first time round.
Mr Bacon: Secondly, once we get
into the 2008 and onwards period, we would not be buying blocks
of work in the way that you describe, because we want patients
to have the choice of the private sector, an NHS treatment centre
or, indeed, foundation trust or voluntary sector. So we would
want progressively to move away, as the Secretary of State has
said, from a centrally procured fixed volume contract, but you
have to see this in terms of developing a new approach and new
players into the market.
Q270 Mr Bradley: Will it be therefore,
in that first instance—and I accept it is a moveable feast—in
the first round of the contracts each individual PCT will approve
how much they are going to pay for the new treatment centre?
Mr Bacon: In the contracts that
we are in the process of letting—and I cannot remember whether
we have just let or are just about to let the Manchester one,
it is on the cusp—that will have been by agreement between
the health authority and its PCTs.
Q271 Mr Bradley: Through what mechanism?
Mr Bacon: Through local discussion.
Q272 Mr Bradley: Through whom?
Mr Bacon: Through the Health Authority
chief executive and the PCT chief executives and their boards.
Q273 Mr Bradley: So all the PCT chief
executives together collectively are taking a decision on how
much their PCTs will contribute to the new surgical treatment
centre?
Mr Bacon: This is for individual
PCTs to take that decision. If you remember back to last summer,
we had quite a kerfuffle around an Oxfordshire PCT that was not
content with how much it was being asked. That was an illustration
of how we are ensuring that the PCTs sign up to the volume of
activity that that they want to acquire.
Dr Reid: I would merely add one
thing. Of course, PCTs themselves are not homogenous organisations;
there are all sorts of interest groups inside PCTs. Among PCTs—the
whole discussion we had in Manchester about central build verses
peripheral services, and so on—I reserve a bit of a right
where I think that self-interest, for instance, it could be, and
I do not mention anyone in particular, but if there was a particular
group of surgeons who were objecting to something coming in to
loosen up the market in the way I described earlier, then I would
take that into account when deciding whether to push or to say,
"No, okay, we will accept a local decision."
Q274 Dr Naysmith: Very specifically,
on what Mr Bacon has just said and you were saying earlier on,
Secretary of State, I know that this central direction, encouragement,
discussion that you have been talking about is considered to be
an instruction from the Department that 15% of the kind of activity
we have been talking about should be contracted for with the private
sector. They are not treating that as something like you said
earlier may happen or as in this document says may happen—this
is the National Health Service improvement plan—and I am
not talking about my own area, although I have discussed my own
area as well, but a very senior strategic health authority officer
told me quite clearly it is being treated as an instruction that
you must go for 15%?
Dr Reid: That may be the case.
Let me be quite plain.
Q275 Dr Naysmith: I am trying to get
at whether it is a direct instruction or it is encouragement?
Dr Reid: If you ask me what is
in the benefit of patients.
Q276 Dr Naysmith: I did not ask you that.
Dr Reid: Yes, but that is my every
thought. Every question that I have been asked has actually been
about providers today, with the exception of Jon, who was asking
about the Welsh Health Service, if we would help them out. Almost
every question I have been asked has been about the providers.
I do not approach this from the point of view of the providers;
I approach this unashamedly saying what is in the interest of
working people? That is the patient. It is in the interests of
working people that we have reduced the waiting times, we have
increased the quality of service, we give them diversity of provision
and from that they have the right, the power, the information
and the resources to make their own choice. What do I need in
terms of the balance of the independent sector and NHS direct
employees to provide that? I need about 10 to 15% of all of the
treatments in the NHS done in the independent sector to make that
offer, to make this work to the benefit of the patient, to make
what we used to call a market, but it is a market without the
exchange of money. If you ask me why is it that we have so rapidly
reduced the waiting times for people in this country for heart
operations, and all the rest of it, the reason is choice. People
told me this could not be done, and when we said, "If you
cannot do it in six months, patients will be given the right in
London", 67% of them, incidentally, chose to go elsewhere
and get it quicker and suddenly we found everyone can do it. So
it is not an instruction to people: it is an instruction to people
in the Health Service to put patients first. If they put patients
first, they will give a degree of choice that has hitherto not
been there, but the overall provision of the National Health Service
direct employees will be greater in four years time than it was
three years ago, significantly greater. My final point/comment,
if you want an example, is how does this actually work in practice?
I have just bought 600,000 scans from the independent sector at
one third of the price it will cost me inside the NHS. In other
words, I can buy three times many scans and make them mobile and
make sure that three times many people can get the scans that
they need. Having got 99% of people seeing a consultant within
a fortnight, four times as many getting through quickly means
that you have got a backlog and a bottle neck at the scan side.
I can get three times as many. Why would I not do that?
Q277 Dr Naysmith: Secretary of State,
with respect, you did not answer my question, which was whether
it is an instruction or an encouragement?
Dr Reid: It is an instruction
to give patients the quality of service they should get, and in
doing that they may wish to choose from the widest range and diversity
of provision and give the patient the right to choose. If you
ask me where I envisage this will end up, I do not need more than
10 to 15% of the whole of the NHS, and the 85% of work that has
been done directly by the NHS will be greater than the 100% that
was being done at the beginning. Everyone benefits from this.
Q278 Dr Naysmith: But 15% of current
contracts must be with alternative providers. Is that right?
Dr Reid: No, not that they must
be. John, do you want to comment?
Mr Bacon: We have two requirements
set. Firstly, PCTs should offer a private sector option in their
four or five choices from December 2005. That is the first thing.
We want each PCT to have that.
Q279 Dr Naysmith: That is a kind of heavy
guidance?
Dr Reid: No, it is not. We are
not going to agree on this.
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