Examination of Witnesses (Questions 220
- 239)
THURSDAY 1 DECEMBER 2005
SIR NIGEL
CRISP, MR
JOHN BACON,
MR RICHARD
DOUGLAS AND
MR ANDREW
FOSTER
Q220 Mr Campbell: Private sector
involvement: this is a hot potato obviously. From information
provided in previous years by PEQ, the response revealed that
prices paid to (non-ISTC) private hospitals greatly exceeded the
cost. Is this still happening?
Mr Douglas: I think overall where
we have been before was a spot-purchase price. Hospitals going
out and buying things on the spot market for the private sector
was a higher cost than us buying through the independent sector.
We believe that is still the case, although we do not think the
differential is probably as great as it was, partly because the
independent sector programme has started to drive down, to some
extent, the spot prices in the market—so there will be a
difference, but not as significant as before—and we are
tending to focus a lot more now on looking at what is the difference
between the independent sector price and the NHS price rather
than doing the comparison with the spot-market, which was more
appropriate for a time when we had very serious capacity constraints.
There is a difference but it is a reducing difference.
Q221 Mr Campbell: Can I ask you to
provide information on the cost of the independent providers other
than the ISTC?
Mr Douglas: We can provide some
information. It is not very good information, which is one of
the reasons we have not provided it, because it is based on not
a very good data collection, but we can provide the best information
we have got.
Q222 Mr Campbell: It is very important,
because it is a big debate and it is a debate on the floor of
the House of Commons on many occasions, and this information should
be available. Can I follow on to say, when will the trusts and
foundation trusts be permitted to compete with the independent
sector?
Mr Bacon: Forgive me, I missed
your question.
Q223 Mr Campbell: When will the National
Health Trust and Foundation Trust be permitted to compete on price
with the independent sector? Will that ever happen?
Mr Bacon: Where we are moving
towards is a position where essentially the price . . . This relates
to individual patients choosing where they wish to have their
service provided, and we will manage that transaction through
a tariff: so to the purchaser of healthcare the location of the
treatment is neutral, in other words, you pay the same rate as
a purchaser of healthcare, the PCT, to the independent sector
as you would do to an NHS Trust. To the extent that there is any
price difference we would be carrying that in a central pool.
We have evidence already through the programmes we have run that
whilst I would agree that in the first wave of independent sector
treatment centres the price we are paying is above the NHS rate,
for some aspects of it, particularly the diagnostic phases, we
are actually paying a lower rate to the private sector than the
NHS rate. So, we expect a mixture here, but what we are very keen
to do is to ensure that for a patient and for that patient's primary
care trust or practice the decision as to where to be treated
is neutral in price terms. That is very important.
Q224 Mr Campbell: What I am trying
to get at is to see if we can get a level playing field: because
trusts cannot go below the national tariff, whereas the private
sector can, and so we have not got a level playing field here.
I think we have indeed stated our intention that progressively
we will move to a position where there is no premium for the private
sector. In other words, they either compete at the going rate
or they do not.
Mr Douglas: If I could be clear
about the issue of pricing on this. A private sector provider
will not provide services to a PCT at a cost less than the tariff
price. The PCT will face the same price whether they purchase
from the private sector or whether their patients go to the private
sector Foundation Trusts. If a private sector organisation comes
in at a price lower than tariff, so if they bid in at a price
that is 10% lower than tariff, clearly we will not say to them
we are going to pay the full tariff price regardless, what we
will do is we will take that 10% centrally and recycle it in the
system.
Sir Nigel Crisp: And offset it
against elsewhere. We will not force money on people.
Q225 Chairman: Can I just ask you
a question that is ISTC specific. What is the idea behind the
ISTCs? Is it an issue of capacity or of choice?
Mr Bacon: I think when we started
the IS programme, which was some while ago now, 2002, we had a
number of objectives, the first of which was capacity building
because at the time there were clearly capacity constraints to
achieving some of our objectives. One dimension of it was capacity.
We also felt that we would get innovation from different ways
of doing things which would improve productivity, would improve
access to services and would improve the patient experience. As
we have progressed the initiative and as the NHS has developed
its capacity, we now see the advantage much more in the innovation
and productivity than we do on a pure capacity basis. There is
evidence that the arrival of the private sector in a very limited
way—let us be clear here, when we have achieved our second
wave of ISs we will still be less than 10% of the total volume
of electives, so this is at the margin, so at the moment we are
talking about a very small volume being delivered through the
independent sector—the stimulus of the independent sector
coming in, not because they are more dedicated or whatever, they
simply do have some different ideas which it is worth capturing,
stimulate change both in the NHS and even more dramatically in
the indigenous private sector in England, in BUPA and BMI. We
have seen tremendous changes in the way that they operate on the
back of our initiatives. I think this is broadly speaking delivering
the objectives.
Q226 Chairman: I am interested in
this concept. Looking in my particular area of the UK, the second
phase particularly seems to have united the health community throughout
South Yorkshire where the first phase did not; it has united them
against it at this particular stage. It does not look very evidence
based in terms of what the needs are as opposed to the choice
issue. There is not much private sector choice in South Yorkshire,
probably because of its socioeconomic background and it is not
a very rich part of the country so there is not a lot of money
around that has brought on a very active private sector. Do you
think you are playing a role in that respect of ISTCs?
Sir Nigel Crisp: I think we are
playing a role in terms of choice, which I think is part of the
point of opening up a wider range of choices as well as innovation
and capacity.
Q227 Chairman: Do you take into account
the independent sector that is there now and look at the levels
they are working to and their individual capacity now as a part
of putting out the second phase, as it were, of the ISTCs? Is
it a wide picture that you look at?
Sir Nigel Crisp: I think the point
about the existing independent sector in any area is that may
not be available to the NHS because the NHS will be seeking to
purchase at NHS quality levels and also at NHS price. It needs
to be much more of a local judgment as to the range of what you
would take into account.
Q228 Chairman: Who will take the
local judgment?
Sir Nigel Crisp: The discussions
are with the strategic health authorities.
Q229 Chairman: They will take the
final decision in relation to these things, will they?
Sir Nigel Crisp: They will be
part of the final decision.
Q230 Mr Burstow: Can I just ask about
something that puzzled me in something Mr Bacon was saying earlier
on around this whole issue of getting into the diagnostics issues
and understanding what is going on and what the capacity is within
the NHS. Clearly the Department at this stage is still in the
dark about all of that and it does rather beg the question how
the Department could justify on value for money terms letting
contracts for scanning. How could you have done that without knowing
what is going on within the NHS?
Mr Bacon: You are referring, no
doubt, to the Allied Medical issue that we talked about before.
What we did perceive in MRI terms on the basis of the information
we did have which, as I have already said, was limited was we
had clear evidence that people were waiting too long for MRI scans.
Given the nature of the illnesses that one tends to have an MRI
scan for, we thought we would do what we could very quickly to
address the worst of that. What we did was to procure at national
level some mobile scanners which we have targeted very specifically
at places where we had information that there were long waits.
What we did was to say to the SHA at SHA level, "Your share
of this national contract . . ."—
Q231 Mr Burstow: With respect, I
understand all of that and I am fairly familiar with the roll-out.
What I wanted to get at and be very clear about was how could
the Department justify on value for money terms when it did not
have sufficient information, on your admission really, to make
an objective decision?
Mr Bacon: We could perceive from
the information we did have that we had people waiting too long,
point number one. Point number two, the way to begin to address
that was an immediate injection of new capacity to tackle the
long wait, which I doubt people around the room would dissent
from. We did manage to procure at a price below—I do not
think that is giving away anything commercially confidential because
we have said it before—the NHS rate. In value for money
terms, we were purchasing at—
Q232 Mr Burstow: That is helpful.
I am conscious of everyone's time and I just want to move on.
Mr Amess was raising questions about gaps in the response to the
questionnaire we sent. Another such gap is in relation to long-term
capital projects, and in particular in respect of 5.3.1 which
is about publicly funded capital projects where you told us that
the information requested is no longer available in terms of cost
and time overruns. Can you tell us why that information is no
longer available?
Mr Douglas: I will probably have
to come back to you on that, I am afraid. It may have been one
that has gone with the change in data collection but I would need
to check on that.
Q233 Mr Burstow: It does beg the
question how we can make any meaningful comparisons with the way
in which PFI schemes are going forward. It is quite interesting
looking at the paperwork that has been supplied that PFI costs
compared to outline business case costings for PFI projects are
overrunning by as much as 60% in terms of 30 of the biggest projects,
that is £25 million-plus schemes. How can we meaningfully
compare the costs of providing finance from the public sector
against PFI schemes when you do not supply and do not appear to
be collecting that information?
Mr Douglas: If I could return
to that and see if we can re-establish the collection of that
data. It is clearly one of the ones we have stopped as part of
the process of change we have had in the Department. It is probably
one that we should look at re-introducing.
Mr Bacon: I am sure we can do
that. There have been very few significant publicly funded schemes
in the NHS.
Q234 Mr Burstow: Looking, for example,
at earlier figures that were supplied previously, we were told
that 10 of the schemes that were running at something like £10
million as capital costs, their cost overruns on the previous
figures were something like 2.6% compared, probably on a like-for-like
basis, with a 7.5% cost overrun on PFIs, or a 60% overrun if you
just compare it with outline business case figures. There is an
issue here of publicly funded schemes actually coming in at lower
costs and lower overruns than PFI and yet this figure now is not
available to us because you have stopped collecting it so we are
unable to see whether that trend is continuing or not.
Mr Douglas: I think we will have
to look at the like-for-like comparison on that. I do not think
the comparison at the OBC stage would be a like-for-like one.
Mr Burstow: The 7.5% is like-for-like
whereas I accept the 60% may not be.
Q235 Dr Taylor: Can I ask for clarification
on table 5.3.3(c), which is the expenditure profile of capital
spend. This tells us that there are six major PFI schemes that
are operational but what I do not understand—if I can use
my own one in Worcestershire as an example—is it lists the
amount of expenditure in 1998-99, 1999-2000, 2000-01 and 2001-02
and that adds up to the total price of £86.6 million. Does
that mean that was paid and, if so, who paid it?
Mr Douglas: No.
Q236 Dr Taylor: Why do you put it
in as expenditure under those years when it has not actually been
paid?
Mr Douglas: What it tries to show
is the spend profile of the total capital costs. What it is trying
to do is show how much capital investment there was in each of
those schemes in each of those years. We do not pay until the
scheme becomes operational. What it is showing is how much money
would have been spent on developing the scheme by the private
sector over that period.
Q237 Dr Taylor: So the private sector
bore those costs in those years?
Mr Douglas: They would be the
capital costs borne effectively by the private sector.
Q238 Dr Taylor: And we started paying
the mortgage from the moment we moved in?
Mr Douglas: We start paying the
unitary charge from the moment it becomes operational, yes.
Q239 Dr Taylor: Going on to the unitary
charge, I understand why it has increased but could you tell us
how many of the six that are functional have got written into
their contract a surcharge for bed occupancy levels?
Mr Douglas: I could not tell you
that off the top of my head, but I could—
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