Examination of Witnesses (Questions 220
- 226)
THURSDAY 16 MARCH 2006
DR THOMAS
MANN, MR
MIKE PARISH,
MR MARK
ADAMS, MR
PETER MARTIN
AND MR
ALAN PILGRIM
Q220 Mr Campbell: Will you be working
with the local hospitals?
Mr Martin: Absolutely, yes.
Q221 Dr Stoate: Mr Parish, you said
earlier that private fees are much higher than the sort of fees
that you are expected to pay in treatment centres and for surgeons
in particular. What do you think the effect of the ISTCs is on
private practice?
Mr Parish: I think it has two
effects. I have no quantification for this, but I think there
is a direct impact on some private practices' demand, the waiting
list element of that demand and then a general confidence in the
NHS element of that demand because I think the more the public
and companies feel confident in what the NHS can provide the less
motivation there is to procure or provide private health insurance.
Secondly, there is a direct competitive impact in terms of bringing
in new providers to the marketplace because whilst there has been
substantial numbers of overseas' doctors coming to work in the
NHS, they do not need to be on a specialist register to work within
the NHS and because of the nature of their engagement in the NHS
they are not able to establish a private practice. I think this
fear is why we think the doctors have been so vocal in their assault
on the initiative. I think there is a fear that the ISTCs could
be an entry vehicle to doctors setting up private practice in
the UK.
Q222 Dr Stoate: To quote Ken Clarke
from times past, do you think some consultants are feeling nervously
for their wallets in regard to ISTCs?
Mr Parish: Yes, I do.
Mr Adams: I used to run the second
largest PMI company for my sins in the UK and that is a sector
where if the NHS has had much published problems in terms of waiting
lists for MRSA or other issues then it has helped the private
funding sector to grow and prosper because people have said they
want to make an alternative choice for their family. As the NHS
demonstrates that the waiting list issue is fading away and the
average standard of facility is averaged up and that ultimately
it is an integrated sector embracing innovation then I think there
is a real threat to the independent sector on the funding side.
Q223 Mr Burstow: I want to pick up
on something that Mr Parish was talking about earlier on in terms
of risk. You said that in a way the ultimate goal will be that
the private sector is investing "fully at risk". Presumably
Phase 1 was not fully at risk to yourselves and presumably Phase
2 of this programme similarly is not fully at risk. How transparent
do you think it is from the point of view of the taxpayer's interest
and how much the taxpayer is bearing in terms of risk at the moment
and indeed in Phase 2?
Mr Parish: I think there are two
areas of risk, there is demand risk and cost risk. We are fully
at risk on costs, we put forward a price and we either achieve
our objective or we do not. In the interim service that we provided
we did not, there were all sorts of complications in that service
and we lost money, but that is the market, that is the way it
happens. There was plenty of risk being taken even in Wave 1.
In terms of demand risk, it really is a question of when we would
be prepared to go fully at risk and I think that is when we have
got confidence that the market would be in a sense liberated,
although I do not think it can ever be fully liberated because
there needs to be the management of supply and capacity. At that
point, in terms of value to the taxpayer, I think the Department
of Health has got a job to do and I think they have done it very
well in terms of professional procurement to purchase competitively.
I think one needs to be very careful about some of the comparisons
made when you compare the whole price you would get from an independent
sector provider to the NHS tariff which is made up of a wide range
of averages. That tariff does not include the cost of the VAT,
which is significant, it does not include the cost of NHS pensions,
which for us to match would cost us 30-40% of our labour costs,
it is not a like for like comparison. I think when the evaluation
is fully carried out we will see that even Wave 1 is significant
value for money.
Q224 Mr Burstow: In a way the issue
I was picking up on was that the aim would eventually be that
you would be investing fully at risk. The implication of the way
you said that was that you are not currently bearing the full
risk.
Mr Parish: We are not bearing
the full demand risk.
Q225 Mr Burstow: Do you think it
is sufficiently transparent from the point of view of the taxpayer's
interest?
Mr Parish: Yes, I do because the
taxpayer will be able to see via the NHS and the Treasury the
cost of investment and the service provided for that investment
very directly. There is no murkiness in there, it is very direct,
ie that is what it cost and that is what I got, therefore I think
there is transparency.
Dr Mann: Mike put his finger on
the fact that there are two kinds of risk. We are carrying all
of the cost risk and that should not be under-estimated. The cost
risk for the NHS has often been most onerous in major capital
investments, recruitment, retention and other factors. We carry
all that risk when we go into contracts. If you look at many of
the PFI schemes and other major build schemes, they have gone
from £130/140 million to £300/400 million. If that happens
to us after we have signed the contract we will carry that risk.
I am sure all of us have suffered those sorts of risks. I do not
see that risk being mitigated in the future. It is a very important
element of the risk transfer from the public purse to our businesses.
Q226 Mr Burstow: You mentioned earlier
on the question of openness, Dr Mann. Would you be happy for the
details of your contracts to go into the public domain and, if
not, what information should be withheld, and on what basis do
you make that judgment?
Dr Mann: The details we would
not want released are the details that Mike identified around
what are the judgments we make about how we can deliver a service
more cost-effectively and around how we feel we are adding value
to the business. We have a team of people who do that and that
is how we think we get our competitive advantage and I would not
want to lose that. What we would be willing to share is a lot
of information that I think improves clinical practice across
the NHS and amongst us. We have talked about innovation. I have
to say that a lot of this is about diligence, it is about saying
let us be very, very scrupulous about all the little things that
you can do, let us do them. You will recall that the Audit Commission
did a report some years ago about the ways in which hospitals
in the NHS could reduce non-attendances and a range of other things
and they went back some years later and reviewed that and what
they found to their dismay is that only 5 or 10% of these things
had been applied. We would share how we have done a lot of those
things, but the commercial assessments and such like we would
not be willing to share.
Chairman: This has been a very informative
session for us. May I thank you for the evidence that we received
in writing this week. Hopefully at some stage in the future you
will be able to read our report and its recommendations. Thank
you very much for your attendance.
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