Examination of Witnesses (Questions 540
- 559)
WEDNESDAY 26 APRIL 2006
RT HON
PATRICIA HEWITT,
SIR IAN
CARRUTHERS OBE, MR
HUGH TAYLOR
CB AND DR
BILL KIRKUP
Q540 Dr Naysmith: Good morning, Secretary
of State. The questions I am going to ask are partly, really,
historical and it is interesting that since the last time we were
going in detail into this subject on this Committee there has
been a total change of personnel sitting at the top table—and
it is nice to see Sir Ian Carruthers who comes from my part of
the world there, too. Welcome, Sir Ian. The reason I introduced
it in that way is because the first question I am going to ask
you is a historical question. Since none of you were really involved
in it would you agree that there has been a lack of transparency
in the value for money methodology previously? That is really
what we are all circling around.
Ms Hewitt: First of all, I know
you had an extensive session with Ken Anderson and Bob Ricketts
who have been involved in this programme from the outset, and
I believe that Ken Anderson and his team have brought exceptionally
high quality and tough commercial negotiating skills to the Department
of Health, which I think have benefited the Department and benefited
patients, both through the ISTC contract but, also, through the
pharmaceutical contract negotiation. What we were doing with Phase
1 of the ISTCs was new, so of course we have all been learning
through that—and I am sure we will come on to other things
like training where we have also learnt to change policy—
Q541 Dr Naysmith: You are not really
answering my question: whether you think that in the early days
things were perhaps kept too secret and not really revealed to
people who might have had an interest in what was going on.
Ms Hewitt: I do not actually think
that that was the case. I have not seen anything to suggest that
we were hiding information that should have been made public.
I am very impressed by the scrupulous adherence to absolutely
best practice procurement and confidentiality where that is required.
Part of the purpose of the ISTCs was to bring in new providers
and if there had been any question of looseness around commercially
sensitive data we would never have got them in.
Q542 Dr Naysmith: One of your criteria
for assuring value for money in is "selecting the best value
offer received". Under what circumstances could that not
be a necessary criterion? Does it actually mean anything? In any
procurement you are going to have that.
Ms Hewitt: It most certainly does.
I was not involved in the Wave 1 procurement but I have been involved
in other departments in major procurements and public/private
partnership deals, one of which, for instance, was an enormous
outsourcing agreement for National Savings. One of the high level
criteria was best value from the different bids received. Underneath
that was a huge amount of detail about what were the criteria
that then enabled you to judge best value.
Q543 Dr Naysmith: Again, in the same
submission, one of your criteria seems to have been rejecting
any scheme "which was not significantly better" than
prevailing spot purchase rates. Spot purchase rates almost by
definition are always much higher, or tend to be higher, so is
it an appropriate comparator?
Ms Hewitt: It was not being used
as the benchmark, it was being explicitly excluded, and I think
it is very important when you do procurements that you make these
things explicit, and that is what that criteria was doing.
Q544 Dr Naysmith: Sir Ian obviously
wants to come in, but it is not offering the benefits of scale,
or economies of scale, which you would really hope to be getting
if you make that comparison. Is it?
Ms Hewitt: On economies of scale,
the first wave—and indeed the second wave is still fairly
small scale—I agree you would expect to get significant
differences on spot prices—
Q545 Dr Naysmith: If you get spot
rates, then you do not get as much as you can get (?). That is
what I am talking about.
Ms Hewitt: Spot pricing is massively
inefficient. So, in a sense, what the criteria were doing was
saying because spot pricing is massively inefficient anything
that is near the spot price is not good value for money. That
may be common sense but I think it is extremely important that
that was put out there at the outset and the private sector will—
Q546 Dr Naysmith: So the important
thing is it is significantly better?
Ms Hewitt: I believe so, yes.
Sir Ian Carruthers: I think it
is important, as Dr Naysmith has mentioned. I was not in this
role but I can give you an account from how it looked from the
NHS.
Q547 Dr Naysmith: So could I, actually,
from the Bristol experience.
Sir Ian Carruthers: I do not think
there was a lack of transparency but what there was was a process
of evolution. Where we started from was, in actual fact, that
there was a lot of extra capacity needed. We quite often had to
utilise the private sector in varying local circumstances and
quite often there were spot purchases which actually are more
expensive, as a general feature. What then happened—and
this comes back to Dr Taylor's question—is NHS Elect was
established but NHS Elect was only in a defined number of areas.
What then occurred is many people could not or would not travel
quite the distances so that it was limited. Part of the use was
about how those organisations engaged with the NHS and how referrals
were made. In parallel to that, to set this in context, we then
began, in the NHS, a separate development which is the NHS treatment
centre. In fact, if you look at some parts of the country they
are much more weighted to NHS treatment centres than they are
independent sector treatment centres. Quite often the cost basis
for treatment centres was based on a hospital base. So what we
had was an issue around value for money where we still had spot
purchases because there was antipathy to using some of this, and
we had an evolving situation where as facilities grew and as people
were more willing to exercise choice and move, there became a
greater need, really, to tackle the value for money issue. I think
it is for that reason we then moved away from localised procurement
to more nationalised procurement. It is about, really, getting
value for money for the NHS. I think we did that through utilising
things like the G-sup and other methodologies which were about
better value for money for the NHS. The ISTC problem is slightly
different because we were creating completely new capability and
the importance of the new capability was that we quite often had
new situations—and I can speak of a place which is just
over the border in Shepton Mallet, where I know you have taken
evidence from—and there is no doubt that the NHS, even in
an area with very low waiting times, could not have got to the
levels that some of them have. So the real issue was that you
need to see this as an evolution, and the aim was to get value
for money for the NHS. That has overall been achieved because,
actually, the pricing structures of the private sector during
this period of national procurement have equalised in a significant
way and, overall, we are now moving to a position where we are
using our own capacity plus, if I can, use ISTCs as NHS branded
capacity much more effectively. I think the spot purchase has
been eradicated and so on. One of the questions, if I may comment,
has been around commercial-in-confidence and the methodology.
I think the real issue is what is commercially confident? I think
the Secretary of State has indicated that we will look at that,
but I think we need to distinguish the detail because it was in
most instances just a straight procurement exercise which had
to balance the price, the comparator with the NHS and, of course,
the other important factor was about creating more diversity of
provision that would give more local access. In fact, the national
procurements with their local centre are overcoming some of the
difficulties faced in NHS Elect, because people were more willing
to be referred 10 miles from home than they were much bigger distances.
Q548 Dr Naysmith: Thank you for that.
I know, obviously, Secretary of State, you will indicate who you
want to answer the question, but there has been a lot of talk
about spot purchasing rates. You have presumably been measuring
those and you say they are coming down as a result of the activities
that you have been involved in. Is there any way you can give
us an indication of how much these spot purchase rates have come
down and how useful that has been, if it has been?
Ms Hewitt: The premium on spot
purchasing when we started on the ISTC programme was about 40%.
The average premium on the ISTCs is about 11%—and I was
just checking that that was indeed included in the supplementary
memorandum we have given you. There is no real need now for the
NHS to use spot purchasing at all. There has been a transformation
in the structure of the independent sector health care market
in the United Kingdom as a result of what we are doing.
Q549 Dr Naysmith: Did I hear you
to say you were not using spot purchasing at all? There is no
need for the NHS—
Ms Hewitt: There will, no doubt,
be the odd occasion when somebody has got to do it but there is
no real reason why spot purchasing should be featuring in any
significant way within the NHS at the moment. What we have got
is not just the ISTCs, we have also got the G-sup (the supplementary
provision). In my own city, for instance, Leicester, where there
is a Nuffield hospital, through not the ISTC programme but through
the supplementary contract the local NHS uses the Nuffield hospital
for orthopaedic patients who are in danger of breaching the six
month maximum time. They work in a very sensible, collaborative
way; patients are very happy and certainly the consultant I met
at the Nuffield is using his overtime hours in the Nuffield with
the agreement, obviously, of the NHS trust, and it is an arrangement
that works extremely satisfactorily. It has got waiting times
down to a maximum of six months, and for most people, of course,
much less; patient satisfaction is very high and as far as I know,
in that particular health community, there is not any spot purchasing.
What we will do is check what figures we have on current levels
of spot purchasing—
Q550 Dr Naysmith: I have got one
last question in this area and it has already been touched on.
It is this question about the value for money methodology. It
has been reviewed in 2004 and I know the response you have given
is that some of it is confidential, but can you give us any idea
of the sorts of things you are looking for in these changes, because
you have been talking about an evolutionary process and things
changing as we get experience of what was going on. What is it
that you want to get in future that you have not got in the VfM
methodology that we are using up until now?
Ms Hewitt: The outcome we want,
obviously, is high and consistent standards of clinical and non-clinical
quality of care for patients in the NHS and independent sector
providers. We want to get all our providers as close to or below
the NHS tariff prices. So a level playing field here, both in
terms of quality and in terms of cost. That is the goal. We will
get their gradually.
Sir Ian Carruthers: Can I just
add to that? I think also there are other issues we will be looking
to as part of this learning curve. We want future ISTCs to be
much more engaged in training—
Dr Naysmith: I think we are going to
come on to talk about that later. What I was just going to say
is that I hope all this is being monitored and recorded so that
we can actually see the difference in two years' time. Thank you
very much, Secretary of State.
Q551 Anne Milton: Good morning, Secretary
of State. I promise to be very brief. Thank you for coming, particularly
as, clearly, you have a very bad cold.
Ms Hewitt: I am waiting for the
pharmaceutical companies and a brilliant R&D programme to
produce a pill for the common cold!
Q552 Anne Milton: You will be well
looked after here; we have doctors and nurses and pharmacists!
Can I just pick up on something you said about spot purchases?
You said that spot purchase rates were massively inefficient.
The advantage of spot purchase is you get what you pay for. So
if you do not get an operation you do not pay them. Some of the
ISTCs are operating at a fraction of capacity and yet they still
get paid. So they get paid even if they do not do anything. It
is slightly curious to me that, particularly spot rates having
come down, you still feel happy with the ISTCs being paid for,
possibly, only working at 50% or maybe 40% capacity.
Ms Hewitt: Obviously, we would
like to see the ISTCs working at a higher rate of capacity, and
by continuing to open up patient choice so that patients by the
end of 2008 will be able to go to any hospital or treatment centre
anywhere in England that provides the necessary operation we will
actually have a more effective use of capacity right across the
entire NHS—traditional NHS providers and independent sector
providers as well. In the meantime, where we have got particular
cases of low utilisation, we are making that additional capacity
available to other commissioners within the NHS who might wish
to use it for their patients. But I do not think we can have it
both ways, because it was the ISTC programme that drove down the
spot prices, we cannot say: "Oh good, because the spot prices
are low we will abandon the ISCT programme". It was the one
that drove the other.
Q553 Anne Milton: If patients start
using the ISTC so they are working at full capacity and they are
no longer working at 40% capacity, then some of those patients
might also be coming out of the NHS. So you are going to have
hospitals, particularly with payment by results, that are not
performing the operations and they are going to be done in the
ISTC scheme. It is a question about over-capacity.
Ms Hewitt: This really goes to
the heart of our whole approach to the reforms. We are moving
away from a monolithic NHS where, really, the system is designed
far more from a provider point of view than from a patient point
of view; where patient choice is limited (or, in some cases, non-existent)
to a system where patients will have far more choice, in the context
of electives (which is obviously what we are talking about), and
they will have completely free choice by the end of 2008 of any
provider in England that can deliver to the quality that we want
and within the time. On top of that, each of the hospitals, each
of the providers and each of our NHS hospitals will be expected
to take responsibility for understanding the needs of their patients;
making sure they are responding to those in the best possible
way, addressing causes of patient dissatisfaction if those exist,
and where capacity needs to be adjusted either because patients
are saying they prefer one thing and not another or because new
medical practice makes it possible to do things in better ways,
then one of the challenges we face is the NHS becoming more nimble
in responding to those changes in capacity which, as I say, are
driven very often by medical technology as well as by growing
patient choice.
Anne Milton: Thank you very much.
Q554 Mike Penning: This massive effect
that ISTCs have had on the NHS. The policy, as I understand it,
was that ISTCs were brought in to increase the capacity to deal
with waiting lists, and yet your officials have indicated to us
that they are effectively very marginal. I wonder if you can confirm
the figures that there have only been 60,000 procedures by ISTCs
and of the NHS procedures 6 million. My mathematics is surely
not as good as yours, Secretary of State, but that does not seem
to be such a massive effect. Is that correct? Why is this contribution
so significant if so few people have been operated on in ISTCs?
A short answer, please, because we have had lots of long ones.
Ms Hewitt: Indeed, but let me
just respond to the question. I do not think I actually used the
word "massive". The ISTC programme is a small pebble
in a very large pool. You are absolutely right, if you combine
the diagnostics and the electives, we are talking about 250,000
patients so far who have benefited—that is diagnostics as
well as electives—and as you rightly say 6 million elective
operations a year. So it is a very small proportion. However,
even a small pebble in a very large pool can create a lot of ripples.
If you like, that is what I am describing: the additional capacity
which made an important—not the majority difference—difference,
for instance, in getting cataract waiting times down; the fall
in spot prices that we have been talking about and the additional
innovation, for instance, in mobile diagnostic centres, which
in the case of MRI scans helped bring those waiting times down
really quite dramatically.
Q555 Mike Penning: Can we see then
just how small this pebble is and whether or not there is an interpretation
that is trying to make this pebble even slightly bigger than it
perhaps is? What significant part of the 60,000 or the 250,000
you were referring to does the BUPA treatment centre at Redwood,
in those figures, contribute?
Ms Hewitt: I am not sure. About
35,000 elective patients treated so far.
Q556 Mike Penning: The Committee
has a figure of 38,000 so we are pretty close, but that is not
within the ISTC programme. Why were those figures used to boost
the way that the ISTCs have been working where they were there
as contracts with BUPA before the ISTCs started? Surely, they
should not be inside those figures.
Ms Hewitt: I am not sure I follow
your question.
Q557 Mike Penning: You are saying
that a certain amount of work has been done by the ISTCs because
of the excellent work they have done, yet you are using figures
from a contract which is not inside the ISTC programme. It is
pretty simple, really.
Ms Hewitt: There are a number
of different ways in which we use the independent sector. You
are quite right that there is an ISTC programme, specifically
Wave 1 and now Wave 2, there is also the joint venture represented
by BUPA Redwood (there may well be other joint ventures in future)
and there is the G-sup contract. I noticed, as I was going through
the transcript of earlier evidence sessions, that actually both
the questions and the responses dealt with a variety of uses of
the independent sector and not purely the ISTCs.
Q558 Mike Penning: That is not the
question I asked you, Secretary of State. I am asking you why
the figures are within the ISTC programme (in other words, how
successful the ISTCs have been) when the BUPA Redwood centre is
nothing to do with ISTCs; the contract was there before. Why are
those figures inside those successful figures?
Sir Ian Carruthers: The BUPA arrangement
was established before the national procurement, but it is viewed
as a prototype ISTC and, actually, it is therefore different.
It was one of the initial things; almost a pilot to establish
how we went forward. I think you have got to see it in that context,
so to leave the figures out would give a slightly distorted picture
because it is not, if you like, a totally private sector organisation
as some of the other groups would be—the Nuffield, and so
on.
Q559 Mike Penning: I think it is
distorting the figures by saying they are inside an ISCT programme
when they are clearly not.
Ms Hewitt: We can give you both
sets of figures. On the total Wave 1 activity, excluding Redwood
and excluding the supplementary procurement, we are looking at
about 855,000 procedures over five years, and around 11% average
premium is calculated on Wave 1 ISTCs, again without Redwood and
the supplementary catalogue.
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