House of Commons - Health

Select Committee on Health Fourth Report

3 Assessment of Phase 1

25. In this chapter we first consider the Government's objectives and whether they have been met. Secondly, we look at the main concerns raised by witnesses.

Objectives

26. The ISTC programme has had a number of objectives, but it has proved surprisingly difficult to identify them or establish the weight given to each of them since a different emphasis has been placed on different objectives at different times. The Government's broad goals seem to have been to use the ISTC programme to:

Increase capacity;

Reduce spot purchase prices in the private sector;

Increase choice;

Introduce best practice and innovation and diffuse these through the NHS, and

Through the challenge of competition from ISTCs, stimulate reform and improve efficiency in the NHS (the 'grit in the oyster' argument).

These we consider below as well as examining witnesses' doubts as to whether the goals have been achieved. In our final evidence session with Department of Health officials we were told of another objective for the ISTC scheme:

to assist reconfiguration; for example, existing hospitals might be closed and some of the facilities replaced by an ISTC.

Since this is a feature of Phase 2, it is discussed in the next chapter.

CAPACITY

27. A fundamental objective at the genesis of the ISTC programme was to increase the capacity available to perform elective surgical and diagnostic procedures on NHS patients. The Commercial Director of the Department of Health confirmed to us that "the primary objective was the capacity issue".[27] To ensure that there was a genuine increase in capacity the Department insisted that staff and buildings used in the ISTC programme were additional to those used in the NHS.[28]

28. The Department stressed that the need for increased capacity was assessed locally in capacity plans. Indeed, the Department's Commercial Director, Mr Ken Anderson, was at pains to point out that it would not have been possible to generate the plans at a national level. He told us:

The capacity planning was done at a local economy level. It was not for us to try to determine at our level. We would not have had the capability because we do not have the granularity of data to go out and make those decisions for a local health economy.[29]

He added:

The SHAs in conjunction with the PCTs did an assessment of the capacity needs of the area and, more importantly, they determined whether or not they could fulfil those capacity needs. We received a series of submissions to the Department on the back of that and that was fairly comprehensive work that outlined in detail what the needs were in the local area. That is how we were informed at the departmental level of what the needs were, particularly around capacity.

Mr Anderson explained that, in accordance with these capacity plans, Phase 1 ISTCs were located in areas which had a lack of capacity or long waiting lists.[30]

29. The Department of Health made much of the contribution of ISTCs to bringing down waiting lists and times. The Department pointed out that 250,000 patients had been treated or diagnosed in the independent sector by the end of 2005,[31] although only a minority of these—50,000—were treated in the mainstream ISTC programme, the rest representing independent provision of procedures not in the ISTC programme such as MRI scans.[32] The record on cataract operations was, we were told, particularly impressive. The Secretary of State told the Committee on 26 April:

If you look at the number of additional operations (for cataracts) that had to be done to get those waiting times down to a maximum of just three months, around a third, I think, of those additional operations were done by the ISTCs—not the majority but nonetheless a significant contribution.[33]

30. This view was fiercely disputed by the Royal College of Ophthalmologists. In written evidence, the College described the contribution of ISTCs to reducing waiting lists and times as "very little as waiting times for cataract surgery in England came down before the cataract ISTCs became operational".[34] The Royal College informed us that the ISTCs had led to an increase in capacity of about 7% to date (March 2006); only 20,000 cataracts had been performed in ISTCs.[35] The College's representative, Mr Simon Kelly, told us that "we [NHS providers] are able to do the same amount of cataract surgery as the independent sector do in the schemes".[36]

31. In general, the additional capacity has been modest in size: as of December 2005, ISTCs had performed 44,000 elective surgical procedures and 9,000 diagnostic procedures, with Phase 1 centres expected to perform an average of 170,000 Finished Consultant Episodes (FCEs) each year over a five-year period.[37] By contrast, the NHS as a whole performs around 5.6 million elective FCEs each year.[38]

32. It is not entirely clear how necessary the additional capacity provided by the ISTCs was. A number of ISTCs are operating significantly below capacity, a point which the Secretary of State conceded.[39] We visited the Will Adams NHS Treatment Centre in Gillingham, a facility operated by Mercury Health, where we were told that the centre was operating at around 50% of its capacity.[40] In oral evidence, we heard a similar story from the NHS Alliance and others. It was claimed that one of the reasons for unused capacity was a reluctance on the part of some GPs and, indeed, some patients to use ISTCs.[41] The fact that there is substantial unused capacity within the ISTC programme casts doubt on the assertion that ISTCs were necessary to increase capacity.

33. If there had been a severe shortage of capacity, the ISTC programme should have had little effect on capacity utilisation of NHS facilities. This has not been the case; according to NHS Elect, the introduction of ISTCs has led to under-utilisation of NHS Treatment Centres (because of the 'take or pay' contract[42]).

34. We heard evidence that, in one part of the country at least, ISTCs were not established in accordance with local capacity plans, which had been agreed with local health providers, as the Department of Health had assured us was the case. Ms Jane Hanna, a former Non-Executive Director of South-West Oxfordshire Primary Care Trust, told us that in Oxfordshire, independent provision was imposed on local NHS providers against their wishes. She told us that the PCT Board voted not to approve a contract with Netcare UK for a private cataract unit. The Board believed it was not in the interests of the local population, since it would involve the transfer of work away from an NHS facility with an excellent reputation, which was already due to meet the Department of Health's six-month waiting time target. Subsequently, Ms Hanna alleges, the Board was placed under pressure by the Department to change its mind, and "policy was imposed through private, informal methods which included threats and bullying".[43] Although Mr Anderson of the Department of Health claimed that he had no evidence that such bullying took place,[44] nevertheless, Ms Hanna's allegations cast serious doubts on the degree to which local autonomy was respected, and therefore calls into question a central plank of the Department of Health's argument in favour of the locating of ISTCs.

35. In evidence to the Committee, the Department of Health conceded that ISTCs have not made a major contribution to capacity or reducing waiting lists; Mr Bob Ricketts, Head of Demand Side Reform and initially responsible for the NHS Treatment Centre programme, said:

I have been very clear that the majority of the contribution even in cataracts was from the NHS […] I would certainly want to go on record as saying that, in terms of delivering three months for cataracts, the NHS did it because at the time the majority of the facilities were NHS facilities.[45]

ISTCs have not made a major direct contribution to increasing capacity, as the Department of Health has admitted. It is far from obvious that the capacity provided by the ISTCs was needed in all the areas where Phase 1 ISTCs have been built, despite claims by the Department that capacity needs were assessed locally.

36. There is also concern that figures relating to the ISTC programme and its productivity have been subject to a degree of misrepresentation, witting or unwitting, in some of the Department of Health's public statements. It has not always been made clear whether such figures include the results from BUPA Redwood, which has treated nearly 40,000 patients to date. BUPA Redwood was established before the ISTC programme was commissioned, and, according to the Acting Chief Executive of the NHS, Sir Ian Carruthers, "it is viewed as a prototype ISTC and, actually, it is therefore different".[46] However, it has been far and away the most productive of the treatment centres to date, and its turnover seems to have been conflated in some situations with that of the mainstream ISTC programme, unrealistically boosting the figures for ISTCs. The Secretary of State was asked what part of the figure of 60,000 patients treated by ISTCs per year was taken from BUPA Redwood. She admitted, "I am not sure. About 35,000 elective patients treated so far."[47] We are concerned that the Department has attempted to misrepresent the situation by presenting the BUPA Redwood figures as procedures performed by the mainstream ISTC programme.

SPOT PURCHASE PRICE IN THE PRIVATE SECTOR

37. Before the introduction of ISTCs, the NHS had made use of the independent sector on an ad hoc basis for some years. Patients were treated by independent providers at the NHS's expense when extra capacity was required to meet targets or speed up treatment; this is known as spot purchasing. The Secretary of State explained:

We mobilised spare capacity that was sitting around in the private sector of the kind that was made visible to patients when they were told, as they so often were, "Well, of course, if you have it done on the NHS you will have to wait 12, 15 or 18 months (whatever it was) but if you would like to go private we can do it for you next week". We said, quite rightly: "If they can do it next week they can do it on the NHS".[48]

38. Inevitably, a more systematised engagement between the NHS and the independent sector has altered this relationship. Traditionally, the NHS paid independent sector providers a premium of 40-100% over reference costs. Following the announcement of the introduction of the ISTC programme, the healthcare sector has seen a downward trend in spot prices. We also heard that the ISTC programme has acted to drive down prices in the wider private healthcare sector. Mr Robin Smith, Chief Executive of Mendip PCT claimed that fees for some operations had fallen by as much as 50% as a result of the existence of ISTCs.[49] ISTCs have had a significant effect on the spot purchase price in the private sector and on charges in the private sector more generally.

39. Initially, following the introduction of ISTCs, more purchases were made from the private sector but reliance on spot purchasing has declined to a point that the Secretary of State now believes that: "there is no real need for the NHS to use spot purchasing at all."[50] If this is the case, the level of the spot purchase price is no longer strictly relevant to the NHS. Moreover, spot purchasing was always regarded as a necessary evil to meet temporary capacity shortages rather than an integral part of NHS procurement, and the introduction of additional capacity would therefore inevitably lessen the need to rely on spot purchasing.

CHOICE

40. Another objective of the ISTC programme was the extension of patient choice. Mr Ricketts explained that this aim had been central to the programme from the outset.

Choice was at a very early stage of development. When Alan Milburn announced the first wave of the procurement in December 2002 he put the emphasis on cutting waiting times, but he also referred to an objective which was to increase patient choice clearly with a view that in three years' time we would have to offer choice.[51]

The point was reiterated by Sir Ian Carruthers, who said that "ISTCs are […] trying to break the monopoly [of the NHS] so that consumers can actually have choice".[52]

41. ISTCs do offer some patients the opportunity to receive treatment earlier than they would obtain it in an NHS hospital; they also provide a choice of location. On the other hand, witnesses pointed to a number of limitations. We were told that ISTCs might reduce choice in the long run if they led to the closure of NHS facilities.[53] It was also stressed that patients could not make an informed choice without proper, intelligible and comparable clinical data from ISTCs and NHS facilities.[54] The Department of Health conceded that data relating to complication rates and other measures of clinical quality are not available across the board of NHS facilities and ISTCs.[55] Mr Ricketts admitted that, under the circumstances, the patient would "not [be] making as informed a choice".[56] ISTCs have for the present increased choice, offering more locations and earlier treatments. However, without information relating to clinical quality, patients are not offered an informed choice.

BEST PRACTICE AND INNOVATION

42. The Department of Health also maintained both that ISTCs embody best practice and innovative techniques and that innovation which occurs in ISTCs will be diffused more quickly through the NHS than innovation occurring in NHS Treatment Centres and other facilities.

43. It is argued that ISTCs are in a better position to innovate since they are new and not constrained by existing practices. Representatives of the independent providers told us that, while they were not unique in promoting innovation, they were driven to make it as widespread as possible because "if we do not provide that best practice in the way we set out, we will not exist. Our goal is to be a long-term player as part of the NHS. Therefore we live or fall by the implementation of our best practice."[57] The Secretary of State stressed the unique role which ISTCs play:

It is actually much easier not just to innovate, but to embed every aspect of best practice in a total system if you are starting on a greenfield site and you do not have established ways of working […] that is probably one of the main reasons why in 2002 in the very early stages of this the NHS Modernisation Agency reported that good practices that they identified at the time in the NHS treatment centres were not widespread, nor did any treatment centre embody more than a few of them, whereas actually a lot of the gains are to be found if you have every aspect of best practice in every aspect of care and you try to get the whole lot together.[58]

44. The Department identified a number of examples of innovation at ISTCs, including:

The use of mobile units to improve access to services for patients in remote areas;
The construction of facilities based around patient flow;
Streamlining the supply of prostheses so that a smaller range is used, allowing theatre staff to become more proficient and specialised in their use;
Performing primary joint replacement under local[59] rather than general anaesthesia to reduce patient stay, and
Blood conservancy and recycling techniques to reduce the need for transfusions.[60]

Others claimed that most of these practices were already occurring in the NHS. The Department stressed that, as a result of the innovations, ISTCs were able to carry out considerably more procedures than the NHS. The Secretary of State told us that the best ISTCs were performing, for example, six to seven arthroscopies per day compared to only three or four in the NHS,[61] while the mobile ophthalmology units operated by Netcare UK were delivering as many as 20 cases per day, compared to 12 to 15 in the NHS.[62]

45. Several witnesses doubted that ISTCs were especially innovative. Mr Simon Kelly of the Royal College of Ophthalmologists told us that he saw no innovation in cataract surgery in Phase 1 of the ISTC programme that was not also practised within the NHS.[63] The President of the Royal College of Surgeons of England, Mr Bernard Ribeiro, conceded that the NHS could learn lessons from the independent sector—he identified the rationalisation of surgical equipment as an example—but countered that "the experiment had already been done" in NHS Treatment Centres, and was not a function of ISTCs' independent status.[64] The President of the British Orthopaedic Association (BOA), Mr Ian Leslie, pointed out that the 'innovative' blood recycling techniques to which the Department of Health had referred had in fact been employed in the NHS for at least two years.[65] The Healthcare Commission supplied a supplementary memorandum which dealt with the issue of innovation and good practice. It pointed to similar examples as the Department of Health—the use of mobile facilities, blood conservancy and recycling techniques, greater use of local rather than general anaesthesia—but noted that these "are not exclusive to ISTCs".[66]

46. We were also told that, since ISTCs did no training and by their very nature undertook the simpler cases, it would be very surprising if they did not appear more 'efficient' than NHS facilities. The NHS Confederation warned that:

Claims for very much greater productivity and lower lengths of stay in ISTCs need to be handled with caution as there may have been differences in the cases selected by commissioners and the stand-alone nature of ISTCs means that some cases are not appropriate for this type of service because of their anaesthetic risk.[67]

47. Witnesses stressed that it was important to compare like with like. The Royal College of Surgeons informed us that, while ISTCs performed more procedures per day that the NHS in general, so did NHS Treatment Centres, "an effective means for the separation of elective from emergency work on the same site".[68] Indeed, the Department's own report on NHS Treatment Centres in January 2005 is very positive about their achievements. It praised the productivity and innovation of treatment centres, drawing attention to several examples from within the NHS Treatment Centre programme; for example, of the Nuffield Orthopaedic Centre in Oxford, it reported that "care pathways were written with primary care involvement resulting in a reduction in the length of stay from a range of twelve to fourteen days to just five days", while it noted that, at Goole, the average length of stay in orthopaedics had been reduced from twelve to five-and-a-half to six days thanks to new pre-operative assessment procedures.[69] The Woodland NHS Treatment Centre at Dartford which we visited was very efficient; for example, it had a theatre utilisation rate of 90%.

48. Innovation in ISTCs is largely a matter of better processes and clinical management rather than surgical techniques or technological advances. It is probable that it has been driven by the regular and consistent case-mix and stems from the 'elective surgery-only' status of all treatment centres rather than the independent sector's involvement in the treatment centre programme.

49. ISTCs have embodied good practice and introduced innovative techniques, but good practice and innovation can also be found in NHS Treatment Centres and other parts of the NHS. ISTCs are not necessarily more efficient than NHS Treatment Centres such as Dartford.

50. The Secretary of State also argued that ISTCs were driving the diffusion of best practice and innovation through the NHS; they were better at doing this than NHS Treatment Centres. She told us:

What the system, taken as a whole, has been very poor at doing is incentivising best practice […] by putting more diversity and more competition into the NHS as a whole we are incentivising best practice and innovation throughout the whole service.[70]

Asked to give examples of ways in which ISTCs were driving best practice in the NHS, the Secretary of State promised us a supplementary memorandum.[71] While the memorandum cautioned that innovation and best practice could also be found in the NHS, it identified four areas in which ISTCs regularly exemplified such best practice and improved productivity:

Efficient administration and working methods, for example in primary care screening, patient reminders and a 12-hour theatre day, six days a week;
Maximising theatre usage, with admission and recovery areas close to theatre and minimised bed transfers;
Minimising time spent by patients under the knife, for example through local rather than general anaesthesia, the streamlining of procedures through a limited range of prostheses and the repeat exposure of operating teams, leading to greater efficiency, and
Speeding up recovery to reduce bed time, increase the facility's productivity and enhance the patient experience, including the use of chair-based post-operative recovery and a discharge lounge.[72]

51. The memorandum gives examples of good practice and efficiency in ISTCs but does not answer the question we posed about the effect of ISTC practice on the NHS. Indeed, we were not given the evidence to assess how, to what extent and how quickly best practice in the ISTCs was diffused through the NHS. A number of witnesses disputed the unique role of ISTCs in spreading best practice. Several argued that, where there had been change to working practices in the NHS, they were not related to the independent sector and denied that the ISTC programme had acted as a stimulus.[73] NHS Elect thought that the role of ISTCs in stimulating innovation had been "limited", partly because locally-developed proposals for collaboration between ISTCs and NHS providers had found little support from the centre, representing a "lost opportunity for sharing of innovation and for the creative use of existing facilities".[74] Equally, the BMA noted that "evidence of [the diffusion of best practice] is lacking" and argued that the lack of integration between ISTCs and the NHS could in fact hinder the spread of best practice.[75] The Department claims that ISTCs drive the adoption of good practice and innovation in the NHS, but we received no convincing evidence which proved that NHS facilities were adopting in any systematic way techniques pioneered in ISTCs.

THE CHALLENGE FROM ISTCS: THE EFFECT ON THE NHS

52. The final objective of the ISTC programme is to stimulate the NHS to adopt more efficient practices through the threat of competition. To put it colloquially, the ISTCs act as the 'grit in the oyster'. Sir Ian Carruthers told us that "the most important impact is the impact they [ISTCs] often have on the local NHS which is about how they improve their practice".[76] Mr Robin Smith said that "the best way to improve performance is to introduce a degree of challenge".[77] Part of the argument is theoretical: it is claimed that there is evidence across economies that competition provides for gains in speed and variety of service as compared to monopoly.[78] It was suggested that in Sweden greater pluralism had led to a reduction in waiting times.

53. The evidence that the NHS has responded to the challenge of ISTCs is set out below. First, the announcement of the ISTCs has at the very least coincided with unprecedented falls in waiting times for some procedures which had had the longest waiting lists for many years. It may be difficult to prove causation, but there has certainly been a coincidence in time, which means that some effect from the ISTCs cannot be ruled out. Secondly, the reductions in waiting times have been greater in procedures covered by the ISTCs than in elective procedures such as prolapse and hernia repair where the ISTCs have not offered much additional service.

54. The ISTCs were also starting against a background of long-running problems in increasing day surgery in the NHS. An Audit Commission report recorded some progress since 1998 but estimated that, with better management of the existing resources, there could be 120,000 more treatments a year.[79] The NHS had not been able to deliver such treatments and many of the difficulties in using resources efficiently had persisted despite significant investment in day surgery.

55. To demonstrate the effect which the ISTC programme had had, the Secretary of State provided the graph below.

Provided to the Committee by the Department of Health

56. However, it could be argued that the graph indicates not a causal effect but a coincidence. Other factors have been more important than ISTCs in reducing waiting lists. The NHS Confederation told us that "the prospect of ISTC competition" had encouraged the NHS to become more productive, but that Government-imposed waiting list targets had also played a role in shaking up the NHS.[80] Waiting times for procedures covered by ISTCs have declined most quickly, but these are often the procedures which the NHS has been instructed to target. The threat of competition from the ISTCs may have had a significant effect on the NHS. This factor may be the most important contribution made by the ISTC programme. However, the evidence is largely anecdotal. Waiting lists have declined since the introduction of ISTCs, but it is unclear how far this has happened because the NHS has changed in response to the ISTCs or because of additional NHS spending and the intense focus placed on waiting list targets over this period. We are surprised that the Department has made no attempt systematically to assess and quantify the effect of competition from ISTCs on the NHS. Given its importance, the Department should have ensured that this was done from the beginning of the ISTC programme in 2003.

Concerns

57. A range of witnesses, from professional bodies and trades unions to patient groups and their representatives, voiced concerns about the ISTC programme. These concerns fell into the following broad categories:

Effect on pay and conditions;

Effect on NHS finances, and

Value for money.

ADDITIONALITY

58. In Phase 1, ISTCs were forbidden to employ anyone who worked for an NHS secondary care organisation, or who had worked for such an organisation within the previous six months. According to the Department of Health, the policy "was designed to prevent a draining of NHS human resource capacity" and to ensure that the new capacity was genuinely 'additional'—hence the term the 'additionality' principle.[81] Mr Anderson stressed:

As a country we did not have at our disposal the number of nurses and doctors that we needed to perform procedures and to bring the waiting lists down. It was a very specific part of policy that looked at ensuring bringing in that extra capacity both in terms of buildings, people and clinicians.[82]

59. We received conflicting evidence about the value of the additionality principle. UNISON defended additionality as an important tool to prevent the poaching of NHS staff by the private sector.[83] Amicus agreed; its Health Sector Officer, Mr Barrie Brown, told us:

If you are increasing capacity one thing we do not want to see is the risk […] of losing highly experienced qualified staff from the NHS to work in the ISTC where we are increasing capacity but losing part of the NHS at the same time.[84]

The policy was also supported by Mr Mike Parish, Chief Executive Officer of Care UK, who said that "if additionality had not applied to date and if it did not apply going forwards then we would be heavily criticised for causing a supply shortage problem within the NHS, which is quite possibly what could be the case".[85]

60. In contrast, the Chief Executive Officer of Mercury Health, Mr Peter Martin, told us that additionality had been a hindrance:

I do not think it is clinically the best solution […] I think it has hindered developing close partnerships locally. It has hindered integration with the local health economy. I personally believe that the best overall solution for the Department and the NHS is by providing clinically robust solutions and high quality but on a cost-effective basis in this mixed economy where we have a mix of UK doctors and overseas doctors, and wave one did not allow us to do that.[86]

Additionality has also been seen as having an adverse effect on the quality of care which we now discuss.

QUALITY OF CARE

61. A significant number of witnesses, including patients and professional bodies, criticised the quality of care provided to patients in ISTCs. This was blamed by some on the use of foreign-trained clinicians (because of the additionality principle). Many foreign-trained doctors do currently work in the NHS and are integral to the workforce. However, they have been integrated into the system over a long period of time. By contrast, there are overseas surgeons employed in ISTCs who have no experience of working in the UK or in the NHS. They might be unfamiliar with processes within the NHS, surgical techniques or equipment, and might have language problems. Some surgeons working in ISTCs, albeit a decreasing number, have come to the UK to work for a weekend or a few weeks, and are therefore often unable to follow up, or even be aware of, complications.

62. ISTC providers stated that the level of complications and unexpected transfers back to NHS facilities were low; they provide care of the same or a higher standard than that provided by the NHS.

63. Many others disagree. In evidence to the Committee, the BOA claimed that orthopaedic surgeons working in the NHS had seen above-average revision and re-admission rates for patients who had been treated in ISTCs.[87] They claimed that there were revision rates of 2.3% in ISTCs, compared to only 0.7% in the NHS.[88] The organisation described stories of "overseas surgeons inserting unfamiliar prostheses, not cementing those designed to be cemented etc".[89] The BOA added that the consequences of defective prosthesis and surgical error might not be apparent for two or three years. The Royal Colleges and the BMA also voiced concern about the quality of care in ISTCs. The Royal College of Surgeons of England told us of "increasing evidence" that ISTCs were unable to manage complications "with consequent transfer to existing NHS facilities and on occasions to the consultant to whom the patient was initially referred".[90]

64. However, most witnesses agreed that the evidence was not currently available to compare clinical standards such as complication rates in NHS Treatment Centres and ISTCs. The BOA conceded that its evidence was anecdotal, and argued for more rigorous auditing of the work done in ISTCs.[91] Similarly, the BMA alluded to concerns about surgical standards, suggesting that service fragmentation and the introduction of competition could undermine the quality of clinical care, but admitted that there was not sufficient data to reach a satisfactory conclusion on the matter.[92]

65. The ISTCs do collect a substantial body of data based on 26 Key Performance Indicators (KPIs), with a subset of nearly 100 overall indicators as part of their contractual obligations. The KPIs represent a broad range of performance indicators, from the logistical (KPI 1 records the percentage of procedures not performed because the patient did not attend) through the clinical (KPI 4 measures the percentage of patients who were returned to theatre unexpectedly) to measures of patient experience (KPI 18 demonstrates patient satisfaction by a monthly survey of 10% of all patients).[93] The measures pointed to extremely high rates of patient satisfaction.[94] Nevertheless, most of the KPIs are a measure of process rather than quality; for example, quality of life changes have not yet been evaluated. There are few clinical KPIs.

66. The ISTCs supplied the Committee with data which they collect. Mr Parish of Care UK explained that the data collected, based on the 26 KPIs stipulated in their contracts:

Is […] audited locally by the PCT, and obviously the Healthcare Commission when they review it. It is made available within the unit to patients. We focus on continuing improvement and therefore each of those statistics is reviewed on an ongoing basis to seek improvement.[95]

He was supported in this by Dr Thomas Mann, Chief Executive of Capio UK, who told us that:

The data is collected from all of us for our ISTC contract. Every month there is a review of the data and a scrutiny of the results of that data, which is jointly undertaken between the NHS and our own people in a group that has a majority from the NHS locally.[96]

67. The independent providers were at pains to stress that these data sets were not collected simply because they were a contractual requirement, but also because they were a critical part of the monitoring of clinical standards.[97] Furthermore, many providers make extensive use of patient satisfaction surveys.[98]

68. There has been an overview study, conducted by the National Centre for Health Outcomes Development (NCHOD),[99] which compared ISTC data with similar data from the NHS. The preliminary report[100] in October 2005 based on the 26 contractual KPIs collected by four ISTC schemes found that:

There is no statistically significant difference in the proportion of patients readmitted [to a hospital after their initial procedures had been carried out] between patients treated in NHS hospitals and NHS patients treated by the independent sector.[101]

However, the report was unable to make comparisons across a wide range of quality measures.

69. Dr Foster Intelligence sent us evidence arguing that there was a good deal of comparable data. However, the organisation admitted that there were several important caveats which must attach to any comparisons. ISTCs are relatively recent creations and therefore the volumes of activity are not "at the necessary level for meaningful analysis"; in some cases, the coding of activity is poor; several ISTC providers operate a number of sites, requiring a high degree of accuracy of coding; and some data which is applicable to ISTCs may be collected by the trust which subcontracted the procedures to the independent sector.[102] Coding is important: it needs to be identical for procedures in the NHS and ISTCs and currently is not.

70. Ms Anna Walker, the Chief Executive of the Healthcare Commission which is responsible for regulating standards within the independent sector, cautioned that comparisons between the ISTC programme and NHS facilities were difficult to make. For example, while reports of serious untoward incidents in ISTCs were made to the Healthcare Commission, similar reports about NHS facilities would be made to Strategic Health Authorities.[103] In written evidence, the Commission underlined this point, also suggesting that the short length of time the ISTC programme had been running made it doubly difficult to make a comparative assessment.[104] It summarised the problem:

Routine data and information reporting does not exist for the independent sector in the same way it does for the NHS […] most NHS information is collected at institutional level, whereas ISTCs equate to sub-departments of hospitals.[105]

71. Our adviser, Professor Sir Ara Darzi, submitted a brief memorandum, stressing that NHS trusts and ISTCs should collect standardised data. He informed us:

There should be a standardised method of capturing data for all patients, regardless of their provider. Quality of life assessment should go beyond a standardised questionnaire—it needs to be multi-faceted, procedure- or disease-specific, and should be centrally collected. Given the narrow range of procedures performed in ISTCs, procedure-specific information should be captured and useful comparisons of case-mix should be possible (ideally, risk-adjusted outcomes should be assessed). This should be applied to both the NHS and ISTCs. In particular, coding needs to be identical in the NHS and in ISTCs for the same procedures, and this is not currently the case. Quality measures (ideally risk-adjusted, prospectively collected, procedure- and disease-specific) should be centrally collected in both NHS Treatment Centres and ISTCs.[106]

72. There are examples of poor care in ISTCs, as there are in the NHS. However, in the absence of the necessary comparable data from both NHS Treatment Centres and ISTCs, there is not the statistical evidence to suggest that standards are different. The Department should have ensured that such data were collected from both providers and published in order accurately to assess quality of care, complication rates and other quality measures. We are concerned that currently only eight of the 26 KPIs are clinical indicators. We welcome the Healthcare Commission's review of the quality of care in ISTCs which the Chief Medical Officer has requested.

73. Given the difficulty in making comparisons, we are dismayed at the strident and alarmist tone of some criticisms of clinical standards in ISTCs on the basis of anecdotal evidence, highlighted by the BOA's questionable claim that there are revision rates of 2.3% in ISTCs.

74. There are also worries about the procedures for vetting foreign-trained doctors. Professor Sir Graeme Catto, President of the General Medical Council, explained that all doctors working in ISTCs are required to be registered with the GMC. However, he sounded a note of caution, adding that:

Being on the medical register does not mean that a doctor is necessarily entirely competent to work in all environments or is necessarily able to work unsupervised or even able to practise all of the procedures within their given speciality.[107]

Sir Graeme went on to say that the GMC's hands are to some extent tied because the European Commission's directive on Mutual Recognition of Professional Qualifications requires doctors from the European Economic Area[108] who are accredited specialists in their own country to be accepted as such in the UK.[109] He was supported in this by Professor Peter Rubin, the Chairman of the Postgraduate Medical Education and Training Board (PMETB) who told us:

Whatever the EU says about the equivalence, there may not be equivalence in terms of the culture in which a doctor worked and all sorts of differences may exist, so it is for the employer to look very carefully at what every individual doctor has done in their country of origin.[110]

75. Employers stressed that they took their responsibilities very seriously. Mercury Health claimed in its report to the HCC that its appointment procedures were the same if not more rigorous than those of the NHS. On the other hand, the BMA, BOA, RCP, RCOA and others were all critical of the procedures. Several witnesses argued for a more robust and transparent appointment procedure similar to those used in the NHS. The Royal College of Anaesthetists suggested that "were appointments [in ISTCs] subject to the current DoH Guidance to Advisory Appointment Committees an additional layer of discernment would exist", and pointed to the example of Foundation Trusts, which were not obliged to follow the Department's guidance, but many of which did.[111] The Healthcare Commission made a similar proposal, and noted that one independent provider operating under the GSup contract had already reviewed its recruitment procedures with a view to strengthening them.[112]

76. As a result of the European legislation, the regulation of foreign-trained EEA clinicians, who make up the majority of doctors in ISTCs, is not as rigorous as it should be. The GMC made it clear to us that it had reservations about the robustness of the current regulatory system for doctors who qualified outside the UK. The fact that language tests cannot be imposed on doctors from the EEA (although they can be on international medical graduates) and that the GMC has no discretion in accepting clinicians from the EEA who are registered as specialists in their home country are causes of concern. As a result, scrutiny of a foreign-trained doctor's fitness to practise in a given set of circumstances is effectively passed on to the employers. In view of the limited role of the GMC in the accreditation of EU doctors, the appointment procedures used by ISTCs must be carefully monitored. It is essential that the Department stresses to those who employ EEA qualified doctors the responsibility they have to ensure that these doctors are proficient. As a safeguard we recommend that ISTCs use the same appointment procedures as the NHS. In addition, ISTC clinical appointments for overseas doctors should incorporate a standardised, independent assessment system based on competency.

INTEGRATION

77. ISTCs are not well integrated into the NHS. According to the NHS Alliance, in Phase 1 of the ISTC programme, there had been a "lack of widespread clinical engagement with local GPs and NHS hospital consultants", as a result of which "local clinicians in both primary and secondary care have felt disengaged and angered by the lack of a meaningful dialogue regarding local clinical issues and their interest, commitment or willingness to work with the ISTCs".[113] The BMA criticised a "lack of robust communication channels between ISTC clinicians in treatment centres and those in local NHS services", and pointed to a survey of its members which demonstrated that nearly 75% of respondents were unable to discuss patient cases with ISTC staff, compared with only 20% for an NHS treatment centre.[114]

78. The problem is exacerbated by the physical separation of many ISTCs from the NHS. The President of the Royal College of Anaesthetists, Dr (now Sir) Peter Simpson, for example, explained that relatively straightforward surgical procedures sometimes required more complex anaesthesia, "A laparoscopy, keyhole surgery in the abdomen, is quite a complicated anaesthetic and therefore not necessarily transferable to remote sites all the time".[115]

79. The ISTCs are also concerned about poor integration with the NHS. During our visit to the Will Adams Treatment Centre at Gillingham, staff told us that one of the reasons that it was operating significantly under capacity was the unwillingness of some local GPs to refer patients to an independent sector facility. Similar problems affected the ISTC in Nottingham.

80. In a supplementary memorandum, the Department of Health acknowledged some of the problems which had affected the Will Adams Treatment Centre. It explained that an executive group had been created including the Chief Executives of Medway PCT, the acute trust and senior representatives from Mercury Health, to focus on ways in which the centre could be more efficiently used and relationships between the centre and the local NHS could be improved.[116]

81. However, poor integration between ISTCs and the local NHS is not inevitable. The Chief Executive of Mendip PCT told us that there had been a high level of clinical engagement between the Shepton Mallet Treatment Centre and local NHS facilities within Mendip PCT.[117] Mrs Pauline Quan Arrow, the Chair of Southampton PCT, was similarly positive about co-operation between the NHS and the independent sector.[118] Even though the Will Adams Treatment Centre had difficulties with local GPs, it believed that it had a perfectly satisfactory relationship with the local NHS hospital which had signed a service agreement to handle any complications.

82. Nevertheless, the Department admits that some ISTCs are poorly integrated into the NHS. In our view, too many fall into this category. We were informed of notable exceptions such as the Shepton Mallet Treatment Centre, which show that with the right approach it is possible to engage NHS doctors and other staff in the work of ISTCs. We discuss ways of improving integration in the next chapter.

TRAINING

83. The Department of Health claimed that ISTCs "offer an ideal training environment over more traditional NHS settings" since they were predicated on regular and uninterrupted work flow and a high volume of procedures.[119] Some training takes place; for example, the facility operated by Mercury Health at Haywards Heath will be able to train 20 junior doctors in elective orthopaedic surgery.[120] However, the Phase 1 contracts did not require ISTCs to train clinical staff and most ISTCs do not train doctors.

84. The professional medical bodies warned that the removal of a great deal of relatively straightforward elective surgery to an environment in which staff were not being trained resulted in clinicians being denied vital experience of so-called 'bread-and-butter' procedures during their training. The BOA described ISTCs as "depleting the competence of the next generation",[121] while the BMA expressed "serious concern" that "procedures most suited to training purposes are transferred to ISTCs".[122] The Royal College of Surgeons informed us that there was evidence to show that the training of surgeons in NHS hospitals adjacent to ISTCs had suffered.[123] Even though Phase 1 ISTCs perform a relatively small number of procedures, there can be a significant local effect on the training of junior doctors.

85. The Department accepts that ISTCs should offer training and has stated that in Phase 2 they will do so. It will be setting up a number of pilot schemes in Phase 1 ISTCs to inform Phase 2. The pilots will be established in order to assess whether the introduction of training provision in ISTCs would lead to a significant loss of productivity.[124] We look at the form training should take in the next chapter.

EFFECT ON PAY AND CONDITIONS

86. One of the independent providers told us that productivity levels and cost advantages of ISTC depended on the ability to use non-NHS staff. Mr Mike Parish, Chief Executive Officer of Care UK, said, "Even if additionality was not required, we would still look to bring doctors in internationally because, frankly, the cost-base of UK doctors is not competitive; it is too high. That is evidenced in some of the pricing solutions we have been developing for the second wave."[125]

87. Lower pay rates in the ISTCs are already causing concern. In the NHS consultant anaesthetists are on the same salary scale as other consultants. This is not the case for anaesthetists working in ISTCs. We were informed by the Association of Anaesthetists of Great Britain and Ireland (AAGBI) that a number of independent healthcare providers (Capio, Nuffield, BMI and BUPA) "have not been following the principle of equal pay for all consultants", and instead have applied the practice commonly followed in private hospitals by which consultant surgeons are paid two-and-a-half times the fee per case that consultant anaesthetists receive.[126] The AAGBI maintained that, as the patients treated in ISTCs are NHS patients, this application of a practice used for private patients was unacceptable. It also argued that it represented a hidden discrimination on grounds of gender, as a much higher proportion of consultant anaesthetists are women (34%) compared to consultant surgeons (7%).

88. Perhaps more significantly, private providers do not match the pension provision made by the NHS. A Department of Health official explained that NHS providers benefited from "state aid" in a number of ways, which put them to some degree at a competitive advantage compared to independent providers, and "staff pension costs" was one of these advantages.[127]

EFFECT ON NHS FINANCES

89. Several witnesses commented on the effect of ISTCs on the services provided by, and the finances of, existing NHS providers. We were informed of beneficial effects: if routine operations are sent to treatment centres, NHS hospitals are more able to deal with emergency patients; ISTCs could in the short term take the pressure off NHS hospitals striving to bring down waiting lists.[128]

90. Most witnesses, however, stressed the negative effects. The ISTC programme is expected eventually to cost a considerable amount of money—£1.7 billion for Phase 1, £2.75 billion for Phase 2 elective procedures and £1 billion for Phase 2 diagnostics. It is likely that such substantial expenditure will have an effect on the NHS.

91. NHS Treatment Centres, in particular, seem to have suffered financially. Under the 'take or pay' aspect of the Phase 1 contracts, ISTCs have to be paid irrespective of how many procedures they actually carry out. As a result there is a powerful incentive to PCTs to encourage patients to use ISTCs rather than NHS Treatment Centres. NHS Elect claimed that the diversion of elective procedures to ISTCs was creating a problem of under-utilisation in NHS Treatment Centres. It pointed to five treatment centres which had substantial spare capacity:

Treatment Centre Capacity currently used per annum (FCEs) Spare capacity available per annum (FCEs) Spare capacity as percentage of total

Ravenscourt Park Hospital 6,000 6,000 50%

ACAD (Central Middlesex)[129] 8,000 3,000 27%

Kidderminster 12,000 8,000 40%

Crewe 8,400 6,000 42%

Birmingham City 7,200 1,500 17%

Data from NHS Elect, see Ev 208 Volume III

The fixed costs of these NHS Treatment Centres will inevitably be borne by the NHS, and unused capacity will raise the unit cost of the services provided. NHS Elect argued, therefore, that there was a hidden additional cost to the ISTC programme, as they are creating a financial penalty for their NHS counterparts as well as the cost they represent in terms of procurement.[130]

92. Other organisations had concerns about the effect of the ISTC programme on other parts of the NHS. A BMA study of clinical directors found that over half of respondents reported a negative overall impact of a local treatment centre, including NHS Treatment Centres, on the facilities and services provided by their NHS trust with more than two-thirds reporting a negative impact from an ISTC. The BMA also highlighted the potential risks of NHS facilities being left with more complex procedures to which a premium would not attach under the Payment by Results system, but which would inevitably be more expensive to perform: "Current policy will see those conventional NHS centres reliant on routine work to cross subsidise large fixed overheads become increasingly vulnerable."[131]

93. The threat of ISTCs is particularly worrying in view of some trusts' high deficits. The Royal College of Surgeons of England told us:

Triaging arrangements have diverted patients into ISTCs leaving existing NHS facilities under-utilised with a concurrent deleterious effect on fragile NHS Trust financial balances.[132]

Similar comments were made by the Royal College of Physicians and the Royal College of Nursing.[133]

94. One clinical director, quoted in the NHS Alliance's written evidence, noted that: "The financial risk to PCTs is considerable."[134] The argument was put that the financial guarantee of the "minimum take"—ISTCs would be paid for a specified number of procedures, whether or not they were actually carried out—could be a significant burden on PCT finances. It was also put to us by a director of commissioning that some PCTs had had money top-sliced from their budgets and given to the NHS providers who had traditionally performed their elective surgery, and that this could not subsequently be recovered, even if the PCT then employed an ISTC to deliver that activity, thereby leaving the PCT effectively paying twice for some procedures to be performed.[135]

95. The Department is aware that ISTCs might have an effect on the NHS. The Acting Chief Executive of the NHS told us that the Department had carried out analysis of the possible effects of the ISTC programme on NHS facilities, but the Department has refused to disclose the analysis to us.[136]

96. The ISTC programme is intended eventually to provide about half a million procedures per year at a cost of over £5 billion in total. This is close to 10% of the total elective workload of the NHS and would clearly affect the viability of many existing NHS providers over the next five years and possibly beyond. Moreover as the quantity of ISTC activity is not evenly balanced across the country, the impact on the budgets of different local health economies is likely to vary.

97. In the Phase 2 programme, which we discuss in the next chapter, ISTCs are being used to assist 'reconfiguration'. To put it more bluntly: major NHS hospitals will be closed and a proportion of elective services they provide will be performed in ISTCs.[137]

98. The Phase 1 contracts, including the 'take or pay' elements, give ISTCs a significant advantage over NHS Treatment Centres and other NHS facilities. This is one of the reasons that several NHS Treatment Centres have spare capacity.

99. In the longer term, there are good reasons for thinking that ISTCs could have a more significant effect on the finances of NHS hospitals. We do not know how big that effect might be or how great the dangers might be. The Department of Health has carried out analysis of the possible effects of the ISTC programme on NHS facilities, but it has refused to disclose the analysis to us. Phase 2 ISTCs may lead to unpopular hospital closures under 'reconfiguration' schemes. We address this issue in the next chapter.

VALUE FOR MONEY

100. Finally, there is concern about value for money (VfM). Two questions are involved:

Was an adequate VfM assessment made before the bids were accepted;

Has the ISTC programme in practice provided VfM?

101. We asked the Department of Health how it had assessed whether the ISTCs would offer value for money. The Department supplied the Committee with a supplementary memorandum which set out the methodology which it had used. In the absence of an accepted public sector comparator for providing clinical services, VfM was assured by:

The running of an open and competitive procurement;

Selecting the best value (compliant) offer received, and

Rejecting any scheme which was not significantly better value than prevailing spot-purchase rates.[138]

102. In order to ensure that each scheme offered better value than the prevailing spot market, a benchmarking process was devised. An NHS Equivalent Cost was established for each scheme.[139] Since independent sector providers face costs which are not borne by the NHS, such as tax, they are paid more than the NHS Equivalent Cost. The Department set a maximum threshold that it would pay—considerably below 'prevailing spot prices'.

103. We were informed that "the average is 11.2% [above the NHS Equivalent Cost] in comparison with historical "spot-purchasing" rates of in excess of 40% above NHS Tariff".[140] However, we are unable to assess these figures because we have not been given the necessary information on the grounds of commercial confidentiality. The Department has declined to disclose the detailed figures which it used to establish the NHS Equivalent Cost on the grounds that "to release information on the detailed process would jeopardise the ability of the Department and the NHS to secure the best value for money in the next phase of procurement".[141] On the same grounds it has refused to provide us with the figures in any Business Case (although it did provide us with a redacted Business Case for one of the bids which had previously been obtained through a Freedom of Information request). An independent review of the VfM methodology used for Phase 1 was commissioned in October 2004. The purpose of the review was to establish whether the VfM methodology was being consistently and correctly applied. The review found that it was the case. This too has not been disclosed to the Committee.[142]

104. Some witnesses thought that the use of spot-purchase prices as a benchmark was undemanding: it would be very surprising if the systematic, high-volume procurement of services from the independent sector through the ISTC programme was not better value than ad hoc arrangement by which procedures were paid for on an individual basis. On the other hand, DoH officials pointed out that independent sector providers had to meet costs which were not included in the tariff/Equivalent Cost such as provision for pensions. Nevertheless, they admitted that a premium over the NHS Equivalent Cost had been paid and the financial guarantee of the 'minimum take' introduced to involve the private sector and get the additional benefits they would bring.[143]

105. A number of witnesses also suspected that the Secretary of State in 2002 decided on an experiment to introduce private sector providers largely irrespective of any objective cost benefit analysis: it was a leap in the dark, based on a hunch that the advantages brought by the private sector were worth paying a significant premium for.[144] Only eight months had elapsed between the announcement of the NHS Treatment Centre programme and the announcement that substantial TC provision would be procured from the independent sector; this looked like unseemly haste. The fact that officials and ministers from the Department of Health have provided a range of changing objectives to explain the ISTC programme also suggested that the ISTC programme was not a carefully thought-out venture.

106. The cost of Phase 1 includes a premium over the NHS Equivalent Cost which was paid to the ISTC providers, but without access to the detailed figures we do not know how big this premium was. There were other costs of Phase 1, for example the effect on NHS finances. It is hard to see that this could have been justified in terms of the need for additional capacity alone. The other major potential benefit, the galvanising effect of competition on the NHS, was not and probably could not be quantified when the decision to go ahead with Phase 1 of the ISTC programme was made. It is claimed that this decision was a leap in the dark in the hope that the 'challenge' of ISTCs would improve efficiency in the NHS. We agree.

107. Moreover, since we do not know the details of the contracts, what figure was used for the NHS Equivalent Cost or how it was arrived at, and since the benefits of ISTCs have not been quantified, it is also impossible to assess whether ISTC schemes have in practice proved good value for money.

108. In view of the high degree of uncertainty about the wider benefits and costs of the ISTC programme, we recommend that the NAO investigate them, in particular the extent to which the challenge of ISTCs has led to higher productivity in the NHS.

27 Q 3 Back

28 Q 12 (Mr Anderson) Back

29 Q 7 (Mr Anderson) Back

30 Q 6 Back

31 Department of Health, Independent Sector Treatment Centres, A Report from Ken Anderson to the Secretary of State for Health, 16 February 2006 Back

32 Q 554 Back

33 Q 568 Back

34 Ev 128 Volume II Back

35 ibid. Back

36 Q 91 Back

37 Ev 1 Volume II Back

38 Q 9; Written evidence to the Health Committee, Public Expenditure on Health and Personal Social Services 2005, HC 736, Ev 184 Back