How is the NHS being Privatised?

Recent governments have denied that they have been privatising the NHS, pointing out that health care is still free at the point of use. Others (such as the King’s Fund) have suggested that claims about privatisation are exaggerated.

These denials are misleading. According to the World Health Organisation,

“Privatisation is where non-government bodies become increasingly involved in the financing or provision of health care services”.

On this basis, the NHS is being privatised in a number of ways, a process that started at least as long ago as the 1980s but has been accelerating since the Health and Social Care Act of 2012 (HSC Act). This introduced a network of Clinical Commissioning Groups and required them to put health services out to competitive tender, allowing the NHS to become increasingly open to the involvement of private sector providers. The process is now accelerating following the passing of the Health and Care Act of 2022.

The Government’s response to the Covid pandemic also increased privatisation by often prioritising the use of private companies over the NHS, sometimes with disastrous results (as with the national Test and Trace system or the awarding of contracts for personal protective equipment to companies with little to no relevant experience).

What’s wrong with privatising the NHS?

There are numerous reasons why the NHS should not be privatised. For example:

  • In contrast to NHS providers, private companies’ first duty is to make profit for their shareholders. This profit comes out of NHS funding, leading to concerns that – in order to extract this profit – private companies have to reduce the quality of patient care by cutting the costs of qualified staff.  Studies show that there is little scientific support for health care privatisation; that costs may be reduced but at the expense of care quality and, in one study, outsourcing of care to for-profit companies was associated with increased deaths among patients. Indeed, according to one author looking at the global picture,

“… privatisation and private health care are not only inefficient, expensive and exclusive of those most needing health care – they actually result in distorted systems that help spread Covid – and kill people who might have survived if publicly-financed and provided health care had been available”.

  • The system undermines NHS providers. This is because private companies will focus on profitable, low risk, straightforward elective (planned) treatment, such as hip replacement, and leave NHS providers to cope with complex and more expensive services such as A&E, intensive care, or the care of people with long-term or complex needs. Before competitive tendering, NHS providers used any financial surpluses from one area to support the more expensive services they delivered. Now, there’s a danger that when the profitable NHS services are contracted out to private companies, established NHS providers may not survive.
  • Private companies usually rely on the NHS to train nurses and doctors – but these companies rarely contribute to the cost of training. Instead they draw on the NHS-trained workforce and add to the problems of severe staff  shortages in the NHS.
  • When the contract for a service previously delivered by an NHS provider is won by a private company, the staff who had been providing that service lose their employment with the NHS. If re-employed by the private company, they may have no guarantee of retaining the same pay, terms and conditions that they had with the NHS.
  • Fragmentation of the NHS workforce means that their bargaining power is undermined.

Ways in which the NHS is being privatised 

There has been an element of private provision within the NHS since its inception. For example, there have always been a small numbers of beds for private patients within some NHS hospitals. [Some argue that GPs are private providers but this is inaccurate: Unlike the private companies now taking over many GP practices and then disappear if these are found unprofitable, GPs  are self-employed and not answerable to shareholders. They are committed to the principles of the NHS and remain responsible to the local community even during hard times.

The first major shift towards privatisation began in the period between 1979 and 1997 when Conservative governments introduced ‘GP Fundholding’ and compulsory competitive tendering for support services such as cleaning or catering.

The Private Finance Initiative (PFI)

This period also saw the introduction of the Private Finance Initiative (supported over time by both Conservative and Labour governments). With PFI, a consortium of private financiers, construction firms and providers of support facilities are contracted to build and maintain buildings for NHS trusts. In return, trusts pay eye watering rates of interest, excessive charges for services over the length of the contract (which may be 40 years or more) and ultimately face excessive debt. Trusts are paying bankers and other PFI investors at least twice (and in some cases seven times) as much for each new hospital as they would if they could borrow the necessary finances from the government (as they could in the past). In addition, PFI deals usually involve NHS trusts handing over their land to private consortia to build on. This land only returns to the ownership of the NHS at the end of the contract, decades later. If an NHS Trust defaults on its PFI deal, the land and any buildings on it are retained by the PFI consortium.

Competition and the internal market

In 1990, the Conservative government brought in the ‘internal market‘ that opened the door to the privatisation of clinical services. At that point, the internal market divided the NHS between, on the one hand, Health Authorities that were allocated budgets to purchase health services and, on the other, NHS trusts that were contracted to provide services: the so-called ‘purchaser-provider split’. In effect, our public hospitals have been turned into businesses, which has meant that when there is a conflict between a Trust’s financial health and patients’ health, financial health takes priority.

The idea behind the internal market was to introduce competition in the NHS on the misguided premise that this would increase efficiency. However, rather than improving NHS performance, the internal market has led to increased bureaucracy and higher transaction and monitoring costs. It has taken money away from patient care and fragmented service provision between primary and secondary care, and between health and social care.  The faults of the system are now being recognised. For example, when stepping down as NHS Chief Executive, David Nicholson suggested the purchaser-provider split was inappropriate and that  service commissioning and provision needed to be integrated. In 2020, the government put forward proposals for legislation that have been interpreted as signalling an end to competition: this is far from the case. (For more information see our page on Integrated Care Systems).

Outsourcing services

Outsourcing services to for-profit companies has consistently increased since 2013, following the Health and Social Care Act and associated regulations  that made it almost compulsory to outsource some services. Outsourcing the implementation of  NHS-related policies to management consultants has been shown to increase inefficiency. Similarly, research indicates that hospitals contracting out cleaning services had lower levels of cleanliness and worse health-care outcomes (as measured by hospital-acquired infections) than if services are provided in-house.

In terms of patient care, the rise in outsourcing coincides with an increase in treatable mortality that may be related to poorer staffing or short cuts leading to poorer quality of care by the private sector. As mentioned above, it could also be associated with the way that private companies ‘skim the cream’ (i.e. treat only the more straightforward and profitable cases) and leave the NHS to deal with more complicated cases but without the extra funding or staff to compensate.

Independent Sector Treatment Centres (ISTCs)

In 2003, on the advice of Simon Stevens (who worked for 10 years at US health insurer UnitedHealth and is now head of NHS England), the Blair government brought about another wave of privatisation by introducing Independent Sector Treatment Centres. These were designed to reduce waiting lists for elective (planned) procedures, such as cataract surgery, but offered very favourable terms for contracts that NHS trusts were not allowed to compete for. The Centres were paid to deliver a set number of treatments specified in the contract, whether or not the treatments were actually provided.

NHS Foundation Trusts

2003 also saw the introduction of new public benefit corporations – NHS Foundation Trusts (FTs). These NHS organisationswere to be granted significant managerial and financial freedom compared to NHS trusts (e.g. FTs were no longer accountable to the Secretary of State for Health but to a board of governors). The supposed aim was to encourage innovation and improve patient care.

However, legally, FTs are no longer regarded as public services but profit-seeking businesses (although profits are reinvested in the FT, and not handed out to shareholders). Initially allowed to generate a small amount of income from offering non-NHS services, the limit on private income has since increased to 49%.

FTs were to have the freedom to set their own terms and conditions of service (including pay), the freedom to decide local priorities, and the freedom to borrow and to set up joint ventures with the private sector. Some aspects of this autonomy have disappeared with the introduction of Integrated Care Systems. Originally the plan was that all NHS Trusts would become FTs. As time has gone on, the independence of FTs has changed, with NHS Improvement taking more central control on certain issues and the distinction between FTs and NHS Trusts without FT status is now far less clear.

However, FTs are still supposed to be accountable to local people – at least in theory: in practice, the public has not had a meaningful role.

The ATMS contract and the privatisation of general practice 

Each GP practice or GP partnership must hold a contract to run an NHS-commissioned general practice. The traditional contract has been the General Medical Services contract (GMS): in 2018/19, 70% of GP practices held a GMS. A much smaller number of practices have what’s called a Personal Medical Services contract, which is now being phased out.

2004 saw the introduction of third type – the Alternative Provider Medical Services (APMS) contract, which encouraged non-NHS suppliers to provide primary care services. It’s led, for example, to the take over of some GP surgeries and out of hours services by entrepreneurial GPs, or private companies such as Virgin, Serco and Operose (a subsidiary of US insurance corporation, Centene). Some GP partnerships may use a APMS contract to set up a social enterprise. However, the costs of tendering for a contract are often prohibitive for GPs and the contracts themselves are relatively short-term, usually 10 to 15 years. There’s growing use of these contracts for GP services, with an increased number being awarded to global consortia.

For example, in 2004, a group of highly ambitious GPs set up a company called AT Medics Ltd. The company expanded rapidly: by 2020 it had contracts with at least 13 CCGs across London to run 49 surgeries, hubs and extended access services across London, making a profit after tax totalling £28.4 million for the period between 2016 and 2020.

In 2019, the shareholders in AT Medics Limited transferred all their shares to Holdings LLP and at some later point the control of Holdings LLP was passed to Operose Health Ltd (see above). Initially it seems that there would be no change of directors, but within a couple of months, all the original AT Medics directors resigned and new directors, all directors of Operose, were appointed. Operose already had contracts for 20 GP surgeries, plus an urgent treatment centre in Birmingham and dermatology and opthalmology services in Kent. AT Medics became known for reducing the number of GPs employed and relying more on less qualified physicians associates.

There are serious concerns about the secretive process by which this type of privatisation has taken place: such as lack of clarity about when and how the Clinical Commissioning Groups involved made the decision to authorise the change of ownership; why there were no publicly released documents or public involvement in decision making.

There are also concerns that when APMS contracts are held by private companies, GPs with local knowledge derived from long-term involvement in a practice will be replaced by temporary, salaried GPs. This will severely undermine the continuity of care that has been the strength of GP practice.

Plus, if private companies with APMS contracts decide that the GP practices are not profitable enough, or they go bust, they must either be bailed out using taxpayers’ money, or leave patients high and dry without a GP service.

The Choose and Book scheme

The idea of ‘patient choice’ has been used as a carrot to encourage patients to use the private sector. The ‘choose and book’ scheme was introduced in 2005. This gave patients who need to see a specialist the right to choose between four or five providers, including some private providers. The system was replaced after 10 years by the NHS e-Referral Service. Concerns have been raised that encouraging patient choice in this way is primarily about creating competition between providers rather than really allowing patients more control over where and how they are treated. Research also suggests that most patients actually want to use the services closest to them, and most do not have the information to chose on any other basis.

Any willing provider

In 2009 the Labour government introduced a new initiative – ‘any willing provider’ – (later called any qualified provider) that allowed private hospitals to take on NHS work beyond the ISTC programme (see above) at rates up to 40% over those offered to NHS providers.

The Health and Social Care Act (2012)

A real watershed in the privatisation of the NHS has been the Health and Social Care Act of 2012 (HSC Act), introduced by then Secretary of State for Health, Andrew Lansley, during the Coalition government. This brought about massive restructuring based on advice from a private management consultancy company, McKinsey. The rationale given for this legislation was that it would reduce expensive referrals to hospitals by enabling new ‘Clinical Commissioning Groups’ (CCGs) to control spending on services: they would be led by clinicians who, as those closest in the NHS to the patient, were said to be best positioned to design and purchase services. At the same time, new bodies at arms length to the government, such as Monitor (which later evolved to become NHS Improvement, which later was absorbed into NHS England or NHSE) were created to ensure that CCGs put more and more services out to tender. And although clinicians were initially seen as central to the work of CCGs, in many instances their role has diminished over time – see, for example, the Commissioning Support Units section below.

However, the main impact of the HSCA, as many predicted, was increased privatisation of the NHS. This was partly due to Section 75 of the Act that requires all services that can potentially be provided by organisations other than the NHS must be put out to competitive tender (if the contract is over the value of £615,278), a process that favours corporate bidders due to their greater resources and expertise in the expensive business of tendering. The rules on competition introduced by the HSC Act have been called ‘the motor of NHS privatisation’.

Later, in 2019, the then head of NHSE, Simon Stevens was praised by politicians when he called for the repeal of Section 75 of the HSC Act, widely seen as signalling a move away from privatisation. However, S75 subjects private contractors to the Competition and Markets Authority: far from removing the private sector from the NHS, repealing S75 actually deregulates the sector and so make parts of the NHS, such as Integrated Care Providers  (see below) actually more attractive to private companies. As the founding director of the Cooperation and Competition Panel for NHS Funded Services told the Commons Health and Social Care Committee in May 2019, “NHS England’s proposals will deregulate NHS markets, rather than de-marketise the NHS”.

NHS Property Services Ltd (PropCo)

The Lansley regime that saw the introduction of the HSC Act also introduced the creation of a new NHS company, PropCo. This company, owned and underwritten by the Secretary of State for Health, took over the estate owned by NHS organisations (such as Primary Care Trusts) when these were abolished by the HSC Act. PropCo now owns and manages a considerable portfolio of land and buildings – in 2019, it held around 12% of the total NHS estate, valued at £3.8 billion.

The company has come into disrepute partly because of the huge service and facility management fees it charges to NHS bodies, such as GP practices and the number of disputes it faces concerning rental rates, while recording a loss every year since it was set up. It has also been criticised for paying its executive directors huge bonuses on top of very generous salaries –  bonuses that are significantly higher than those offered in nearly every other NHS body.

PropCo has significant potential to contribute to the privatisation of the NHS: it is currently publicly owned but could at any time sell all but one of its shares to private investors.

Commissioning Support Units

The HSC Act also created a new market in ‘commissioning services’ (such as planning NHS services, managing contracts with health care providers, and designing the NHS of the future). Much of the work of commissioning, theoretically the responsibility of GPs and CCGs, became the job of Commissioning Support Units (CSUs): for example, the procurement of goods and services, and the provision of business support services such as Human Resources (HR) and payroll.

It’s been pointed out that CSUs are “essentially shell organisations which act as a front for the private companies behind them”.  Their role in contracting with the private sector has expanded considerably with the establishment of the Health Systems Support Framework.

Health Systems Support Framework

The Health Systems Support Framework (HSSF)  was established by NHS England to provide

“a quick and easy route to access support services from innovative third party suppliers at the leading edge of health and care system reform, including advanced analytics, population health management, digital and service transformation”.

It’s already available to many parts of the NHS and public sector bodies but it’s particularly relevant to the development and on-going management of Integrated Care Systems and the dependence of these on new digital and technological advances to manage a population’s health.

The Framework consists of a range of organisations that have been accredited by NHSE on the basis that “their products are of a high quality, their prices fair and their financial position stable”. These products are organised into 10 categories or ‘Lots’: to give just two examples, Lot 1 concerns ‘Enterprise-wide Electronic Patient Record Systems’ and Lot 4 concerns ‘Informatics, analytics, digital tools to support system planning, assurance and evaluation’. Currently, the HSSF lists 83 ‘third party suppliers’, the vast majority of which are private companies, and most of these are the big multinationals such as Deloitte, Centene, Optum and McKinsey.

New models of care (such as Integrated Care Systems)

Even before the organisational changes brought about by the HSCA Act had a chance to settle, NHSE – without any public debate or mandate – decided that the NHS needed, again, to be extensively restructured.

The first indication of this was NHSE/Simon Steven’s  five-year plan for 2015-2020, which introduced new ways of delivering services that provided further, far-reaching opportunities for the private sector. As a result of this plan, the NHS in England was initially divided into 44 local health economies or ‘footprints’ (initially – and confusingly – called Sustainability and Transformation Plans, and also called ‘footprints’), each of which had to produce a proposal (a Sustainability and Transformation Plan!) showing how it would cut costs while improving care and integrating health and social care services. ‘Footprints’ generally incorporated a number of local authorities and CCGs.

STPs (i.e. the proposals) had to be drawn up at ‘at scale and at pace’ – in other words, at breakneck speed – leading many ‘footprints’ to  call in private consultancy firms like PriceWaterhouseCooper to help them write their  proposals. In addition to the millions of pounds received in consultancy fees received, these firms also had the opportunity to shape plans to suit their own interests.

The footprints, later called Sustainability and Transformation Partnerships (ST Partnerships), were required to introduce new ways of delivering services: instead of working independently of each other, the organisations within an ST Partnership (such as GP practices, hospitals, mental health service providers and local authorities) were encouraged to ‘integrate’, although the way they are jointly organised to deliver services varies across the country (for more information, see our Integrated Care pages). In a further development, CCGs were abolished and in 2022 each STP ‘footprint’  (by now reduced to 42 in number) became an  ‘Integrated Care System‘ (ICS). ICSs are thought to be modelled on the Accountable Care Organisations found in the US and other places, notorious for putting profits over patient care.

NHS wholly owned subsidiaries (SubCos)

In addition, privatisation is a potential outcome of the use of  subsidiary companies (or SubCos) set up by NHS Trusts, usually in response to underfunding and growing deficits. When a Trust sets up a SubCo, it transfers a range of in-house services (anything from cleaning and portering to medical physics and estate planning) plus the NHS staff working in those services, to a private, Trust-owned company. Equipment and buildings are also transferred.

These companies main purpose is to reduce expenditure – for instance by employing staff on worse terms and conditions than NHS staff, or avoiding tax (SubCos could take advantage of a loophole in paying VAT). In addition, many SubCos were set up to find new ways of generating income, such as selling services to other Trusts. Legally separate to the parent Trust, and initially 100% owned by the Trust, SubCos are vulnerable to being sold on, for example to commercial companies. (See our page on SubCos for more information.) However, in 2020, changes to VAT, as well as the demands of dealing with the Covid pandemic, may have put a temporary lid on the creation of new SubCos.

Use of the NHS logo

Not many patients are aware of just how many private companies are providing NHS services because these companies often use the famous blue NHS logo on their vehicles, signage, staff ID etc., and provide little to no indication that they are commercial companies.  According to the Department of Health, using the NHS logo will reassure patients that contracted-out services are provided in line with NHS values. It is unclear how this can be the case, given that privately provided services will be shaped by the first priority of commercial companies – to make a profit for their shareholders.

Personal health budgets

It’s also worth remembering that the introduction of personal health budgets are seen by some as a step towards privatisation in that they encourage patients to make top-up payments, and open up the NHS to private insurance companies.

Revolving door culture

Unfortunately there is also a ‘revolving door  between the public and private sector, with an exchange of staff (including in some cases Ministers) between the Department of Health or NHSE/NHSI and private health companies and consultancy firms, like McKinsey or BUPA. This blurs the boundary between public and private sectors, public and private interests.

The new generation of trade deals

Finally, once NHS services are outsourced to private companies it may be difficult to reverse this. This is particularly of concern with the current generation of trade deals that focus on services as well as goods. For example, under the investment protection measures that many trade deals now include, if a transnational corporation wins an NHS contract it will be able to sue the UK government for huge compensation if new government or local authority policies – even those introduced for public health or safety reasons – undermine the corporation’s future profits. The threat of such action not only casts a chill on policy making, but will be a powerful deterrent to any government considering the reversal of NHS privatisation. (See our pages  on Trade deals and the NHS.)

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What these different forms of privatisation mean is that the assets of the NHS, whether these are tangible (e.g. land or tax payers’ money) or less tangible (such as the value of the NHS logo), are being relentlessly transferred to the private sector.

(See also our pages on Marketisation and  Private companies involvement in the NHS).

Further information

The history of privatisation.  The Lowdown https://lowdownnhs.info/?s=privatisation

For a time line of how the NHS has been privatised, see https://www.yournhsneedsyou.com/timeline/

https://keepournhspublic.com/wp-content/uploads/2018/02/PRIVATISATION-2.pdf

https://www.nhsforsale.info/privatisation/impact-problems/failures-of-private-provider-contracts/

https://lowdownnhs.info/news/nhs-changes-made-under-the-radar/

leghttps://keepournhspublic.com/campaigns/legislative-changes/integrated-care/threat-nhs-social-public/

updated 2021

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