Private companies’ involvement in the NHS

Private companies have had a growing presence in the NHS, initially through providing support services (such as catering, portering, laundry, IT or cleaning) and, more recently, clinical services (for example, GP services, diagnostic tests, surgery). In addition, they are now becoming involved in the actual planning and procurement of NHS services (see Commissioning Support Units). This page of the website deals just with private companies involvement in the provision of NHS clinical services.

Early privatisation

Private provision of NHS clinical services initially came about in a number of ways, including:

  • The introduction of Alternative Provider Medical Services (APMS) contracts in 2004, to encourage non-NHS suppliers to provide primary care services. This has led, for example, to the take over of some GP surgeries and out of hours services by private companies, such as Virgin or Serco (for more details see https://abetternhs.wordpress.com/2011/05/29/gps-and-private-businesses/).
  • The creation of ‘independent sector treatment centres’ (ISTCs) in 2005. These deliver a set number of elective or routine treatments, like cataract surgery, under contract. They are paid whether or not the number of treatments specified in the contract is delivered. (For implications of ISTCs, see http://www.lse.ac.uk/LSEHealthAndSocialCare/pdf/eurohealth/Vol16No3/Vaid.pdf );

Privatisation and the Health and Social Care Act (HSC Act) of 2012

However, the scale and pace of private companies’ involvement in the NHS has accelerated rapidly following the Health and Social Care Act (HSC Act). In 1989 only some mental health, surgical and pathology services were run by private companies. But after the introduction of the HSC Act, the list expanded to include GP surgeries and Out of Hours services; urgent care and minor injury units; diagnostic services including imaging; maternity care, elective (non-emergency) surgery; community nursing and a range of other community services such as physiotherapy; ambulance services; and prison health. Private companies also became involved in running entire hospitals, including A&E departments.

This means you may now find that your GP works for a company like Care UK. Tests that your GP orders on your behalf (like blood tests or scans) may be carried out by companies like In-health. If your GP refers you to hospital for surgery, this might be to a privately run centre with an NHS contract, or to an NHS hospital run by a company like Circle. On return home, if you are lucky enough to receive community care (e.g. district nursing), this may be provided by a private company commissioned by the NHS such as Virgin.

The rules on competition introduced by the HSC Act have been called ‘the motor of NHS privatisation’, and make it mandatory for commissioners (usually Clinical Commissioning Groups) to put services out to competitive tender if they can potentially be provided by organisations other than the NHS.

This has meant that between April 2010 and April 2015,

  • 86% of contracts for pharmacy services were awarded to non-NHS providers
  • 83% of contracts for patient transport services were awarded to non-NHS providers
  • 76% of diagnostic services were awarded to non-NHS providers
  • 69% of GP/Out of Hours services were awarded to non-NHS providers
  • 45% or community health services were awarded to non-NHS providers
  • 25% of mental health services were awarded to non-NHS providers. (http://www.nhsforsale.info/contract-alert.html)

In the financial year 2015/16, the private sector won contracts worth just over £2.1 billion for providing clinical services, compared to £2.7 billion won by the NHS and £955 million  by the not-for-profit sector (http://www.nhsforsale.info/contract-alert.html). However, the growing extent of private provision is not obvious to patients because most of the companies contracted to provide NHS services are able to use the NHS logo, and may even do so without using their own.

One of the rationales for privatisation has been that the private sector is more efficient in running services. This has turned out to be something of a myth: for example, a number of corporations have withdrawn from large contracts or had their contracts terminated due to serious problems. For example, a £800 million contract for older peoples’ services was eventually awarded to UnitingCare by Cambridgeshire and Peterborough CCG after a tendering process costing over £1 million. Eight months into the contract, UnitingCare withdrew stating that the contract was not financially viable.

Similarly, the private company running Hinchingbrook Hospital (Circle) cited financial reasons for pulling out of a 10 year contract in January 2015. This was just two years into the contract and just before a highly damning report from the Care Quality Commission on the hospital’s management and culture and the quality of care it provided.

There are also concerns about whether or not private companies are avoiding paying tax on their profits. For example, in October 2016, BBC Midlands reported that 12 NHS GP practices and urgent care centres across the West Midlands are ultimately owned by Malling Health, a company based in a tax haven in the Bahamas. Malling Health exchanged bank loans with an interest rate of 4% for a loan at 20% interest with the owner of Bahamas-based Butterfly Ventures. The company says this arrangement is more flexible, but experts claim it’s a way of diverting money into a low tax area (see video report at https://www.facebook.com/midlandstoday/videos/10154587299074761/).

It’s not just the number of private companies involved in the NHS that is snowballing but  the scale of the contracts is also increasing. For example, in 2012, Circle took over operational control of Hitchingbrooke Health Care NHS Trust – the first entire NHS hospital to be run by a private company. However, two years later, after a highly critical report by the Care Quality Commission (CQC) and a £5 million loss, Circle gave up its contract, citing a rising demands and cuts in NHS funding – the same challenges that NHS-run hospitals have to cope with.

One of the biggest contracts with a private provider so far is with NHS Support Chain, a part of Exel Europe Ltd (a transnational postal and logistics corporation including DHL), which is overseen by the NHS Business Services Authority. Under their agreement, 11 for-profit businesses (two of which have previously been criticised by the NHS regulator for poor quality care in hospitals and nursing homes) will be paid up to £780 million by the NHS to carry out a range of operations and diagnostic tests, such as X-rays and scans, in order to deal with a growing backlog and to meet waiting time targets. http://www.theguardian.com/society/2015/mar/12/nhs-agrees-largest-ever-privatisation-deal-to-tackle-backlog.

There are also worrying indications that, without formal consultation, NHS commissioners in Staffordshire plan to give an enormous £1.2 billion, 10-year contract to the private sector to provide care for cancer patients and those at the end of life. http://www.theguardian.com/commentisfree/2015/mar/16/nhs-privatisation-biggest-history-staffordshire-cancer?CMP=share_btn_tw. The interested companies had initially included Virgin Care and United Health, but the only remaining bid is from a consortium of private company Interserve (known for its involvement in PFI) and the Royal Wolverhampton Hospital.

Features of the deal include

  • The successful bidder will become a ‘prime provider’ who will  be able to sub-contract services to other providers of their choice (apparently taking over the commissioning role of the CCG).
  • The contract has been likened to a blank cheque, as the successful bidder will be able to set its own rules (for example for performance standards and targets) after the contact has been awarded.
  • There were strong indications that the contract would involve a private company as it appeared to have been written with private companies very much in mind. For instance, although NHS organisations don’t pay tax, bidders for the contract are encouraged to use a “VAT efficient model”.
  • For the first two years, the winning bidder will take over responsibility for existing services, after which they will have a free hand to commission, decommission or cut services, potentially shutting down existing hospices and NHS providers of patient care.
  • The successful company will also have considerable freedom in deciding what to pay itself. Based on similar health privatisation contracts, fees are likely to be a minimum of £100m – money that will be diverted from funds currently spent on patient care.
  • Finally, there appears to be no way for the NHS to get out of the contract, irrespective of performance: it looks like it would could be impossible for the ‘prime provider’ awarded the contract to be sacked for failings that they could blame on their sub-contractors. http://www.theguardian.com/commentisfree/2015/mar/16/nhs-privatisation-biggest-history-staffordshire-cancer?CMP=share_btn_tw

The end-of-life care contract is to be awarded in 2017. Meanwhile the £687 million part of the deal to run cancer services is facing delay, pending an inquiry prompted by the collapse of the similar sized deal in Cambridgeshire and Peterborough for elderly care (see http://www.stokesentinel.co.uk/nhs-managers-told-review-plans-privatise-cancer/story-29091451-detail/story.html).

The Strategic Projects Team

The Strategic Projects Team (SPT) was set up as a special internal business unit within the NHS, providing services to support ‘commercial change’. It has been dubbed the NHS’s privatisation arm.

It has advised on a number of projects, a significant number of which ended in failure. For example,

  • The SPT ran the bidding process for the Hinchingbrooke contract, mentioned above, a project described by Parliament’s Public Accounts Committee as an expensive experiment that left Circle Health unaccountable while taxpayers picked up the bill.
  • The SPT provided services to Cambridgeshire and Peterborough CCG when it put its Integrated Older People’s Pathway and Adult Community Services out to tender. Worth around worth £800 million over five years, the contract went to UnitingCare in October 2014., only to be terminated in December 2015 as it was “no longer financially sustainable”. The additional cost to the CCG of procuring and entering into this contract was £6m. The the two Foundation Trusts involved also incurred costs. (https://www.england.nhs.uk/mids-east/wp-content/uploads/sites/7/2016/04/uniting-care-mar16.pdf)
  • A £750 million contract brokered by the SPT to bring together hospital, mental health and community care services in Cambridgeshire collapsed after 18 months.: it was considered ‘financially unsustainable’. The contract had gone to UnitingCare, and took 15 months to procure in a process that cost more than £1million. (https://www.theguardian.com/society/2016/jan/26/nhs-watchdog-signed-off-doomed-750m-contract-despite-doubts)

Following a damning report published by the National Audit Office on the Cambridgeshire and Peterborough deal in 2016, the SPT is being wound up.

Further information on the SPT:

https://www.opendemocracy.net/ournhs/tamasin-cave/’ninja’-nhs-privatisers-you’ve-never-heard-of

https://www.opendemocracy.net/ournhs/caroline-molloy/hinchingbrooke-why-did-england%27s-privatised-hospital-deal-really-collapse

http://www.bbc.co.uk/news/uk-england-36847643

https://www.nao.org.uk/wp-content/uploads/2016/07/The-collapse-of-the-UnitingCare-Partnership-contract-in-Cambridgeshire-and-Peterborough.pdf

What is the problem with private companies’ involvement?

In contrast to NHS providers, the first priority of private companies providing NHS care is to ensure a profit for their shareholders. The fear is that to extract this profit, private companies have to reduce the quality of patient care.

Private companies don’t get involved in the services that are expensive to deliver, such as the delivery of A&E care, Intensive Care services, or the care of patients with long-term or multiple needs. Instead they cherrypick, taking the more profitable services, like routine hip replacement, that NHS hospitals count on to help subsidise their more costly departments. In other words, there is a danger that when NHS services are contracted out to private companies, established NHS providers – even those providing core services like A&E –  may not survive.

Privatisation also means that co-operation and communication between different services is undermined, there can be little long term planning and, as care is increasingly fragmented between different providers, the loss of continuity of care for patients.

Once NHS services are outsourced to the private sector it may be difficult to reverse the process, particularly if trade agreements like TTIP are signed. The leading bidders for the Staffordshire contract for cancer and end of life care, for example, are all thought to be US private health companies. Under the investment protection measures that TTIP will probably include, a transnational corporation that wins an NHS contract will be able to sue the UK government for huge compensation if new government or local authority policies undermine the corporation’s future profits. The threat of such action will be a powerful deterrent to the reversal of privatisation.

Further information

For up to date information on the scale of private companies’ involvement in the NHS, see http://www.nhsforsale.info.

For more information on privatisation, see for example:

See also our section on “Turning the NHS into a market“.

Updated December 2016

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