1. The conversion of the NHS into a healthcare market Colin Leys Goldsmiths College London Queen’s University Canada House of Commons Seminar 9 June 2009

2. Outsourcing and the ‘internal market’ 1980s - hospital management corporatised - non-clinical support services outsourced to private sector 1990s - the purchaser- provider split – DH becomes ‘purchaser’ - hospitals become proto-businesses (trusts) ‘ - capital charges introduced - financial targets replace planning based on analysis of needs - new NHS premises privatised (PFI, LIFT) - some technical work (pathology, imaging) outsourced - NHS coverage reduced (long term care, dentistry, routine eye care) 2000s - ‘payment by results’: hospital income now based on payment for every individual completed treatment - all ‘back office’ work to be outsourced in 2010

3. The 2000 NHS Plan - from an ‘internal’ market to a full market in clinical care The Department of Health sees competition with private providers (or at least contestability”) as the only way to make the NHS efficient and contain costs But the UK private healthcare industry has always been small and high-cost, relying entirely on NHS consultants working part-time. So a new kind of high-volume private provider was needed, able to compete with NHS trusts

4. Three routes to creating a competitive private health sector The costs and risks (financial and political) of handing over NHS hospitals to private companies are seen as too high Three lower-risk routes to private provision of clinical care at near-NHS rates: 1) standardised low-risk surgery 2) outpatient clinics 3) primary and community care

5. Route 1: Independent Sector Treatment Centres ISTCs were represented as a way to help reduce waiting times for elective care by bringing in additional capacity But 25% of their staff were drawn from NHS hospitals and this proportion has risen over time Instead of the promised 170,000 procedures a year, in 2003-2007 ISTCs performed a total of 128,000 Extremely favourable contract terms mean they bear no significant financial or clinical risk

6. ISTC programme morphs into the Extended Choice Network Some 170 private hospitals and clinics now accredited to treat NHS patients ‘Patient Choice’ expected to divert growing share of NHS acute care to the ECN No upper limit on share set. NHS hospitals are left with the high-risk caseload; some lose staff and income to nearby ISTCs and/or ECN providers

7. Route 2 – outsourcing outpatient work from hospitals to ‘polyclinics’ Lord Darzi’s plan: up to 64 per cent of hospital outpatient work could be moved into a new kind of health centre Capital to be provided by LIFT companies Services to be commissioned from competing providers

8. Route 3: privatising primary care a) General practices put out to tender: GP groups compete with corporate providers b) 750+ neighbourhood Health Centres or ‘GP-led’ ‘super-surgeries’: 152 (one per PCT) to be operative in 2009 c) All community health services (mental health, district nurses, speech therapy, etc) to be outsourced: existing staff to form ‘social enterprises’ to compete for work with for-profit providers ll

9. Consequences of conversion to a health care market 1. Duplication of services by competing trusts and private providers raises costs 2. Administrative costs rise from 5-6% of NHS budget in mid-1970s to about 20% today 3. Quality declines – staff-patient ratios and skill-mix are reduced, consultation times are cut, etc 4. Co-payments are gradually introduced - free treatment gradually becomes ‘basic’: a two-tier service reappears within the NHS

10. Quality Staff numbers and skill-mix reduced in NHS hospitals, especially those with PFI NHS hospital beds cut by 10 % 2004/5 to 2007/8 GPs to be given financial incentive to reduce referrals Polyclinics to have lower doctor/nurse ratios Corporate primary care companies employ GPs on lower salaries and benefits and offer shorter consultation times

11. Co-payments Fees charged for ‘extras’ (midwifery, dermatology) Drugs not approved by NICE may be offered to NHS patients for payment Personal budgets for the chronically ill (pilot schemes in 50% of PCTs in 2010)

12. For a copy of these slides or further information email colin.leys2@homecall.co.uk