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NHS: Finance

My Lords, I thank the noble Lord, Lord Rea, for raising this debate. I recognise the force behind his arguments, and his commitment and passion for the NHS, but I hope to demonstrate that it is possible to feel as passionate about the NHS with a diametrically opposed view. First, I must declare my interest in healthcare as chair of council at St George’s, University of London, which trains doctors and healthcare professionals. I will mention training. I am also a board member of Monitor, the NHS foundation trust regulator, which has seen the benefits of giving a degree of independence to NHS providers in terms of improving financial rigour and quality of care. Like the noble Lord, Lord Rea, I have worked in the NHS all my life as a doctor. I know that the NHS must change: I strongly support the Government’s reform agenda. Indeed, I urge them to get on with it. The NHS would benefit from a far greater diversity and plurality of providers from within the statutory for-profit and not-for-profit independent sectors. Like other noble Lords, I believe in the founding principle that the NHS should be available free at the point of need. It should be largely a comprehensive health insurance system and an expert commissioner of health services. But I do not see why the whole of NHS care should not be independently provided if it remains largely free to those in need. If the NHS concentrated more on being an expert commissioner of healthcare and freed itself from the provider role, it might make better investment decisions in the light of evidence-based public health need. In that sense, I support the points made by the noble Lord, Lord Selsdon. Let us face it, huge chunks of healthcare already provided by the independent sector are paid for by the public purse—for example, half of all care in residential nursing homes. Some 30 per cent of the total NHS budget pays the private sector for pharmaceutical supplies, sterile products, much-maligned information technology and so on. Of the 70 per cent of the NHS budget that is spent on pay, well over a third of it pays GPs, most of whom have always been independent contractors and not salaried employees. The NHS has been buying some operations from the private sector for donkey’s years. Mental health service commissioners buy over 60 per cent of secure care from the private sector, and contract out care for some of its most challenging learning disabled patients. The sums spent are close to £1 billion on these last two types of contract alone, so it is a bit late to be squeamish about the private sector’s contribution. Opinion polls show that the members of the public do not mind whether they are treated in a public or private facility as long as they are treated well. The thing that recently convinced my mother, a lifelong supporter of the NHS, to have her cataract extractions in a Nottingham private hospital instead of the local NHS trust was that her NHS consultant explained exactly how the trust was organising her care at an independent clinic, paying for it and monitoring the outcome. Of course on this occasion there was no competition, but an extremely productive partnership of exactly the kind talked about by the noble Lord, Lord Selsdon. The main arguments against independent treatment centres relate to training, sometimes quality of care, and cost. Training does have a price and increasingly I hope the NHS will want to contract training placements from the private sector, and it is time that the deaneries organised themselves in this respect. At the moment too little training is done in the independent sector, as well as too little research and development. Not only does that create artificially low costs for some independent sector treatments, but it also makes it difficult to instil in the trainee an open mind to think about the possibilities of how they work and the culture in which they work. Of course, many of these problems will not be an issue when everyone is on a level tariff, but getting to that level tariff is crucial. The price the NHS pays for private work remains an issue. While it may have been necessary to provide sweeteners to get early contracts in, I fervently hope that the currently above-tariff prices are merely transitional and not a permanent feature. Quality of care is an issue. There is much mudslinging from both sides of the fence, but precious little data. The independent sector often has contractual requirements to provide far more detailed data on outcomes than is currently demanded of any NHS trust or individual consultant. Nevertheless, the regulatory framework is different. So far, despite the protestations of some surgeons who see their lucrative sources of income dropping dramatically if there is no waiting list and competition within the independent sector for NHS contracts, there is little hard comparative data on productivity in the new independent sector contracts. One result of private sector involvement, however, may well be better outcome data all round, which can only be to the benefit of patients. Will private sector provision lead to the closure of NHS departments, or even whole hospitals? The answer is maybe, and if commissioning is effective then perhaps it should. Hospitals that lose business will undoubtedly suffer in the new environment, but I hope Ministers will have the courage to see the policy through to what may be uncomfortable conclusions. History in this area, of course, is not encouraging. The question is whether the efficiency gains that independent treatment centres and other private providers can bring can offset the inefficiencies they may well generate in the local district general hospital. We do not know. So far, as the noble Lord, Lord Rea, said, the contribution of the independent sector to surgical care has been too small to assess the real impact. However, I would dispute with him that the tumbling waiting lists have had nothing to do with introducing independent sector treatment. The plans for these services have had a huge impact on NHS behaviour. They have had to concentrate harder on how they contract for services. NHS managers have found it easier to negotiate cheaper fees with their own consultants for extra work, with payments well below the standard BUPA rate. This is the sort of outcome competition is supposed to produce. It does not surprise me that the British Medical Association does not like a situation where the NHS moves away from being a monopoly provider; it has served its members extremely well—better than anywhere else in Europe. I ought to admit here to being a member of the British Medical Association, but not always a well behaved one, as noble Lords can see. The reaction of the UK private sector is telling. All four major providers have restructured their businesses. BUPA has sold nine of its hospitals because it believes they cannot adapt to the new NHS market and the effect that it is likely to have on the private one. Like other private providers, it is installing the NHS choose-and-book IT system so that patients can gain access to its beds as Patient Choice arrives. All four UK operators have now provided procedures to the NHS at tariff prices or below. This is convincing evidence that the policy is beginning to bite. All this heralds a much less comfortable time for many NHS institutions and staff. The price for this may well be disruption of established services. How bad that is and how well it is handled may well decide whether the outcome of this policy is judged to be a success or failure. This is why I believe foundation trust policy is so vital. It allows a measure of independence in decision-making but maintains staff within an employment framework and a pension system which is extremely valuable to them. It gears up providers to be competitive and delivers a mindset to be able to challenge the independent sector at its own game. I hope the Minister will give a commitment to maintaining and developing further those freedoms that foundation trusts currently have. I have some questions for the Minister about the plurality of providers. Do the Government have a view on how broad the notion of providers should be? Are there plans to achieve that position or will the market be left to decide? When do the Government expect to provide a true level playing field on tariffs to ensure that the resentments felt by the NHS about the new providers can be challenged on a fair basis?