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Independent Sector Treatment Centres

I thank all right hon. and hon. Members who have contributed to the debate. They are an eminent gathering of health policy experts, and we have had an extremely high-quality debate. I thank my right hon. Friend the Member for Rother Valley (Mr. Barron) for the measured and balanced way in which he introduced his remarks, and for his leadership of the report by the Select Committee on Health. It has made a timely contribution to the debate about independent sector treatment centres and, more widely, the changing nature of the relationship between the NHS and the private sector. The report’s content and its analysis of the changing situation were of particular value. I hope to reassure the hon. Member for Southend, West (Mr. Amess)—I call him my hon. Friend—that far from not taking the recommendations seriously, we have paid careful attention to them. I can point to changes that have since taken place, particularly on two issues—additionality and training—that many Members have raised this afternoon. I shall turn to those points during my remarks. If I may, I shall begin with a point about perspective. There is often a great deal of hot air vented and ink spilled on the subject, but it is important to remember that by the end of the decade under the current ISTC programme, about 5 per cent. of NHS elective activity will be carried out in the independent sector. We must place the issue in perspective and consider the huge range of work that goes on in our national health service. On another point of context, last year £216 million was spent on procedures through centrally arranged procurements, compared with the £80 billion-plus that was spent in the national health service. I am not trying to minimise the issues that we are here to discuss, but it is an important point of context. I am disappointed that my hon. Friend the Member for Pendle (Mr. Prentice) has not stayed for the close of this important debate, although I was pleased that he was present earlier. If he had stayed, I should have asked him and others who question the value of the ISTC programme, and more broadly, the Government’s work over the past 10 years on reducing waiting times and lists, to consider the individual patient benefit of such work. Too often, we quote the statistics, but there are many examples of lives that have been changed and improved as a result of the action that has been taken. The hon. Member for Westbury (Dr. Murrison) said that today is a day when we look back over the past 10 years, so perhaps he will not mind if I do so, as Ministers are accustomed to do, with a few figures. In the first quarter of 1997, 284,000 patients were waiting more than six months for in-patient treatment. My hon. Friend the Member for Dartford (Dr. Stoate), who spoke with incredible knowledge about the subject, was absolutely right: such waits were commonplace at the time. If we think about the human cost of that statistic that we throw out, it is enormous. Today, 350 patients are waiting more than six months. In 1997, more than 30,000 people were waiting more than 12 months, and today, no one is waiting longer than 12 months. I would have said to my hon. Friend the Member for Pendle that opponents of the ISTC programme rarely ask how many patients in the past were forced to go private. We would never have known about such spend in the private sector, because patients had to fork out for it out of their own pockets. We all know that that is what happened to many people. They were left in such a position when NHS waiting lists were that length, and they were forced to dig into their own pockets—their own savings—to obtain their operation. I shall argue that, because of the changed relationship between the NHS and the private sector, in which the two work together for the benefit of not only the NHS but its patients, fewer and fewer people now face that reality. Waiting lists continue to come down, and Government Members should be extremely proud of that fact. We have achieved a good measure of agreement today about the principles. My hon. Friend the Member for City of York (Hugh Bayley), who asked some very pointed questions about the ISTC programme, began by saying that he did not disagree with the principles, and that was largely the spirit of today’s debate. I shall refresh Members’ memories about the reasons behind the programme. The Department of Health conducted national capacity planning exercises with strategic health authorities in 2002 and 2004. Through those exercises, SHAs estimated the additional capacity in elective treatment and diagnostics that was required to meet key public service agreement waiting times targets, and they identified how much of that capacity would need to be sourced from the independent sector. The capacity planning outcomes provided the basis for the first wave of national procurements of elective and diagnostics capacity from the independent sector. The procurement process was designed to allow the independent sector to work within local health care economies to provide solutions that met local requirements. The specific aims, as the hon. Member for Southend, West said, were to help to provide the capacity needed to deliver swift access to the system for NHS patients, thus reducing waiting lists and times; to support the implementation of patient choice; to stimulate innovative models of service delivery and drive up productivity; to bring down the cost to the NHS of spot purchasing; and to introduce choice and contestability between providers of health care services for NHS patients in order to drive improvement in quality and efficiency throughout all providers. The first independent sector treatment centre opened in October 2003, and 23 ISTCs are now delivering services to NHS patients. At the end of February, ISTCs had provided more than 110,000 elective procedures for NHS patients, and independent sector contracts had delivered more than 280,000 diagnostic tests. There was additional procurement on top of the ISTC programme, so altogether, centrally procured independent sector schemes have delivered well over 500,000 procedures, diagnostic tests and episodes of care for NHS patients. The hon. Member for Wyre Forest (Dr. Taylor) asked me to provide him with an update. The figure stood at 300,000 in October 2006 when the Government responded to the Committee’s report. It is a measure of how much more the independent sector has contributed in that time. Utilisation of the wave 1 ISTC contracts is high and rising—at 92 per cent. in February 2007. Cumulatively, that represents 85 per cent. overall to March 2007, as has been mentioned. Patient satisfaction is also high, and was measured to be 97 per cent. across wave 1 schemes in March 2007. Colleagues have made some extremely high-quality points and I now want to go into the detail of those. My right hon. Friend the Member for Rother Valley, the Chairman of the Committee, spoke about whether there was any evidence of capacity planning and whether the programme had been thought through sufficiently. I assure him that the figures across the wave 1 schemes show high utilisation rates, as ISTCs bed down in their local health care economies. In some cases the utilisation rate is higher than the figures that I have just given, and in one or two cases it is almost 100 per cent. That suggests to me that the exercise conducted by the Department has shown that that capacity both was needed and is being used. I understand entirely the points that my hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins) made. The experience from other parts of the country—I include Greater Manchester in that, and the surgical centre in Trafford, which was one of the early schemes and serves my constituency—is that questions will be asked in the early days of any ISTC, as the local health economy gets used to working with a new provider in the locality. However, as time progresses those issues are addressed and there is better integration between the NHS locally and the ISTC. The figure that I have for utilisation of the ISTC to which my hon. Friend referred is 75 per cent. for April and May this year, showing some progress from the figures that she quoted. My right hon. Friend the Member for Rother Valley referred to training and the quality of the data. I shall come to those issues in the meat of my remarks. He also asked about the size of phase 2, which I shall address, too. However, I want first to address the issue of value for money, which a number of hon. Members raised, including my hon. Friend the Member for Pendle in an intervention. It is important to remember that the NHS has always procured services from the independent sector. The difference now is that we are doing so rationally, within clear regulatory and financial frameworks, for the benefit of all of us who use the NHS. Historically, the NHS used the private sector to provide extra capacity, but on an ad hoc, spot purchase basis, often paying more than 40 per cent. above the cost of the same procedure as performed by itself. As the Committee’s report rightly noted:"““ISTCs have had a significant effect on the spot purchase price in the private sector and on charges in the private sector more generally.””" As a Department, we would point to further evidence to back up that point. As Laing and Buisson, which provides independent analysis of the UK health care sector, noted in its 2005-06 report:"““The emergence of a new raft of ISTC providers able to quote at, or fairly close to, NHS reference costs made it clear that the days of NHS spot purchasing from the ‘incumbents’ at 30-40 per cent. over reference costs were over, and that they would have to reduce costs and prices if they wished to be involved in a significant way in servicing the NHS market””." For wave 1 schemes, the average cost above the equivalent NHS cost is 11.2 per cent., a figure with which hon. Members present will be familiar. The picture is developing, so I cannot give exact figures today, but we expect costs in wave 2 schemes to be below that, and in some cases significantly so. My hon. Friend the Member for Pendle asked why that situation should be tolerated, and my hon. Friend the Member for City of York made a similar point. Self-evidently, there is a pretty straightforward comparison in those figures between the spot purchase costs and the costs being paid through the ISTC contract. Two further points are relevant. Additional capacity has been established, on a permanent basis and for the benefit of the NHS and its patients, which the NHS could not have made available as quickly as the ISTC programme did. There needs to be an element of certainty in that funding, which is why the contracts were constructed as they were. My hon. Friend the Member for Pendle asked how that could be justified. In bringing in that extra capacity, it is important that we accept that the private sector faced additional costs, which other NHS providers would not have faced, by virtue of the conditions imposed on it in the procurement process. For instance, the additionality clauses, to ensure that the capacity was genuinely new for the NHS, brought overseas recruitment costs and other processes that were more costly than if the capacity had simply been switched from one place in the UK to another. I could give other detailed reasons for those costs; for instance, new buildings had to be established. There were good reasons why the contracts needed to reflect the costs being incurred by the private sector in bringing extra new capacity to the NHS. That is the justification that we would give. In the long term, we are working towards ensuring that where the capacity goes is not centrally dictated. It will be patients who choose where they wish to be treated, and there will indeed be a level playing field in terms of how providers will be paid for using that capacity. In the current period, the initial stages of those contracts provide support so that the services can become established. By systemising the process of buying independent sector services through bulk procurement, the ISTC programme has significantly cut the cost of doing business with the independent sector. Our aim is to move towards a level playing field, with all providers operating at NHS tariff or NHS equivalent costs, and being compared solely on quality and access, and that predominantly by patients. That is important as we move towards a free choice environment. Colleagues have asked about the second phase of procurement. I can report that it is progressing well and that the first providers from phase 2 are now delivering services. The Department has today agreed another phase 2 scheme, to which the hon. Member for Westbury referred, which will provide around 6,000 procedures a year in Cheshire and Merseyside, bringing more choice and accessibility in health services and further reducing waiting times. In total, phase 2 is expected to deliver up to 250,000 elective procedures and up to 1.5 million diagnostic assessments a year, and to create an independent sector extended choice network, contributing significantly towards meeting the 18-week target. The majority of services are expected to commence in 2007-08. The hon. Gentleman asked about the shape of phase 2 schemes, as did my right hon. Friend the Member for Rother Valley. The estimate is the figure that I have just given. The discussions with the independent sector are progressing and it is impossible to say now what the precise outcome will be. The call from the Committee and others has been for the contracts not to be simply imposed on local health economies and for there to be a process of dialogue and consultation at the local level, to ensure that the contracts are a good fit with capacity requirements. That is indeed the process that is under way in different parts of the country.