Privatisation/PFI

Privatisation in the NHS takes many forms and impacts on the NHS and patients in a number of ways. This overview gives a brief history of NHS markets and privatisation and sets out the main issues. Further information can be found in the Resources section of the KONP website – articles and links in Resource Cabinet and from other organisations such as NHS Support Federation and People vs PFI in External Links.

For details of privatised clinical services, see Privatisation of NHS Services

NHS markets and privatisation

The ‘Bevan model’ of the NHS was created in 1948 as a publicly funded and publicly provided service; the state-run NHS directly employed doctors and other clinical, diagnostic, management and support staff, managed hospital and community services and owned and managed the buildings. There were always exceptions: GPs and dentists operated as private contractors although they were fully integrated in the network of NHS services. Hospital consultants were free to take on a limited amount of private work. A number of voluntary sector services were funded through grants.

This basic model existed until the Thatcher government from 1979, which brought in compulsory competitive tendering, and the 1990 NHS and Community Care Act which separated commissioners from providers, creating the market for NHS services and hastening a significant expansion of private healthcare. The Tories also introduced the Private Finance Initiative (PFI), which involved extremely lucrative private decades-long contracts to build and manage hospitals and other public infrastructure. During the Tory years, the NHS was systematically defunded, leading to crumbling buildings and lengthy waiting lists, but despite keen neo-liberal interest in privatised and insurance-based healthcare, the NHS was considered ‘politically untouchable’.

New Labour Governments from 1997 believed the ‘third way’ to tackle NHS decline was through increased private sector involvement. PFI schemes were used to develop new buildings while private hospitals and clinics were encouraged to take on NHS patients to reduce waiting lists. Despite this, and numerous reorganisations, the NHS remained recognisably the ‘Bevan model’, predominantly in public hands.

The coalition government’s 2012 Health and Social Care Act marked a watershed in expansion of NHS privatisation. The Act raised the income NHS hospitals can raise from private sources from 2% to 49%, resulting in a wave of new Public Private Partnerships with FTs, and enforced competitive tendering of many services. Within a few years, this resulted in endless rounds of hugely expensive competitive tenders, leading to disastrous fragmentation, with many primary care and community services provided by a range of private companies.
A change of Tory Health Secretary from Andrew Lansley to Jeremy Hunt, and a new NHS England boss, Simon Stevens, has brought another policy turnaround – heralding a different, and more deadly, approach to privatisation. Since 2016, the English NHS has been divided into 44 locality-based Sustainability and Transformation Partnerships (STPs) which together cover all England. Each STP covers all the hospitals, GPs and community health services in its area, and must plan for the health of the local population. STPs are expected to evolve into a series of locally-based Accountable Care Systems (ACSs) that will ‘integrate’ most or all of the hospitals, GPs, community health and often social care services in the area. Over time, the separate organisations comprising ACSs are expected to merge into a single Accountable Care Organisation (ACO), managing all these services.

These ACSs and ACOs will no longer be public bodies, but will be accountable through a massive commercial contract. It is probable that giant US healthcare corporates and insurers will bid for these contracts; other bidders are likely to include NHS Foundation Trusts bidding in partnership with finance corporates. At a stroke, these giant contracts could privatise the entire NHS in one area.
In Nottingham and Nottinghamshire in 2017, Optum UK, a subsidiary of US healthcare giant Optum, was awarded the contract to integrate all NHS and social care across the STP area. For a more detailed account of the history of NHS privatisation, click here.

Privatisation of NHS Services

The history of markets and privatisation in the NHS are covered in a separate article.(link), and information about Private Finance Initiative (PFI) and new plans for privatisation of NHS buildings can be found here. (link). This article looks at the extent of privatisation of NHS services, and some of the effects and implications. A more detailed account can be found at this link.

Department of Health spending on Independent Sector Providers (ISPs) increased from 6.1% in 2013-14 to 7.6% in 2015-16. A 2017 BMA report on NHS privatisation reveals that over the same period, spending on ISPs increased from £6.6bn to £8.7bn, an increase of 33%. Both figures exclude spending on general practice, dentistry and community pharmacy.
Most of the spending on ISPs is in the community health sector; in 2015/16:
• 44% of NHS spending on ISPs was spent on community health services;
• 25% on general and acute services
• 11% on mental health and learning disability
• 2% on primary care

Companies with major contracts include BMI, Ramsay, BUPA, Care UK, Nuffield Health, Spire and Virgin Care. Many of these companies are part of larger corporate structures with partners based in tax havens, making it possible for them to avoid UK tax. Privatisation takes many forms, including private care in NHS hospitals, NHS care in private hospitals, extensive contracts for NHS community services, ambulance services, prison healthcare and learning disability services.

An important impact of privatisation is the replacement of skilled professionals with staff with lower levels of training and skill – replacing doctor posts with 2-year trained ‘physician associates’, registered nurses with ‘nursing associates’ or unqualified staff, and other healthcare professionals with ‘associates’.
To date privatisation has involved contracts for particular services or groups of services. However, new plans starting from 2017 are set to involve massive tenders for Accountable Care Systems (ACSs) and Accountable Care Organisations (ACOs) which could see the wholesale privatisation of NHS services in a particular area. Further information can be found through this link.

Private Finance Initiative; Buildings and Infrastructure

The Thatcher government introduced the private finance initiative (PFI) as a way to raise money for crumbling hospitals and other public sector buildings. In opposition Labour castigated PFI, but went on to embrace it and greatly extend PFI as part of New Labour’s ‘Third Way’, leaving a massive legacy of unsustainable debt.
Around 100 NHS hospitals have been built under the PFI. Ownership of these hospitals has undergone dramatic shifts over the last decade, and nine out of ten of these assets are now effectively owned by international investment funds.
The twenty hospital PFI schemes in London cost £2.7bn to build, but will require payments totalling £20.2bn from the fifteen NHS trusts that are involved in these contracts. Trusts with PFIs are allocating a significant proportion of their operating revenue to PFI. The two most indebted, are spending over 10% of their income on PFI. On average the schemes in London could have borrowed 1.5 times more capital if they had been financed through public lending (discounting at 4%), such as a municipal bond.
2017 Naylor Review
In 2017, The Naylor Review has raised the spectre of a new wave of Public Private Partnerships (PPPs) to create the new buildings and infrastructure set out in the Government’s Five Year Forward View (FYFV).
Government expects NHS managers to make cuts amounting to £22billion per year by 2020-21, compared with 2015 levels of spending. The only way to achieve this level of savings is through closing many local hospitals and community sites and reducing staff costs. Local facilities will be replaced by a small number of new ‘community hubs’ housing some specialist provision and large numbers of staff – and will mean long journeys and hours of travel for many patients.
The Naylor Review proposes partnerships with property developers to sell off many existing buildings. Developers will build the new community hubs, leasing these back to the NHS, no doubt at exorbitant costs.
For more details, click here