Hospitals

Royal_Liverpool_University_Hospital-1024x768

Hospitals up and down the country are undergoing privatisation in various ways and to varying degrees. Contracts with private companies include for elective surgery, and for the non-clinical day-to-day running of a hospital. 

Private companies, such as Mitie and ISS, have large multi-year contracts for all aspects of facilities management of hospitals, including cleaning, maintenance and catering. A fall in capacity within the NHS is leading to more and more patients being referred to private hospital chains for elective surgery. There has also been an increase in the use of insourcing to tackle waiting lists; this is where hospital trusts pay private companies to carry out elective procedures on NHS patients within NHS hospitals  There have been several years of hospital trusts seeking to create their own private companies to undertake non-clinical work. This has been referred to as privatisation by the backdoor. The Covid-19 pandemic gave the private sector many opportunities for closer ties with the NHS.

 

Privatisation

Private sector involvement in NHS hospitals covers a wide range of services:

  • Elective surgery
  • Facilities management, including contracts with Capita, ISS and Mitie.
  • Hospital management, see Circle Health
  • Private patient care
  • Spin-off companies for support services

Elective Surgery

By early 2020, over a decade of underfunding, beds cuts, and lack of a workforce plan (with the additional problems that brexit brought to staff numbers) meant the waiting list for elective surgery had risen to its highest level ever at 4.45 million. The following two years of Covid-19 pandemic pushed it even higher to 6 million by February 2022.

Bed reductions have played a significant role as numbers of acute and mental health beds fell year on year since the austerity regime was imposed by the Cameron government in 2010, with 13,000 acute beds and 25% of mental health beds closed.

Successive Conservative governments from 2010 have refused to fund increasing NHS capacity at a sufficient level to have any impact on the waiting list, so hospital trusts and other commissioning bodies turned to contracts with the private sector. The result is that the number of NHS patients being treated in private hospitals has increased significantly since 2010.  In 2018, the Royal College of Surgeons reported that almost one in three (29.4%) NHS-funded knee replacements and almost one in five (19.7%) NHS-funded hip replacements were carried out by the independent sector in 2016-2017; in 2012-13 the figures were 20.1% knee replacements and 13.7% of hip replacements. For 2019 the independent sector carried out 32.9% of NHS-funded knee replacement procedures and 28.9% of NHS-funded hip replacement procedures.

Private companies get paid to carry out hospital-based work on NHS patients in two ways:

  • outsourcing, whereby private companies perform elective procedures on NHS within their hospitals, and
  • insourcing, whereby private companies are paid to carry out elective procedures on NHS patients within NHS premises during what is termed 'downtime' for equipment and theatres, such as the weekend.

Outsourcing

For many years commissioning bodies (NHS England, NHS trusts and CCGs) have had conrtacts with private hospital companies for them to carry out elective procedures within the private hospitals. For some companies, such as Spire, it has been the mainstay of its business. During the Covid-19 pandemic the private hospital sector was given major opportunities to work for the NHS. 

In March 2020 at the start of the pandemic, the government agreed a contract to block-book the entire capacity of all 7,956 beds in England’s 187 private hospitals along with their almost 20,000 staff. It is reported to have cost around £400m a month. The plan was for the private hospitals to treat covid-19 patients as well as providing Covid-19 free hospitals to carry out NHS elective surgery and cancer treatment, as the NHS hospitals began filling with Covid-19 patients. The contract was published in October 2020 and listed as worth £1.65 bn.

The published contract reveals that £1.57 billion was shared between 26 private hospital corporations, each of which picked up payments ranging from £0.9m up to £346.6m which went to Britain’s largest private hospital group, Circle Health, having completed the take over the previous market leader BMI Healthcare in mid-2020.

The other big winners were Spire Healthcare Ltd (£345.9m), Australian-owned Ramsay Health Care (£271.1m), Nuffield Health (£165.2m), US-owned HCA International Ltd (153.2m), and Care UK with £76.3m. The remaining £218m was split between 20 smaller companies.

A second set of contracts for January to March 2021 was worth up to £474m. Unlike the first set of contracts, these included minimum payments for making capacity available, as well as for services that were actually used.

Prior to the pandemic, private hospitals undertook 3.6 mn NHS-funded planned procedures in 2019, which dropped to only 2 mn during the first year of the pandemic – a fall of 43%. Two letters had been sent to the wider NHS explaining why the deal had been struck and what it would cover, which make it clear that it would include care for Covid patients with serious breathing problems as well as routine operations, such as hip and knee replacements. However, The Independent Healthcare Providers Network, which negotiated the deal on behalf of private hospitals, insisted that it was never intended to cover people with Covid. 

In mid-2021 the government announced the NHS Increasing Capacity Framework contract which is valued at £10 bn over four years. This framework contract creates a list of independent providers that can be asked to carry out NHS work and is part of the government's plan to tackle the waiting list for elective procedures. The plan was for it to begin November 2020 and run to 2024.  Most leading independent hospital companies have now signed up for the contract and the framework will lead to outsourcing significant amounts of routine activity to independent hospitals.

In February 2022, Sajid Javid, Secretary for Health and Social Care, announced the Elective Recovery Plan to reduce the waiting list. The plan contains a number of initiatives intended to get back to most patients waiting no longer than the supposed 18-week maximum enshrined in the NHS constitution. For example, hospitals will stop inviting many patients for at least some of the checks and follow-up appointments that have been standard for years. The plan also gives patients the right to have their operation at a hospital many miles from their home, if it has spare capacity.

Integral to the plan is the increased use of the private sector, whether this be by outsourcing work to private hospitals or insourcing, whereby private companies use NHS facilities to carry out elective procedures on NHS patients.

In February 2022, NHS England's annual accounts reported that the NHS commissioners’ spending on private healthcare increased 27% to more than £18.4bn in 2020-21, with pandemic effects causing it to rise faster than spend on NHS trusts and general practice.

Insourcing

Insourcing involves private companies conducting medical procedures, such as surgery and diagnostics, in NHS premises in downtimes, primarily the weekend, when the NHS is not using the premises. The staff they employ are generally full-time NHS employees who work on their rest days.

national framework agreement is in place with NHS Shared Business Services listing 18 companies. These companies have already gone through a competitive tendering procedure to be put on the list and can be used by trusts without additional contract tendering. The framework began back in 2018 and runs until September 2022. However, trusts are also using companies that are not listed on this framework.

More details of insourcing can be found on a separate page here.

Facilities Management

Many hospitals have outsourced all aspects of facilities management, often under large multi-year contracts covering every aspect, such as cleaning, catering, building maintenance, car parks, and grounds maintenance. Even if a large facilities contract is not in place, catering and cleaning are often outsourced. Hospitals built under the Private Finance Initiative (PFI) always resulted in a long (20-40 years) facilities management contract once the hospital was up and running, often with a company involved in the initial building. For more details see our pages on PFI.

Hospital Management

The most extreme example of private involvement in an NHS hospital, to date, was the contract awarded to Circle in 2011 for the complete management of Hinchingbrooke Hospital near Cambridge

This ten year contract to run Hinchingbrooke Hospital began in February 2012. Under the agreement, the staff and assets remained part of the NHS. At the time Hinchingbrooke hospital had a debt of approximately £39 million, which Circle needed to eliminate if it was to make a profit from the contract.

The Hinchingbrooke contract was a disaster for Circle in both financial and reputational terms. A report by the National Audit Office in September 2012, noted that Circle had already missed its own financial target for the Hinchingbrooke contract, generating a deficit of £4 million by September 2012, £2 million behind where Circle said it would be.

To try and make the contract financially viable, Circle needed to make big savings at the hospital and this led to a drastic reduction in care quality. Savings were made at the expense of staff, with between 270 and 300 jobs being cut and several wards lying empty. The hospital fell from joint-highest in the area in a patient satisfaction survey to nineteenth out of 46 hospitals trusts across the NHS Midlands and East region in August 2012.

In early 2015 as Circle announced that it was terminating the contract to run Hinchingbrooke, the CQC released a report on the hospital. The report rated the hospital as inadequate and the hospital trust was put into special measures.

Private care in NHS hospitals

Before the introduction of the Health and Social Care Act in 2012, hospitals were only permitted to make 2% of their income from private sources. However, when the legislation passed this cap was lifted to 49%.

The Independent probed an investigation into the effects of this change. Hospitals can now make considerably more money from private paying patients within the NHS institutions. For example, income from private patients for the Royal Marsden in London, a world-leading centre for cancer, increased by 105% from 2010/11 to 2016/17 up to £91.9 million. This made up nearly a third of its total funds.

Figures released quietly by the government acknowledged that the NHS in England made nearly £584 million from private patients in 2016/17, a nearly 29% increase from 2011/12.

In 2021, The Lowdown reported that Oxford University Hospitals Foundation Trust was seeking to expand its private patient care, despite a massive waiting list of NHS patients. Then later in 2021 The Lowdown reported that the Royal Marsden NHS Foundation Trust, as RMH Private Care, is seeking private partners to expand their private patient income, after the opening of its new diagnostic and treatment centre in Cavendish Square, central London. RMH Private Care is already the UK’s most lucrative NHS Private Patient Unit.  The Financial Times reports that the Trust earned £132.6m from private patients in the year to March 2020, up 9% from £121.3m the previous year and up 44% from £92m in 2016/17: “income from private patients now accounts for 36% of the trust’s patient revenue, and 29% of total revenues.”

These private patients are being treated by NHS doctors in NHS beds so private patients looking for world class facilities are using beds and services that should be provided by the NHS to our whole population.

Dr David Wrigley, a GP in Carnforth, north Lancashire said: “The fact private patients can jump the queue for treatment flies in the face of the founding ethos of the NHS – that all patients are seen as equal and treated according to need and not the ability to pay.”

Spin-off Companies for Support Services

In recent years there has been a rise in the number of spin-off companies within the NHS, which can be described as a form of back-door privatisation. These spin-off companies, wholly owned by the trust, employ non-clinical staff such as porters, cleaners, and maintenance staff. More details of this phenomenon can be found on our dedicated pages on Spin-off Companies.

Issues

There are concerns with every aspect of privatisation in hospitals.

Facilities Management

In facilities management, there have been concerns with quality and cost. There have been reports of low-pay received by the staff employed by facilities management companies and cost-cutting leading to reduced cleanliness. An investigation by researchers at the University of Oxford found that hospitals that used outsourced cleaners had higher rates of MRSA, which causes life-threatening infections.

In 2013 Interserve signed a contract with Leicestershire Partnership NHS Trust, University Hospitals of Leicester NHS Trust and the Leicester City, Leicestershire County and Rutland Primary Care Trust Cluster to improve estates and facilities management services across the cities and counties. The contract was seven years long, worth around £300 million and was expected to save the NHS a significant amount of money.

However, in April 2016 this contract was scrapped four years early due to major problems and poor standards. These included patients in one hospital receiving meals up to three hours late and the merging of cleaning and catering services meaning around 100 people lost their jobs.

After the contract was scrapped, it came to light that the ex-Interserve staff were getting paid half what the NHS contracted staff were being paid.

Elective Surgery and Patient Safety

The safety of the private sector has been a concern for many years, with questions over their lack of ICU beds, use of registered medical officers, lack of transparency, communication issues with the NHS, and even the use of individual rooms. The issue of NHS patient safety has been investigated by the Centre for Health and the Public Interest (CHPI).

The concerns include:

  • Post-operative care in private hospitals is usually carried out by inexperienced junior doctors who are working excessively long hours.
  • The consultant who carries out the surgery and who is responsible for the patient is permitted to be off-site.
  • Nature of this post-operative care has been cited as a factor in a number of patient deaths.
  • Lack of intensive care facilities means if something goes wrong then patients have to be transferred back to NHS hospitals, which in itself is very dangerous.
  • Data on patient safety in private hospitals is poor and they aren’t required to make this information public in the same way as NHS hospitals are.

With the number of patients being treated in these hospitals increasing, particularly with the Choose and Book system or with acute trusts referring patients to clear extensive waiting lists, it is important to note these issues.

CHPI conclude that NHS commissioners and clinicians would find it difficult to avoid blame, and possible legal consequences, if NHS patients are harmed in private hospitals. Particularly now that the risks are openly documented.

This raises the issue of the cost of these referrals, both in the short term and the long term. In the short term, the cost of treatment for NHS patients in private hospitals is much higher than it would be if they could be treated in NHS facilities. Moreover, if something is to go wrong and there are legal consequences then it is the NHS that may have to pick up the bill in the long term.

In another report, the CHPI also document the safety issues in private hospitals following the scandal whereby surgeon Ian Paterson wounded 500 women who underwent unnecessary breast surgery in private hospitals. They conclude that until the private hospitals have full liability for the patients under their care, then there will be no guarantee of safety.

The Paterson scandal led to a public inquiry that released a damning report in February 2020 stating that the private healthcare system he worked in was “dysfunctional at almost every level”. However, the government has yet to make the major changes in the report that would have improved patient safety in private hospitals. In November 2021, the safety of the independent hospital sector was once again under the spotlight in a report released by the HSIB (Healthcare Safety Investigation Branch) – Surgical Care in Independent Hospitals – triggered by the death of a NHS patient sent to an independent hospital for bowel surgery. The report made six safety recommendations, three to NHS England and NHS Improvement, one to NHSX, and two to the Care Quality Commission (CQC).

Spin-off companies

There are several concerns surrounding this type of privatisation; these are discussed in the section entitled Spin-Off companies.

Companies

Nearly all private hospital companies carry out NHS work, two of the largest are:

Circle Health

Circle was founded in 2004. In early 2020, Circle acquired BMI Healthcare for an undisclosed sum.  The acquisition of BMI Healthcare, with 59 hospitals, makes Circle Health the leading private hospital chain in the UK. BMI Healthcare was heavily reliant on NHS work, with nearly 50% of its revenue coming from NHS work in 2016. Circle Health's subsidiary, Circle Rehabilitation Ltd, runs a rehabilitation facility in Reading and in Birmingham. The company won the contract to run Hinchingbrooke Hospital in 2011, however Circle terminated this contract in early 2015. A full company overview can be found here.

Spire

Spire Healthcare is the UK's second largest private hospital company, with 40 hospitals and eight clinics. The company was founded in 2007 and is a public company with share traded in the UK. The company's revenue is from personal medical insurance patients, NHS patients and self-paying patients. In 2019, Spire received 29.1% of revenue or £285.7 million from the NHS.  A full company overview can be found here.

There are also individual profiles for leading companies including HCA International, Nuffield Health, Ramsay, Care UK.

Background

The privatisation of hospital care has been ongoing for years. Successive governments over the last 30 years have brought in 'reforms' that have encouraged the use of private companies. The governments of Blair and Brown used private providers to bring in choice and increase capacity to bring down waiting lists.

However, it was the health and social care act 2012 that ushered in an era of competition and really opened up the NHS to private providers; the number of contracts being awarded to non-NHS organisations since 2012 has accelerated.

The NHS Support Federation's Contract reports over the past few years bring together the evidence of the increased number of NHS contracts going to private companies. These can be found on our publications page here.

Sign up for the latest stories and investigations

Something went wrong. Please check your entries and try again.