Dear All,

This press release must have been seen by John Snow who interviewed Alan
Milburn on news at 7 last night.  John Snow referred to criticisms of PFI
from healthcare professionals and insisted on the point.   Alan Milburn was
distinctly rattled and referred to 'third rate academics'.

The message is getting through.  Lets keep up the pressure.

Also note the publication in BMJ of deaths caused by taking patients off
critical care too soon.

I am not sure if the press release below will have gone on the RadStats
website.

See quote from Radstats message:
'Following the suggestion (see below) Paul Hewson will add a news page to
the
Radstats website.
So if you have any suitable material, please send it to Paul
([log in to unmask]) and he will put it on the website.'



Janet & Ray Shapiro

-----Original Message-----
From: Alex Scott-Samuel <[log in to unmask]>
To: [log in to unmask]
<[log in to unmask]>
Date: Friday, May 25, 2001 8:20 AM
Subject: UK health care and privatisation briefing


Health Policy & Health Services Research Unit
School of Public Policy, UCL (University College London)
29-30 Tavistock Square, London, WC1H 9QU
tel: 020 7679 4985; e-mail: [log in to unmask]


BRIEFING NOTE FOR THE GENERAL ELECTION ON HEALTH AND
PRIVATISATION

SUMMARY

This briefing assesses two points made by the Labour Party
in its manifesto:

1) That the private sector should be allowed to
deliver NHS funded healthcare and manage NHS hospitals
2) That health care will remain free at the point of
delivery

Increased costs
· It is highly likely that the transaction costs of
contracting with the private sector will be significant.
Labour costs will rise in a competitive labour market
whilst the evidence from the US shows that privately
managed hospitals are inefficient and spend 34% on
administrative costs compared with 12% in the NHS as a
whole.

Accountability and regulation
· The increasing use of the private sector to deliver
NHS funded health care requires regulation and new
accountability mechanisms to be put in place. However
Labour has already demonstrated its commitment to ‘least
burdensome regulation’ and has sought to abolish Community
Health Councils. Losing direct political control of service
delivery requires new safeguards

Evidence on efficiency and quality in the uk
· Private healthcare in the UK has a poor record.
Although there is a dearth of data on private sector health
care private hospitals are far from being the ‘Rolls Royce’
institutions which Labour believes them to be. They have
lower staffing levels and lower levels of clinical support.
The NHS has also picked up the pieces of poor private
sector performance. Last year there were 142,000 admissions
from private hospitals to the NHS. · The NHS has for a
long time experienced the efficiencies and effectiveness of
privately managed services. Britain’s filthiest hospitals
are ‘cleaned’ by private sector contractors. In other areas
of contracting out there is no evidence to demonstrate that
delivery of services by the private sector has led to
higher quality. Labour’s faith in the private sector is not
grounded in any firm evidence.

What does the private sector stand to gain?
· Labour seems to assume that the innovation and
‘efficiencies’ of the private sector can simply be
harnessed to deliver public health goals. However few
commentators have asked why the private sector would want
to become involved in such a venture. Where are the sources
of profit in health care? What will be required to get the
private sector on board? · More importantly the
fragmentation of the NHS a la Railtrack and the reliance on
private sector contractors may impair Labour’s ability to
deliver public health goals.

Care free at the point of delivery?
· The Labour party’s failure to make personal care
free at the point of delivery has demonstrated that it is
committed to redefining the boundaries of state funded
provision. The New Health and Social Care Act puts in
place mechanisms for NHS bodies to redefine free health
care and to introduce charges for personal care


Professor Allyson Pollock
David Rowland
Dr Neil Vickers

24 May 2001

INTRODUCTION

The Labour Party’s manifesto commitment to allow private
sector companies to take over the management of public
hospitals is an extension of the
concordat signed between Tony Blair and the Independent
Health Association last year. However, the problems and
pitfalls of pursuing such a strategy have rarely been
articulated. The move away from a hierarchical, unified
NHS structure to one which is severely fragmented has
implications both for the cost of providing health care in
the United Kingdom and the quality of the care that is
provided. Care will be more expensive and quality
standards will be at risk. The claim made by New Labour
that it is not who delivers the service that matters, it is
the quality of the care that counts, has a simple logic to
it which discourages both scrutiny and public debate. There
are however important issues at stake. Relying on private
healthcare companies to provide state funded health care
introduces new stakeholders into the system with a
financial claim on NHS revenues. It will almost certainly
lead to an increase in the administrative costs of the NHS
and will move health care provision further away from
democratic control.

The Labour party has also committed itself in rhetoric if
not in practice to maintaining health care free at the
point of use. However whilst nursing and
medical care is free at the point of use personal care can
be charged for. The new funding arrangements for Care
Trusts allow NHS bodies to charge for personal care. The
Labour party thus seems intent on redefining the type
of care that will be provided free of charge.

THE COSTS OF THE NEW ARRANGEMENTS WITH THE PRIVATE SECTOR

The NHS as a hierarchical and unified structure has despite
its many critics provided a comprehensive free service that
is also- according to accumulated OECD data -very cheap by
international standards. Although it is very unfashionable
to say so health systems of the ‘command and control
planning’ type which have predominated in the UK and in
Scandinavia have been remarkably successful in delivering
high quality free care to whole populations. In contrast
the health care system of the US which is market based and
has diversity in provision has proved inefficient and
costly. The NHS as a unified structure has two main virtues
in terms of cost containment. It is able to control labour
costs by remaining a monopoly purchaser and provider of
labour and it operates with very limited transaction costs.
Whilst the new arrangements proposed in Labour’s manifesto
and by the IPPR are as yet unclear a move further away from
a unified structure will almost certainly incur new costs
and lead to greater inefficiencies.

· Contracting and transaction costs – the transaction
costs of any contractual agreement are proportional to the
complexity of the good being
contracted for – thus refuse collection = low costs, health
care = high costs. As one of the authors of the forthcoming
IPPR report notes ‘Monitoring consumes resources, the cost
of which has to be taken into account in any overall
assessment of a quasi market’s contribution to efficiency’
. In all international comparisons the NHS has
traditionally scored highly on account of its low cost of
administration which up until the 1980s accounted for about
5 % of health services expenditure. As a hierarchical
structure the NHS thus had low administrative and
transaction costs. However the introduction of the internal
market and the fragmentation of the structure of the NHS
led to an increase in administrative costs from 5% to 12%.
The ratio between nurses and administrative staff fell from
3.5:1 in 1981 to 2:5.1 in 1996 . Whilst the new agreements
with the private sector will be of a significantly
different nature than the internal market of the 1990s it
is clear that any further move away from a hierarchical
structure to a contract based model will result in much
larger monitoring and administrative costs than are
currently found in the NHS.

In the United States which has a mixed provision of care
provided by public hospitals, for profit hospitals and not
for profit hospitals administration
costs are excessive. Within hospitals alone nearly a
quarter (26%) of the budgets are spent on administration
costs  . Within private sector for profit hospitals over
34% of the budget was spent on administration costs. In
general overall costs of care were higher at for-profit
hospitals. Thus if the new arrangements with the private
sector are to deliver cost effective health care serious
consideration will have to be given to reducing the
administration costs.

· Monitoring the true cost of care – when contracting
for complex services such as care services it is very
difficult for public bodies to monitor the
true cost of care and to know when a price increase request
is in fact justified. The complexity of the contractual
arrangements means that there is great scope for private
sector contractors to behave opportunistically. The
Australian experience of private management of public
hospitals has shown that contract prices have been
renegotiated upward to meet the demands of the private
contractor . Public authorities are thus susceptible on the
pricing issue. In the UK market for community care it has
been reported that those running independent sector care
homes have threatened to evict residents if the public
authorities do not meet their demands for higher fees .
There is the worrying possibility that the same is likely
to occur if public hospitals are privately managed
particularly at times when the system is under stress.

Relying heavily on non-NHS sources of provision leaves the
government hostage to the demands of the private sector. As
in the case of the railways the primary role of public
authorities will be to ensure that private health care
companies stay in business whatever the cost to the public
purse.

· Labour costs – Ironically allowing the private
sector to employ staff will introduce competitive forces
into the labour market which will drive labour
cost up rather than down. Private hospitals will have to
compete to attract highly qualified staff such as doctors
and nurses who are in short supply. Economic theory would
predict that this change will bring about a widening in the
dispersion of wages and salaries and probably a rise in
their mean levels as well. This prediction has been borne
out in the United States where hospital wage rates have
been found to be higher in competitive than in concentrated
labour markets.   One of the major virtues of a unified
hierarchical NHS is its ability to control labour costs in
a way which competitive labour markets cannot.

REGULATION AND ACCOUNTABILITY IN THE ‘NEW NHS’

The new arrangements for the delivery of services by the
private sector raises important questions about how
accountable the ‘new NHS’ will be. The democratic control
of the NHS may have always been weak but the
private healthcare sector has been and continues to remain
unregulated and outside of political control. There are a
number of important questions which Labour have failed to
answer:

· Regulation – Using the private sector to provide
services for patients funded by the state means that
stringent safeguards need to be put in place.
The Labour government has already demonstrated its attitude
to regulation. The National Care Standards Commission
regulates the care of elderly and frail patients in private
nursing homes. However, despite the fact that there is
strong evidence to show that low staffing levels are
associated with poor quality of care the 38 national
minimum standards for Care Homes for Older People for
England contain no requirement for minimum staffing levels.

The government has also recently attempted to abolish
Community Health Councils the only semi independent
monitoring body within the NHS. How will
complaints about private providers be investigated and how
will the public’s voice be heard under the new
arrangements?

Given that the government wants to establish a much larger
private sector in healthcare, the pressure to
under-regulate will be considerable. It is
essential that public interests prevail over this pressure.
So far the government has approached the task of regulating
the private sector with kid gloves. The private sector has
overwhelming and disproportionate representation on the
government’s Better Regulation Taskforce (which covers all
aspects of private sector regulation). The government is
also committed to introducing a bill to reduce regulatory
burdens on the private sector . Any regulatory regime for
the private sector must be transparent and free from
capture from the private health care industry.

· Accountability – accountability for service
provision will come via a contract between an NHS trust or
health authority and a private health care
company. However, a contract with a privately managed
hospital will require much more than stipulating just cost
and volume. PFI contracts for privately managed residential
care homes specify in great detail the quality of care to
be delivered. However, there is a question as to how
enforceable these contracts are, as it is easy to contest
the meaning of each specification. This leaves plenty of
scope for opportunistic behaviour by private providers.
What legal remedies will be sought under a contract if a
private healthcare company delivers poor standards of care?
Will the NHS be liable for the actions of its contracting
partner?

The recent Sharman report into accountability for public
expenditure highlights the difficulty of accounting for
public funds when state services
are provided by the private sector. The report makes clear
that even where functions have been devolved to other
non-governmental bodies government must ensure that it has
robust mechanisms to safeguard the correct use of public
money. How will public bodies oversee the way in which
private companies managing public hospitals spend public
money?

USING THE PRIVATE SECTOR TO DELIVER PUBLIC INTEREST GOALS

· The bargaining strength of public and private
contracting bodies needs to be examined. What will be
required to attract the private sector in to the running of
public hospitals? What guarantees of ‘trade’ will private
healthcare companies require before committing resources to
a hospital? How well does this accord with either the
efficient use of public money or the pursuit of public
health goals?

· Why would the private sector want to become
involved in providing services to the NHS? How will they
make profits? Why is it that Boots wants to run
and own primary care facilities? Why is it that companies
offering private health insurance i.e. Norwich Union want
to become involved in primary care. The assumption made by
government is that the private sector’s efficiencies and
innovations can be harnessed to improve on the delivery of
public health goals. However, does the private sector see
the new arrangement in this way? Will private health care
companies wish to be harnessed?

· Transferring management of public hospitals to
private managers will also mean the transference of
responsibility for resource allocation to profit
motivated actors. Will resources be allocated according to
need or according to other goals?

· The running down of direct state provision will
also lead to the fragmentation of the health service – the
ability of government and or other
public authorities to co-ordinate the delivery of health
policy goals will be seriously curtailed. Planning will be
impossible. Again the privatisation of the rail network is
a good example of what occurs when a move from
a hierarchical management structure to a contracting (and
subcontracting) service delivery method takes place.

WHAT EVIDENCE IS THERE TO JUSTIFY THE BELIEF THAT PRIVATE
SECTOR MANAGEMENT IS EFFICIENT?

· Evidence – What evidence is there to show that
private sector management of public hospitals around the
world leads to greater efficiency and higher
quality care provision? The services within hospitals in
the UK which have been contracted out - laundry catering
cleaning – etc provide examples of private sector
management of services formerly provided by the
public sector. There has been no evidence put forward to
demonstrate that the contracting out of auxiliary services
has led to either higher levels of efficiency or higher
quality services . Perhaps more importantly the
recent naming and shaming of the dirtiest hospitals in
Britain revealed that four out of the five trusts which run
the 10 dirtiest hospitals employ private contractors to
clean their wards.  In the market for community care the
claim that the private sector is able to deliver higher
quality at lower cost has been difficult to substantiate.

A new form of managerialism is thus unlikely to solve the
ills of the NHS. Unless evidence can be put forward to
demonstrate that private sector
management is more efficient and more likely to deliver
much needed reforms the policy can only be justified with
reference to the theoretical assumption that the market
works best.

HOW HIGH ARE HEALTH CARE STANDARDS IN THE PRIVATE SECTOR?

· It is widely acknowledged that the private sector
is not as good as the NHS at diagnosing and treating
post-operative complications. The cause of the discrepancy
is to be found in the fact that few private hospitals
offer round the clock specialist care. In the private
sector patients are typically admitted for some relatively
routine surgical operation (cataracts, hips,
hysterectomies, prostate operations). The procedure will be
performed by a private consultant assisted by an
anaesthetist. If medical complications do not present
within a short time both specialists will leave the
hospital. The patient is then placed under the care of the
Resident Medical Officer (RMOs) or Officers and the
hospital nursing staff. If, as happens not uncommonly, s/he
suffers an anaphylactic reaction to the anaesthetic drug or
develops a clot causing a potentially fatal obstruction in
a blood vessel, s/he will need specialist care very
rapidly: early detection of post-operative complications is
the key to the patient’s survival. If the patient is
fortunate, s/he will be transferred to the NHS where a
range of specialist services and equipment will be
available. Otherwise, their risk of death maybe much
greater than in the NHS. (The same of course applies if the
patient suffers, e.g. a cardiac arrest, for reasons
unrelated to the surgery.)

· Last year, there were around 800,000 elective
surgical procedures carried out in the private sector in
the UK and there were 141618 admissions from
the private sector into the NHS in England. These data need
to be handled with care (they may be incomplete and
admissions are not the same as procedures). But they are
sufficient to indicate a problem that must be addressed.

· The levels of experience and training of clinical
staff in private hospitals give cause for concern. RMOs are
usually junior doctors with little specialist training. If
they do not recognise early symptoms, they will not be able
to report them to the consultant. The same goes for nurses.
The need for skilled nursing staff is greater in the
private sector than in the NHS since there is less
supervision by doctors. But specialist nurses are even
rarer than specialist doctors in the private sector. Part
of this problem stems from the fact that the private sector
does not invest significantly in the training of medical
personnel.

· Over the last decade medical practice in the NHS
has come under close scrutiny, especially following the
setting up of the inquiry into medical
negligence at the Bristol Royal Infirmary. However great
these flaws will prove to have been, the fact remains that
procedures do exist in the NHS to prevent a poorly
performing doctor from putting patients’ lives at risk.
And following Bristol, the likelihood is that those
procedures will be invoked with increasing stringency. The
current regulatory framework places no obligations on
private hospitals to identify or to investigate
significant failures in medical practice. And there is no
systematic counterpart to the NHS exercise in clinical
audit.

There are reasons to suppose that such failures will occur.
Within the private sector medical practitioners work in
isolation and the patient’s clinical care is the
responsibility of just one person. In the early 1990s, this
led to a spate of perioperative deaths and very serious
injuries in the private sector among patients having their
gallbladders removed by keyhole surgery. (The demand for
keyhole surgery came from patients. Unfortunately their
doctors had little experience of what was then a new
technique and the consequences were sometimes tragic.)

· The Association of the Victims of Medical Accidents
has investigated a number of cases of patients dying while
undergoing treatment in a private
hospital, in circumstance which clearly warranted a
coroner’s investigation, but where the coroner was
dissuaded from undertaking a post-mortem examination. The
National Enquiry into Perioperative Deaths (NCEPOD) in
its 1995-6 Report commented on the disappointing response
of the private sector to participating in its inquiry.
Participation ought to be compulsory so as to facilitate a
scientific evaluation of the standards of medical care
in the private sector comparable to those that are ongoing
in the NHS.

IS LABOUR COMMITTED TO PROVIDING HEALTH CARE FREE?

On health policy, Labour likes to claim that the choice
before the electorate is between a Conservative Party that
wants to abolish free medical care and a Labour Party
committed to a modernised NHS ‘free at the point of use’.
This hard and fast distinction is not consistent with
its rejection of the Royal Commission on Long Term Care’s
recommendation that personal care should be provided free
of charge.

In fact, Labour’s NHS Plan and the legislation giving it
legal force make ample provision for charging. So ample, in
fact, that the private medical insurance industry may be
about to receive the biggest boost to its fortunes since
1948 when the NHS was founded.

Labour’s NHS Plan contained two big ideas: care trusts (a
new kind of NHS body) and intermediate care (a new setting
for health and social care). Put
them together and you get a potent recipe for massively
increased user charges.

Here’s why:

Care trusts will bring health care bodies and social
services under a single umbrella. They will be purchasers
and providers all rolled into one. Health care will
continue to be free at the point of the use. But social
care will be charged for. The government anticipates that
care trusts will control about 75% of the NHS budget by
2004.

Intermediate care refers to care provided in order to ease
the transition from hospital to home. The government wants
to create an extra 5,000
intermediate care beds by the middle of 2004. Some will be
in community hospitals, others in special wards in acute
hospitals and some in purpose-built new facilities or
redesigned private nursing homes. The plan also aims to
introduce 1,700 extra non-residential intermediate care
places.

Regardless of where it is given, the DoH envisages that for
the first episode all intermediate care will be free at the
point of use. ‘Based on current practice an intermediate
care episode should typically last no more than six weeks.
Many episodes will be much shorter than this, for example,
1-2 weeks following acute treatment for pneumonia or 2-3
weeks following treatment for hip fracture…’ . Thereafter,
NHS care—meaning nursing and medical care—will be provided
free of charge; but means-tests and user charges will apply
to housing and living costs and to the costs of ‘personal
care’. It requires no great acumen to see that care trusts
will have a strong interest in bringing patients into the
intermediate care sector as quickly as possible and in
defining personal care as broadly as possible. For both
these steps will help them maximize revenue from user
charges. Issues are bound to arise over the status of many
ordinary tasks of daily living (mostly centering on
washing, feeding and toileting). When is giving a patient a
bath, for example, medical care and when is it personal
care? It will be up to care trusts to say.

These changes will greatly favour the development of an
expanded market in private medical insurance. It may be
that insurers will offer policies that
take effect at the point where the care provided by care
trusts ceases to be free. Holders of such policies could,
for example, be entitled to longer stays in hospital with
the insurer meeting the cost no longer covered by the
state. Unlike health authorities the new Care Trusts do not
provide comprehensive geographic coverage rather resource
allocation is on the basis of GP practice lists or
enrolees. There are currently no restrictions in the Act
barring care trusts from selecting low risk patients or
from encouraging patients to buy private health insurance
for preferential treatment. The risk is that differential
risk pools will emerge creating inequities across care
trusts and between patients. Ensuring fairness will be a
complex and expensive and bureaucratic administrative task.

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