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A third of NHS contracts awarded since health act have gone to private sector, BMJ investigation shows

BMJ 2014; 349 doi: https://doi.org/10.1136/bmj.g7606 (Published 10 December 2014) Cite this as: BMJ 2014;349:g7606

In the run up to the UK general election, accusations are flying about the alleged privatisation of the NHS in England. The BMJ’s reporter Gareth Iacobucci investigates the reality behind the claims

Private sector providers have secured a third of the contracts to provide NHS clinical services that have been awarded in England since the Health and Social Care Act came into force in April 2013, an investigation by The BMJ has found.

Its analysis of 3494 contracts awarded between April 2013 and August 2014 disclosed to it under requests made under freedom of information legislation showed that, in total, non-NHS providers (including private sector, voluntary sector, and other providers) have secured 45% of contracts awarded since April 2013 (fig 1). The analysis of the data supplied by clinical commissioning groups (CCGs) showed that 1149 contracts (33% of the total) were awarded to private sector providers, 335 (10%) to voluntary and social enterprise sector providers, and 100 (3%) to other types of provider, such as joint ventures or local authorities.

A total of 1910 contracts (55%) were awarded to NHS providers. This category included NHS hospitals, community and mental health providers, and general practices.

Figure1

Key findings: No of CCGs supplying data, where contracts were awarded, and where the money went

The BMJ analysed a range of contract types, including those awarded to a single source without an open tender, those awarded through a competitive tendering process, and those awarded to several providers under “any qualified provider,” a government policy that opened up a wide range of community based NHS services to different providers outside the NHS.

Of the contracts that were analysed, 195 (6%) were awarded by competitive tender. Private sector providers were most successful at bidding for these contracts, winning 80 contracts (41%), whereas NHS providers won 59 contracts (30%) (fig 2). A further 48 contracts (25%) were won by the voluntary and social enterprise sector, while eight (4%) were won by other types of provider.

Figure2

Who won competitive tender contracts

The BMJ also requested financial details of all contracts to see where NHS funds were being distributed. In many cases CCGs were unable to provide figures or withheld data because of commercial confidentially.

CCGs did disclose the full value of 1349 contracts (38% of the total analysed), worth £10bn (€12.6bn; $14.7bn) in total. Of this total, NHS providers were awarded contracts worth £8.5bn (85%), voluntary and social enterprise providers were awarded £690m (7%), private sector providers were awarded £490m (5%), while other providers were awarded £330m (3%). The figures reflect the fact that many of the highest value contracts in this subset were awarded to NHS providers to provide acute care.

But the financial picture is muddied by private sector providers being more likely to pick up smaller contracts on an any qualified provider basis. In these instances, commissioners approve a range of different providers to offer services such as diagnostics, audiology, and podiatry in the community. Providers are paid according to activity, so the overall values of contracts were typically undisclosed by commissioners.

Level playing field

The BMJ sent its freedom of information request to all 211 CCGs in England. Responses were received from 192 CCGs (a 91% response rate), although 10 of these were unable to provide data; 17 CCGs did not respond to the request; and two responded after The BMJ’s deadline for collating the data.

The request was submitted so The BMJ could examine how the NHS market had developed since the coalition government’s Health and Social Care Act was introduced in April 2013. The act enshrined principles of choice and competition in law by requiring the new CCGs to ensure that NHS and non-NHS providers operated on a level playing field in being able to provide NHS services.1 It also gave the health sector regulator Monitor new powers to police the market to ensure that choice and competition were being offered across England.

Simon Stevens, the chief executive of NHS England, recently told The BMJ in an interview that the proportion of NHS care being provided by private sector was unlikely to increase much in the next few years.

“The figure quoted is that 94p of £1 of care is delivered by NHS providers. For some things, patient choice is going to create some permeability there, but that’s not going to be the central driver of change or improvement,” he said. 2

In his interview with The BMJ he said, “In terms of where elective surgery is provided, since the mid-2000s there has been a consensus that patients should get to make that choice rather than health service bureaucrats. But the truth is that [private sector involvement] is at the margins.

“My firm prediction is that the vast majority of care will continue to be provided by NHS providers.”

Previous analyses from the campaign group the NHS Support Federation that looked only at the contracts awarded through competitive tender have indicated that the vast majority of contracts awarded since April 2013 have been awarded to private sector providers.3 The BMJ’s analysis of its larger sample showed that the private sector was winning a smaller share of the overall number of NHS contracts than in the sample cited by the federation. But campaigners have told The BMJ that its findings provided further evidence that the changes wrought by the 2012 act were gradually accelerating the privatisation of the NHS.

Clive Peedell, a consultant oncologist in Middlesbrough and co-leader of the National Health Action Party, a political party set up to oppose the Health and Social Care Act,4 said, “Obviously it’s a small number of the overall number of contracts. But that percentage is still enormous. If [the private sector share] stays at 33% long term, then the NHS gets diluted, as you’ll get more and more private sector involvement over time.”

He added, “It’s not happening overnight. It’s more palatable for the parties to say, ‘We’re not privatising,’ but clearly that is the long term goal of what’s happening.”

Peedell said that the figures vindicated his belief that levelling the playing field for non-NHS providers would lead to greater private sector involvement in running NHS services. “The government was promising [before the act] that there would be no privatisation at all. The clever thing they said was, ‘We’ve made it illegal to favour the private sector’—whereas actually what they did was make it illegal to favour the NHS. That is exactly how you can do it by stealth if you want to privatise a service.

“If you’ve got a public system, and then you make it illegal for the NHS to be the preferred provider, by definition it’s going to get diluted. That’s what we’re seeing.”

Exploring the market

Thirty (15%) of the 195 contracts awarded by competitive tender were transferred from NHS providers to non-NHS providers. Of these, 13 were transferred to private sector providers, 14 to voluntary sector providers, and three to other types of provider. By contrast, only one contract was transferred from a non-NHS provider to the NHS.

The GP Amanda Doyle, co-chair of the representative group NHS Clinical Commissioners and chair of NHS Blackpool CCG, said that CCGs tended to use competitive tenders when they wanted to “explore the market,” which may explain the success of non-NHS providers in picking up contracts.

“The vast majority of contracts CCGs hold are with NHS providers. But when a CCG goes out to tender, they are often doing that because they are looking to explore the market for a service for one reason or another,” said Doyle. “It might be that they want more capacity, [or] it might be that they want a different form of service provision, and so those are the very services that are more likely to interest the independent sector.”

Figures not disclosed for “commercial reasons”

Although The BMJ’s analysis shows that 85% of the money allocated to the 1349 contracts for which financial details were available was awarded to the NHS, a slow trickle of money leaving NHS providers was evident. The figures supplied showed £400m moving from the NHS to the private and voluntary sectors between April 2013 and August 2014. Of this, £350m went to the voluntary and social enterprise sector and £50m went to private sector providers (fig 3). The figures disclosed showed no evidence of money transferring from the private sector or the voluntary sector to the NHS.

But with many contract values not provided, it was not possible to track the exact flow of money across all the contracts.

Nigel Watson, a GP in Hampshire, chief executive of Wessex Local Medical Committees, and a member of the commissioning and service development subcommittee of the BMA’s General Practitioners Committee, said that greater transparency was needed concerning where NHS funds were being spent. “It is fundamentally wrong when it’s public money to not provide financial details for commercial reasons,” he told The BMJ. “If we’re going to be open and transparent then we need to be open and transparent about all of it.”

Figure3

Where £10bn of NHS funding (1349 contracts) went before and after the Health and Social Care Act

Cherry picking

The financial picture is clouded because a quarter (875) of the overall contracts awarded were on an any qualified provider basis, meaning that their values were difficult to ascertain. Half of these (436 contracts) were held with private sector providers, followed by the NHS at 45% (395), the voluntary sector at 4% (33), and other providers at 1% (11).

Of the 1414 contracts described by CCGs as “community based services,” such as community ophthalmology, diabetes, and musculoskeletal services, non-NHS providers were awarded 973 (69%) and NHS providers 441 (31%).

Carrie MacEwen, president of the Royal College of Ophthalmologists, said there was concern among her colleagues that private firms that were selected on an any qualified provider basis were cherry picking less complex procedures, to the detriment of existing care pathways and the case load available for specialty training. “It can become quite selective,” she said. “Fragmentation is a huge issue. The AQPs [firms contracted on an any qualified provider basis] are coming in and obviously helping themselves to the easy stuff but leaving the difficult stuff for the NHS departments, and that is causing considerable concerns around budgets.

“Some of the AQPs have very specific criteria, and they are not prepared to take complicated things. That is a problem, because the more complicated ones are left. They may take more time, more instrumentation, they may cost more money, and they are having an effect on our training. When it comes to looking for straightforward cases for trainees to work with, they can’t find them because they have been taken away by the AQPs.”

The GP Steve Kell, co-chair of NHS Clinical Commissioners and chair of NHS Bassetlaw CCG, said that although awarding contracts to any qualified provider could sometimes be a useful way of contracting for a standalone service where new capacity was required, it was not an effective tool for driving integrated care. “It’s much harder to deliver an integrated service in an AQP style. The last thing we want is fragmented provision where bits of the pathway don’t join up for patients. That’s got to be our priority,” he affirmed.

But Kell said that non-NHS providers may sometimes be filling gaps in provision that have historically been missing in the NHS. This could be the case with mental health, for example, where The BMJ’s analysis found that non-NHS providers won two thirds of the contracts for mental health services (162 of 237), while NHS providers won a third (75) (fig 4).

“We [the NHS] are not necessarily good at dealing with social isolation and some of the big problems there for our population,” said Kell. “It’s therefore probably understandable that some of the smaller contracts might be around those additional services outside the NHS.”

Figure4

Distribution of contracts by healthcare sector

Evolutionary growth

David Hare, chief executive of the NHS Partners Network, which represents private sector companies that provide NHS services, said that The BMJ’s analysis suggested that commissioners were increasingly placing trust in the private sector.

“The pattern is evolutionary growth but growth none the less,” he said. “The numbers do indicate that commissioners are placing increasing confidence in the independent sector. The sector performs well on acute elective waits, on PROMs [patient reported outcome measures] data such as for orthopaedics, on diagnostics, [and] on the friends and family test.”

Hare said that private sector organisations were well equipped to provide more NHS services in the future—especially as new models of care are introduced that rely less on large acute care centres. But he said that the power of some large NHS hospital trusts was a barrier to redesigning services. “The incumbent providers are often too big to fail. It is difficult to redefine services where you have large incumbent providers,” he said.

Hare was non-committal when asked if more NHS contracts should be awarded by competitive tender in the future but said, “The bigger issue is: can commissioners be confident they can demonstrate that in not taking services to tender the incumbent provider is doing the best they can for patients?”

“Can commissioners be confident they can demonstrate that in not taking services to tender the incumbent provider is doing the best they can for patients?”—David Hare

Pressure to contract to the NHS?

CCGs may feel pressure from various angles when selecting particular bidders, including potential legal challenges (box) and media attention.

Rachael Addicott, senior research fellow at the healthcare think tank the King’s Fund and author of the recent research paper Commissioning and Contracting for Integrated Care,5 said that the political support from all parties for integrated care may create further opportunities for the private sector because of its strengths in areas such as information technology, informatics, and back-office efficiencies.

“Sometimes, the things [commissioners] are looking for in the new models are things that non-NHS providers are more able to deliver. Perhaps private sector companies are a bit more nimble around some of those issues,” said Addicott.

But Addicott said that her research indicated that some CCGs were “anxious” about the potential bad publicity of awarding large NHS contracts to private companies. “There are a lot of concerns out there that this is privatisation by the back door,” she said.

“It could be potentially putting a lot of CCGs off radically new models, especially this side of an election. We do know that those going through procurements are quite anxious about the repercussions of it [awarding contracts to private companies] and how it’s perceived by their communities. Some of them are getting significant backlash in the media.”

Alliance contracts

In the face of these competing pressures, joint ventures and alliances between the NHS and private sector may become more commonplace as CCGs look at new methods of care delivery that retain an NHS ethos.

Addicott’s report defines alliance contracts as arrangements where “separate providers enter into a single agreement with a CCG to deliver services, where the commissioner(s) and all providers within the alliance share risk and responsibility for meeting the terms of a single contract.”

Kell said that CCGs were open to different options as they looked to implement new integrated models of care. “We are looking at things which are different from traditional NHS hospital based models,” he said.

“CCGs are trying to develop a sense of joint responsibility for populations, so people in the hospital are thinking beyond their hospital walls to look at nursing home quality and anything that affects our patients. It’s about working together.”

How fear of litigation affects GP commissioners

Clinical commissioning groups may be influenced by a fear of litigation when assessing which providers to award contracts to. The recent case of NHS Blackpool CCG, which faced an investigation by Monitor after a complaint from the private provider Spire Healthcare that the CCG was restricting choice, highlights the potential for commissioners to be challenged under new laws on competition.6 Monitor eventually found that the CCG had not acted against the rules, but only after conducting a year long investigation into the issue.

The CCG’s chair, Amanda Doyle, said she was frustrated at the cost of the investigation and its effects on the CCG’s work. “This required us to spend tens of thousands on staff to produce the evidence that was required and to feed the investigation. My feeling was that that could have been used more appropriately to improve patient care rather than to justify a position when the evidence didn’t support it.

“I’ve got no issue with competition as such, and the rules are the rules. But I think it’s really important that what we’re trying to do is act in the best interests of patients. A lack of clarity over the rules and how they’ll be interpreted may see CCGs go out to tender when they may not feel that’s the best approach to change the services. It [the Blackpool case] is likely to make CCGs that bit more careful to ensure that they don’t get a challenge.”

Nigel Watson, chief executive of Wessex Local Medical Committees and a member of the commissioning and service development subcommittee of the BMA’s General Practitioners Committee, said that such fears were causing some CCGs to “stick to rigid scoring systems” when awarding contracts by tender, which he argued would often favour private companies that bid at a low price.

“CCGs have gone through a period of being fearful of legal challenge,” he said. “The suggestion is that some of these tenders go out to the cheapest bidder, not necessarily the local provider who’s the one you might want to work with and have a relationship with,” he added.

Notes

Cite this as: BMJ 2014;349:g7606

References

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