Outsourcing the NHSBMJ 2015; 350 doi: https://doi.org/10.1136/bmj.h875 (Published 19 February 2015) Cite this as: BMJ 2015;350:h875
Outsourcing in the NHS in England has increased substantially over the past 15 years as both Labour and Tory led governments have pursued policies of divesting frontline care and non-medical support services to external suppliers. Department of Health figures show that the proportion of the overall NHS budget spent on private healthcare providers increased from 2.8% in 2006-07 to 6.1% in 2013-14.1 2 An independent study by Oxford Economics has calculated a growth in the private sector’s turnover from outsourced frontline healthcare services from £6.9bn (€9.3bn; $10.6bn) in 2010 to £12.2bn in 2013.3
Non-medical services such as finance, contracting, and IT have also been heavily outsourced. In 2010, the NHS Confederation estimated that the total spend on “back office” functions across the NHS in England was £2.8bn.4 It suggested that a minimum of £600m of this could be released for frontline care if it was divested from the NHS, presenting a big opportunity for the private sector.
It is difficult to quantify how much non-medical work in the NHS has been outsourced to date, but the direction of travel is clear, with the coalition government’s Health and Social Care Act 2012 set to prompt the full scale outsourcing of commissioning support services to third party suppliers. Earlier this month, a string of private companies including Capita, Mouchel, and Optum (part of United Health) were approved to provide up to £5bn of support services to NHS commissioners. Regional support units subsidised and staffed by the NHS can also bid for this business,5 but they must become independent of the NHS by 2016 and compete in an open marketplace under the terms of the act.
The widespread outsourcing of NHS medical services in England began under Tony Blair’s Labour government, which set out to stimulate the internal healthcare market. NHS patients were offered the choice of receiving some elective procedures from private providers while still receiving care free at the point of need. This included being treated at the government’s new privately run independent sector treatment centres. Ministers said the centres would increase capacity and reduce NHS waiting times, but critics argued that the scheme allowed private companies to cherry pick the most profitable services.6
In 2009, healthcare think tank the King’s Fund concluded that there was “no quantitative evidence” that independent sector treatment centres had reduced NHS waiting times,7 although research published in The BMJ in 2011 suggested the outcomes of elective surgery at these centres were at least as good as in the NHS.8 But the overall cost effectiveness of the programme was questionable, with estimates suggesting that the private sector was paid almost half a billion pounds for treatment that never took place because of the block contracts awarded by the government.9
Prompted by criticism of its block contracting for these treatment centres, Labour introduced the any willing provider policy to allow private companies to provide a range of elective medical procedures on a cost per case basis. This policy was later renamed any qualified provider and accelerated by the Conservative led coalition as it expanded on Labour’s existing policies through the Health and Social Care Act.
The act legally enshrined principles of competition into the NHS and arguably swung the balance of power from the public to the private sector as a result. The reforms require NHS clinical commissioning groups to open up more healthcare services to the market (by competitive tender or any qualified provider), creating more opportunities for non-NHS providers to bid for services. Companies can also appeal to sector regulator Monitor if they suspect commissioning groups of engaging in anti-competitive practice, leaving commissioners nervous of litigation.
A recent investigation by The BMJ found that the private sector has been awarded a third of the contracts to provide NHS clinical services in England since the Health and Social Care Act came into force in April 2013.10 Although ministers insist this is still a small part of the overall NHS budget, the growth seems likely to continue in light of current government policies. This continued growth comes despite a series of high profile cases that have cast doubt on the outcomes achieved through outsourcing.
The private company Serco has entirely stopped providing medical care in the United Kingdom after large financial losses and heavy criticism over the standards of care it provided.11
In a separate case involving outsourced eye surgery in Somerset, the safety of thousands of NHS patients was called into question when a confidential report showed how patients were left in “severe pain” after procedures carried out by private contractors.12
Most recently, private firm Circle Health announced its withdrawal from the contract to run Hinchingbrooke Hospital in Cambridgeshire after healthcare regulator the Care Quality Commission uncovered serious failings at England’s first privately run NHS hospital.13
Both Labour and Tory led governments have argued that the outsourcing policies they have pursued are not privatisation because healthcare remains free at the point of use. But critics point out that the policies used meet the World Health Organization’s definition of privatisation in healthcare as “a process in which non-governmental actors become increasingly involved in the financing and/or provision of healthcare services.”14
Since Labour left office in 2010, its shadow health secretary Andy Burnham has said that the party went too far in letting the private sector into the NHS and has pledged that the NHS will be the “preferred provider” if his party returns to power. It will be intriguing to see whether this pledge will be honoured if Labour wins the general election in May.
Regardless of who forms the next government, the current chief executive of NHS England Simon Stevens believes that the proportion of NHS care being provided by the private sector is unlikely to increase beyond “the margins” over the next few years.11
How far these margins will be stretched is the key question that remains unanswered.
Cite this as: BMJ 2015;350:h875
Competing interests: I have read and understood BMJ policy on declaration of interests and declare the following interests: none.
Provenance and peer review: Commissioned; not externally peer reviewed.