Structure of UK private healthcare sector

In 1997, over 12 million people were covered for medical expenses by insurers, friendly societies, and cash plan companies. Seven million people (12% of the population) were covered by private medical insurance. Care for this group, however, represents only 75% of acute medical and psychiatric inpatient and outpatient hospital treatment in the private sector. Some private care is self financed, and the NHS also contracts out to private providers—notably in the psychiatric services, care of elderly people, termination of pregnancy, and through waiting list initiatives.

Private medical insurance is more common among older people and those in social classes I-III, with coverage ranging from 22% for social class I to 2% for social class IV. The proportion of the population with private medical insurance also varies by geographical distribution; 20% of the population in the outer London metropolitan area are covered but only 4% in the north of England.1 About two thirds of private medical insurance policies are paid for by employers, and one third are paid by individuals.

Contribution of private health care to health economy

The aggregate value of services supplied in the private sector in 1996 was £13.7bn. Most of the money is spent on care of elderly and physically disabled people (46%), on pharmaceutical products and devices (22%), and in the acute hospitals sector (17%). Sixty four per cent of inpatient psychiatric care in 1996 was financed publicly but provided privately, as was 57% of long term residential home care of people with learning disabilities and 34% of long term residential care for elderly people. However, fewer than 1% of patients having elective surgery in the private sector had their operation financed from public funds.1

Nevertheless, the NHS is a substantial supplier of private beds. There were an estimated 1400 dedicated pay beds in NHS private units in 1997, of which 39% were in London. In 1989, the Health and Medicines Act freed NHS authorities to charge market prices for such services.

Changing case mix and increased demand

The case mix in private health care has shifted from simple elective surgery to include complex surgery such as coronary artery bypass grafts, acute and subacute care, intensive care, and cancer (including bone marrow transplantation and radiotherapy).2 The demand for health care by insured people is high. Since the mid-1950s, apart from a few exceptional years, the overall claims in the United Kingdom have been £80-£89 for every £100 of premium paid.1 Insurers manage demand by, for example, concurrent utilisation review (a system for continuing monitoring of use of a service) and case management (allocation of an experienced manager to oversee progress of a healthcare episode).

The use of new medical technologies is common in private practice. Usage may differ widely in the absence of clinical consensus about which intervention is best. Medical departments of insurance companies gather evidence on the effectiveness of new technology to determine whether it is eligible for funding; private medical insurance generally excludes treatments for which the evidence of effectiveness is poor, as does the NHS. Isolation of private sector purchasers from mainline policy development on cost effectiveness would constitute a serious lack of support for their efforts.

Innovations and controlling costs

In the 1990s insurers began to think more laterally about the health of their insured populations. Among the more successful plans introduced are employee assistance programmes to promote psychological wellbeing in the workforce, “back to work” initiatives linking cover to a range of common physical conditions affecting productivity at work, and 24 hour telephone helplines to advise, inform, and counsel customers. The NHS has recently set up its own helpline, NHS Direct.

Specialists practising privately are reimbursed on a fee for service basis, so there is a strong financial incentive to investigate and treat patients. Some insurers have made important moves to open dialogue with medical consultants about the nature and quality of care offered to insured patients, and this is made easier through the preferred provider mechanism.3 Preferred providers are those who enter into an explict relationship with the payer so that, for example, access, cost, and quality standards are agreed by the provider in advance in return for guaranteed levels of business from the payer.

(Credit: MARK OLDROYD)

The move to evidence based medicine has affected practice in the private sector as well as the NHS. The large insurance companies have noticed a fall in procedures such as insertion of grommets for glue ear and dilatation and curettage in younger women. Guidelines issued by bodies such as the royal colleges are increasingly being taken into account when assessing claims.

Regulation of private sector

Common minimum standards should operate across both public and private sectors. Important areas in which regulation could benefit patients include the organisational standards of hospitals, clinical governance of practice, better information for patients about costs and fees, and a national complaints procedure for the private sector. A recent government white paper is taking such regulation forward.4

What is the optimal relation with the NHS?

Consumer expectation of health is changing, and people are making heavier demands on health services.5 Some of these demands the public systems may not even attempt to meet—for example, removing anxiety over unresolved symptoms, treatment for conditions mainly affecting the quality of life, and the achievement of personal life aims such as fertility.

The NHS addresses the social ethic of pursuing the maximum gains within a limited budget.6 Voters appreciate the policy in the abstract, but it does not always work for the individual. When people require health care they become aware that their needs are competing with the needs of many others and that the degree to which their need is met can be quite arbitrary.

Furthermore, the NHS has not resolved the dilemma of simultaneously attempting to provide elective services to reduce waiting times and acute and emergency care, usually from the same facilities. These two competing arms of the service are driving the system in different directions. Bed occupancy rates are now so high that they frustrate efficient throughput of emergency cases and completely negate optimal use of resources for elective work. Good use has been made of day surgery, but the NHS still has a pressing need for elective facilities for more complex work while the private sector has an abundance of underused facilities.

The private sector should be encouraged to support the NHS in taking on a proportion of the elective workload. This could be particularly effective as hospitals are centralising services in larger centres that cover wider populations, with fewer smaller hospitals. To fund NHS elective surgery in the private sector, consideration should be given to the limited introduction of a mixed economy in health care. Certain parts of the population, according to income, would be expected to pay more for guaranteed access, and those who could not afford to pay would have similar access funded by the state. However, the current public and private sectors cannot simply be grafted on to each other; we need to consider how cooperation can best service the public health.

The primary concern in discussions about mechanisms for financing health care ought to be the health policy objectives of the total system.7 Other European countries do not have separate private and public healthcare systems. Currently the United Kingdom has no overall strategic view about the best deployment of total available resources to achieve national public health and healthcare aims. Consequently there are lost opportunities for cooperation in training and development, technology and costing expertise, and the coordination of screening programmes and research and development; incentives are confused for people who work in both sectors.

No single system will dominate provision of health care in future, nor can any one model accommodate the huge pressure of technological development and patient demand.8 Collaboration between public and private healthcare sectors, where it is sensible to do so, would serve the country better than continued isolation.