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Special Report on Private Health

A bugbear of every health care system, whether it is state-funded or based on private provision, is the difficulty of holding down costs. But although the NHS and the independent sector could both help themselves in that respect by collaboration in joint projects, there has been much more talk of this so far than real action.

Surveys carried out by the Royal Institute of Public Administration and the Nuffield Centre for Health Service Studies show that the most common form of interchange is the use of clinical facilities, such as pathology, radiology and pharmacy, with online stores buying services from the NHS rather than vice versa, writes David Loshak.

Nevertheless, at least a quarter of the 202 distinct health authorities in England and Wales have contracted out long-term care to the private sector. The reason for this has often been ‘creative accounting’, enabling health authorities to transfer a cost from an overstretched health budget to some other account.

Nevertheless, the public sector now spends Pounds 5 million a year spending seriously disturbed young people or private psychiatric units, such as AMI’s two units at Kneesworth, near Cambridge, and Langton House, Dorset, and the charity-based St Andrew’s Hospital, Northampton. The facilities they provide are lacking in the NHS.

There have been fewer instances of acute care being contracted out to the private sector by the NHS, and nearly always the arrangement has been regarded by both sides as short-term. Even so, some 10,000 operations are contracted out each year to the private sector, with 60 private hospitals involved. But for the 400,000 operations a year in the private sector, the NHS waiting list of 650,000 would rise alarmingly.

Such arrangements, notes Williams Laing, in an Office of Health Economics report on Private Health Care, are ‘second order issues, an avenue of last resort when efforts at achieving an in-house solution fail’. But the interchanges have usually worked well, he observes.

It is beginning to look as if health authorities are now getting this message. There have been some major developments recently which foreshadow much greater collaboration between the two sectors in future.

A joint venture between St Bartholomew’s Hospital and American Medical International’s Portland Hospital for women and children will set up two test-tube baby units, providing 550 treatments a year, and saving the existing unit at Barts which has been threatened with closure.

Doctors and support staff will, for the first time, rotate between the public and private sectors.

This could set a pattern for the future in several areas where the NHS lacks resources. A potentially even more significant development has occurred at Guy’s, which has decided to contract out the management of its 47 NHS pay beds to the Hospital Capital Corporation.

The company will spend Pounds 4 million to upgrade the private wing and run it like a modern private hospital. Guy’s stands to make at least Pounds 200,000 a year out of its share of the profits.

In its last weeks, the outgoing government has welcomed this initiative and if the Conservatives return to power, similar ventures will be officially encouraged. There is clearly untapped commercial potential in NHS hospitals which private capital could do much to develop.

A recent paper on the NHS by the Centre for Policy Studies, which has had considerable influence on subsequent Conservative policies, suggests, for example, that district health authorities could raise private capital to build hospitals which could then be rented out.

Or there could be joint ventures between health authorities and private capital whereby expensive items of equipment could be financed and run by a private sector management company.

As it is, the independent hospitals are notable for having a lot of high technology equipment. This is an opportunity for NHS districts, which often lack the funds for such machinery but have a patient demand for it, to buy in the private sector facilities on a contractual basis.

During the election campaign, a major issue has been the length of NHS waiting lists, and here, too, there is scope for a co-operation between the two sectors.

BUPA Hospitals has suggested to local health authorities that it could help them reduce the queue of those waiting for acute operations. BUPA’s 11 hospitals, and almost all other private hospitals, are under-occupied at week-ends and holiday periods, so could well be used at such time by NHS patients.

The private sector has its eyes on the extra funds that have been earmarked by the Health Department for reducing waiting lists and see this as a development which could lead to closer collaboration all round.

In the longer run, this means a market environment in which the two sectors would constructively compete on equal terms, as well as co-operate, to provide the optimum service suited to each locality.

A major hurdle still to be overcome is the resistance to such change on the part of health authority members. But the new breed of NHS managers is alive to the opportunities, and in the longer run, given the encouragement and impetus from above, will move to exploit them.

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