Examination of Witnesses (Questions 1
WEDNESDAY 24 OCTOBER 2001
MILBURN, MP, MR
Chairman: Colleagues, can I welcome you
to this first session of our inquiry into the role of the private
sector in the NHS and I once again thank you, Secretary of State,
and your team for coming along. Can I also put on record our thanks
to your Department for their very helpful written evidence? As
this is a new inquiry, I suggest that there should be one or two
declarations of interest that we need to make before we start.
I will begin by saying I am a member of UNISON. My constituency
in the Labour Party has a constituency agreement with UNISON and
UNISON did make a donation to my constituency party at the last
Mr Naysmith: My constituency has a constituency
agreement with the GMB and we were given a donation to run our
general election campaign.
Julia Drown: I am a UNISON and a TGWU
member and UNISON has a development plan with my constituency.
I cannot remember whether they made a specific donation to the
John Austin: I am a member of MSF.
Andy Burnham: I too am a member of UNISON
and the TGWU.
Jim Dowd: I am a member of MSF and GMB.
1. Can I begin by asking our witnesses to introduce
themselves to the Committee?
(Mr Milburn) Alan Milburn, Secretary of State for
(Mr Coates) Peter Coates, Department of Health Private
(Mr Macpherson) I am Nicholas Macpherson from the
Public Services Directorate in the Treasury.
(Mr McKeon) Andy McKeon, head of Medicines, Pharmacy
and Industry Group.
2. Mr Macpherson, what does your role entail?
(Mr Macpherson) I run the Public Services Directorate
in the Treasury, whose main aim in life is to improve the value
for money of the public services year by year.
3. Secretary of State, what forecasts have you
made of future activity levels under the Concordat?
(Mr Milburn) Let me begin with where we are now.
4. No; that is my next question.
(Mr Milburn) It depends on what we decide to do in
policy terms but there are five areas that we are considering
developing. As you are aware, prior to the Concordat and prior
to the Private Finance Initiative, the relationships between the
NHS and the private sector, although they are quite longstanding,
were pretty ad hoc in most cases. We do not think that has been
particularly to the benefit of NHS patients. In the course of
the last few years, we have the Private Finance Initiative going
in hospitals now which is of benefit to patients and the Concordat
is good also because it is providing extra care for NHS patients.
5. That is a different view to your predecessor,
is it not?
(Mr Milburn) May I come to the five points? You rightly
asked where we were going in the future.
6. I asked what your forecasts were of activity
(Mr Milburn) I will come to that. Our big problem
today is that we are short of capacity in the health care system.
There is extra money going in from the public purse to address
these shortages, whether of staff or buildings, but we need extra
help too. We made a start with the Concordat and the PFI but perhaps
I can come to the five areas where we plan to take this further.
First, tomorrow, I will be announcing that we expect to make up
to £40 million available to the NHS to buy treatment for
NHS patients in private sector hospitals over the course of the
coming months. That is double the £20 million we put in this
time last year.
7. On a technicality, am I right in thinking
you have just broken your own embargo on that announcement?
(Mr Milburn) I felt it might be of benefit to the
Committee if I told you. You would be pretty unhappy with me if
you read it in tomorrow morning's newspapers. Usually, people
complain about things being announced on the Today programme.
8. Absolutely but given that you have known
for some time that you were coming here this afternoon why, according
to your words just now, have you got a press release out which
I suspect is probably embargoed for a minute past midnight? Why
did you not just announce it now rather than embargo it?
(Mr Milburn) Because there are other aspects to the
press release. I do not know if you have a copy of it but you
should not have because it is restricted to the press. I will
send you a copy tomorrow and you can read all the other interesting
things that are in it. Secondly, we have started work on what
we are calling a national framework agreement to build longer
term relationships between the National Health Service and the
private sector with a view to doubling the number of NHS patients
treated in private hospitals to 100,000 a year from next year.
Thirdly, we are exploring the possibility of contracts under which
part of or indeed even entire private hospitals would become NHS
providers of services for a number of years. Fourthly, we will
consider approaches from private sector providers to build privately
owned diagnostic treatment centres which will perform operations
purely on NHS patients. Fifthly, we are exploring whether private
sector providers in mainland Europe who have spare capacity available
could treat NHS patients there, although my very strong preference
is for those private providers to establish their services here
with their own staff, to provide treatment for NHS patients at
home rather than those patients having to travel abroad. On all
these five points we are in active discussion at the moment. There
is no blank cheque and we have to be assured that we not only
get good value for money for the taxpayer but we are also assured
of the highest standards of care clinically for patients. However,
I think these plans do amount to a pretty big expansion in the
relationship between the NHS and the private sector that I believe
will bring benefit to NHS patients. There is one important caveat
to all of this. In the second half of this financial year, right
now, the private sector will undertake around 1.5 per cent of
the total number of operations that are undertaken on NHS patients.
The NHS is the dominant provider of care for patients in the United
Kingdom. Nonetheless, what we know is that the private sector
can make a significant contribution in particular to guaranteeing
shorter waiting times for NHS treatment for NHS patients.
9. Factually, what is the level of activity
that has taken place under the Concordat to date?
(Mr Milburn) There are two separate but related things.
First of all, the number of operations that have been bought with
the so-called Concordat money. We put in £20 million last
year at around this time, in November when we launched the Concordat.
It bought around 10,000 operations in total. The build up was
slow through November and December and peaked in March. I want
to come to the reasons for that. In total, we estimate that currently
somewhere between 50,000 - maybe up to 60,000 - operations a year
are undertaken at the expense of the National Health Service on
NHS patients, so treatment for free but in private sector facilities.
As a matter of perspective on all of this, the private sector
in this country currently has around 10,000 beds in its hospitals.
The National Health Service has around 136,000 beds.
10. How was that £20 million distributed
across the country? Was it according to where people had relationships
with private sector partners or according to need?
(Mr Milburn) I cannot quite remember the methodology
but it was not according to the relationship. The relationships
are pretty uneven. Incidentally, we have just had completed a
survey of National Health Service providers and NHS hospitals
to see how they are using the relationship with the private sector
to benefit NHS patients.
11. Could you give us a note?
(Mr Milburn) We are analysing at the moment and we
will gladly pass that on to you. It is uneven according to specialty
and it is also uneven geographically. I suspect that is for a
number of reasons.
12. The relationship is uneven or the allocation
(Mr Milburn) The relationship is uneven and the spend
therefore is uneven. My sense is that in some parts of the service
there is broadly some ideological concern about contracting with
the private sector. Elsewhere, there are suspicions probably on
all sides. Thirdly, there are uneven relationships that have been
developed over a period of years. If we are going to make this
thing work and if we are going to expand the capacity that is
genuinely available to the NHS patient we have to put that relationship
on a more mature footing.
13. In your evidence the Department refers to
four essential tests which need to be applied to any proposed
partnerships with the private sector. What steps have you taken
to evaluate whether the existing Concordats at local level meet
all those tests?
(Mr Milburn) The local relationships thus far under
the Concordat arrangements have not been subject to the extent
of monitoring that we will want to see in the future. For example,
there are some issues about the price differentials that are being
paid by the NHS to different private sector providers or even
probably to the same private sector provider. Basically, there
are three firms who dominate around 60 per cent of the market
as far as the private sector is concerned in this country. BUPA
is one; BMI and I guess GHG is the biggest general health care
group. We are getting anecdotal evidence back and that is one
of the things that we need to substantiate as a consequence of
our analysis of this survey. Different prices are being charged
in different places. We have to make sure that we get decent value
for money for the taxpayer. What we will move to over time is
a situation where, as you know, we are able now to publish this
information on an annual basis, to assess what the costs of carrying
out different procedures are in different NHS hospitals. We publish
these NHS reference costs on an annual basis. If you look at the
price of a hip operation or the price of a heart operation, it
might be cheaper in Wakefield than it is in Darlington, for example.
Maybe there are some good reasons for that but my guess is that
there are some bad ones too. It is quite important in our arsenal
to make sure that we get decent value for money from within the
National Health Service. In future, if we are going to have a
longer term relationship with the private sector, where the NHS
is not just contracting on a spot purchase basis - i.e., there
is a problem with the waiting lists and we decide that we are
going to pay a premium rate to deal with that for a month. We
do not always get the best value for money. One of the reasons
that we are taking the steps that I set out earlier in answer
to Mr Burns is to make sure that not only do we have a longer
term relationship but we get fair value for money. My own view
is that if we enter in particular into longer term contracts what
we will be able to do is get better value for money for the NHS
and for the taxpayer. One of the ways that we will seek to do
that is probably by using NHS reference costs as a benchmark for
the sort of prices that we would expect local NHS hospitals to
pay when they contract with the private sector hospitals.
14. Can I ask a couple of practical questions
about the tests and what appears to be happening, certainly in
my part of the country? You will recall that when we undertook
our inquiry into NHS consultants' contracts we received some evidence
suggesting that there was a correlation in certain areas between
the lengthy waiting lists of certain consultants and their involvement
in private practice. There were suggestions that there were interesting
connections here. How do you defend a situation where the patients
who are waiting to see a particular consultant in the NHS are
subsequently referred through the Concordat to a private hospital
and then see the same consultant in that private hospital that
they were hoping to see on the NHS waiting list? I can give you
an example. I spoke last week to a gentleman in my area whose
mother had had this experience in Leeds. She had been waiting
for some considerable time. She was an elderly lady. She was told
she was going to be referred to Roundhay Hall Private Hospital,
and she was amazed to find that she was seen by the consultant
that she had been waiting a long time to see on the NHS. It does
not seem to add up to me that this arrangement has been made in
an effort to improve things. I would have thought it would make
more sense for that consultant to see the lady in the NHS and
to spend more time on his NHS work.
(Mr Milburn) If that could happen, that would be a
sensible thing to do but virtually every hospital in the country
is running pretty hot right now. Across the National Health Service,
the acute hospitals are running at an occupancy rate of between
89 and 90 per cent on average for beds. I wish there was a lot
of spare capacity in the NHS, because it would make all of this
so much easier.
15. This is because of consultant time, not
bed occupancy. She was seeing the same doctor.
(Mr Milburn) I understand that but it is entirely
possible that, having seen the consultant, the problem was not
the consultant time. The problem was the lack of a bed, the lack
of an operating theatre and the length of time that your constituent
was going to have to spend on the waiting list. What we are trying
to do here is a very simple thing. I think we all accept - I think
this is a matter of agreement in Parliament - that the biggest
problem we have across the health care system, not just in England
but I guess in the rest of the United Kingdom as a whole, is the
capacity shortage. We have to find a way of expanding capacity.
If there is spare marginal capacity available in an NHS hospital
and we can treat NHS patients there, that is what we should do.
16. You are slightly dodging the question.
(Mr Milburn) No, I am not.
17. It is not about capacity; it is about accessing
advice from a consultant. In your essential tests, you talk about
one of them being that any proposed partnerships with the private
sector are consistent with the local and national strategies of
the NHS and its development. I do not understand how that kind
of situation is consistent with your, in my view, very welcome
efforts to try and obtain consultants to work full time in the
National Health Service when they first qualify, for the first
seven years. That, to me, is exactly the way we should be going,
but this lady's experience of the Concordat seems to me entirely
contradictory to that strategy.
(Mr Milburn) I do not think it is, with respect, because
what we are trying to do in both cases with the Concordat and
incidentally with the extra investment going into the National
Health Service and with our proposals around the consultant contract
that we are in negotiations with the BMA about right now is exactly
the same thing. That is about expanding the capacity that is available
to NHS patients. I can see how people could get to that conclusion
but I think it is the wrong conclusion because at the moment a
consultant qualifies and a lot of consultants incidentally have
whole time contracts working purely for the National Health Servicein
fact the majority do - and most consultants are doing a really
good job in the NHS and over-fulfilling their contractual obligations
to the NHS. Where there is a choice that consultants make between
spending their time operating privately on privately paid for
patients, not NHS patients, the consequence of that is that it
is denying care to NHS patients. My primary interest is if people
want to pay for their own care that is fine. If people want to
take out private health insurance, that is fine too but what I
believe in is a system that is there for free and available to
all. What I want to do is expand its capacity. The reason that
we are making the proposal around restricting access to private
sector worki.e., to privately paid for patients for up
to the first seven years of a newly qualified consultant's careeris
precisely to expand the availability of their time, their effort,
their skills for the benefit of NHS patients. What the Concordat
does with the private sector is expand the capacity that is available
to NHS patients. It just so happens that that part of the capacity
might exist in a BUPA hospital or a GHG hospital rather than an
NHS hospital. In the end, what counts from the patients' point
of view is the quality of care that they receive and how timely
is the manner in which they receive it. My guess is, although
I would be interested in seeing the details of the case you refer
to, that the consequence of going through the Concordat is that
the person you referred to is getting faster treatment than if
they had to wait on a long NHS waiting list.
18. Would you accept that that person was not
unreasonably concerned, having waited for a long period of time
on the NHS, to be told she was going to a private hospital under
the Concordat and then she had seen the same consultant who was
earning in his private time within that private hospital? It seems
to me not to quite add up. I can understand her concerns. Would
you accept as well that these hard working consultants who commit
themselves full time to the NHS resent very much the way in which
they believe the government is now rewarding those consultants
who spend a lot of time in the private sector by pushing NHS patients
through the Concordat into their private work?
(Mr Milburn) No, I do not accept that either. I would
be interested to see the details of the case that you refer to
but my guess is that the person may have been concerned about
seeing the consultant wearing two hats, operating in an NHS hospital
and still operating on that NHS patient, providing treatment for
free according to clinical need in a private sector hospital,
but I bet they were pleased with the quality of care that she
got and the fact that they had to wait less time than they would
otherwise have had to. That is where we have to get to, with respect.
We have to get to a position, in my view, where what counts is
the patient's interests.
19. I am obviously concerned with patients'
interests. Can I raise an issue that I wrote to you about in respect
of the essential tests that your evidence refers to? The fourth
essential test is that any proposed partnership with the private
sector is consistent with public sector values, including the
treatment as determined by clinical need.> You will recall
I asked a question in July and subsequently wrote to you about
my concerns over how we ensure clinical priorities where we have
the situation that I illustrated to you. We have in Yorkshire
an arrangement whereby a number of health authorities are, through
the Concordat, purchasing operations at Thornbury Hospital in
Sheffield, which is a BMI hospital. My concern on this was how
do we ensure, where you have a series of streams of different
patients, that the clinical priority for those patients is accorded
on the basis of their needs? The consultants are based in the
NHS in Sheffield, working in the Thornbury Hospital. They are
performing operations on their own private patients and on their
NHS patients in Sheffield and on at least two sets of NHS patients
from Leeds and Calderdale or Kirklees under the Concordat. You
wrote to me indicating that a reasonable degree of consonance
had been secured between waiting times and clinical priority had
not been compromised, but I have looked at the protocols and there
is no mention of any clinical priority as far as I can see. How
do we cross-prioritise, with a large group like this, to ensure
that within the Concordat the patients who most need help are
treated first? As far as I can see, with this arrangement in Yorkshire,
that is not happening.
(Mr Milburn) I think that is a very reasonable point,
if I may say so. That is why we have to get to a different longer
term position to the one we have now. The Concordat is now being
used by NHS hospitals to bail out their immediate problems. It
means people get treated more quickly and that is a good thing.
I do not have a problem with that at all. The more people we can
treat more quickly, the better the National Health Service will
be for patients. However, what is self-evident from the figures
under the Concordat is that there is a headlong rush now, under
the current arrangements, to spot purchase to ensure that the
National Health Service locally gets to the position it needs
to get to by the end of the financial year, so you suddenly have
a big whoosh of cases going into the private sector in March and
then it dips back down again in April. This is a problem across
the National Health Service as well because the National Health
Service follows precisely that seasonal pattern, where it starts
very slowly in April; it tends to build up by the autumn; it dips
again in the winter and you have a mad rush through February and
March to get through the maximum number of cases. What we have
to do in NHS hospitals is to even that pattern out and that we
would get an optimum use of resources amongst doctors, nurses,
staff and facilities. Where I want to get to with the Concordat
is this: rather than just doing spot purchasing - i.e., the NHS
being bailed out by a local private sector hospital - I want the
primary care trust who commission the care and the independent
private sector providers sitting down together, working out a
longer term relationship that plans the treatment, plans the care,
not just over a period of months but potentially over a period
of a number of years, providing of course that the NHS gets a
good deal on cost and gets the appropriate clinical standards.
That way, it seems to me, you begin to address precisely some
of the clinical priority issues that you have alluded to. If you
have a longer term relationship, you can plan the case mix that
will be looked after in the private sector. It is worth bearing
in mind that the private sector tends to have skills in particular
specialisms. It is very good at doing cataracts, hips and knees.
It does less cancer. It does some heart operations but nowhere
near as many as the National Health Service. We have to get to
a position where we are taking optimum advantage on a longer term
basis with the private sector of the skills and expertise that
it has. We can only do that if we are prepared to get out of short
term purchasing and into longer term agreements.