Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 50 - 79)



  60. I know what you will say
  (Mr Milburn) The way to do that is to get the waiting times down in this country. That is why our effort has to be focused on the Health Service in this country and expanding the capacity of care in this country. That is what we are going to do over time. We will get to a position where I hope the people who face an even starker dilemma sometimes, which is the folk who have a bit of savings, who have saved all their lives and then have to choose between waiting for treatment and paying for treatment, and at the moment some of them feel compelled to pay. That is a terrible situation to be in. We have to solve that dilemma for them, the way you do that is by expanding capacity and getting the reforms into the system, which is what we are trying to do, now. You are right, in the end the patient is confronted with that dilemma and has to make a choice based on the dilemma as it is today and not the dilemma which I hope will be solved in future years. That is true. I think there are things that we can do to help now. As I said, what we are trying to do is to test this out in three areas, Portsmouth, East Kent, West Sussex/East Surrey because it is basically pretty complex, it is terrain we have never been in before. As you will remember from your own time in the Department of Health the advice that ministers have always received until this ECJ judgment is very clear, that under the National Health Service Act 1977 it was not allowed to send patients abroad for treatment except in a limited circumstances under the E112 referral system with prior authorisation. The ECJ has effectively jettisoned that legal advice. There are a whole host of issues we have to solve. You touched on standards, that is a very important issue from my point of view. What we cannot have is a sort of free for all where patients are sent abroad willy nilly to any old provider, regardless of the quality of care, regardless of the back up facilities, that would be a disaster in clinical terms and it would be very bad for the National Health Service too because the National Health Service would be paying for the treatment and care. I can tell you what we are thinking about, but do not hold me to it, what we are thinking about in outline terms is—Andy McKeon has been dealing with this for us—I think the best way through for guaranteeing standards is that we get to a position where we have an approved list of providers. We are in discussions with some providers in some countries in Europe who seem to have a reasonable track record. I think I would want to be pretty assured. Again, I think I may well want to ask the Commission for Health Improvement to assure itself that the standards of care are really up to scratch in those providers, first of all. That is the first thing we would probably want to do. Then it would be up to the local primary care trust in any area of the country, once this thing is running full scale, which it will be probably from the new year, to decide how it wants to spend its money and whether it wants to spend its money sending patients abroad or whether it wants to spend money sending patients to the hospital down the road or elsewhere in the National Health Service.

  61. One factual point, when you said up and running probably by the beginning of next year, are you talking about the pilots or the actual system itself?
  (Mr McKeon) We are looking to have the pilots to see if we can make arrangements to send people for treatment abroad around the turn of the year. Then after that we will then get the system up and running and think about having a list of a credited providers, having got the mechanics sorted.
  (Mr Milburn) Then there are three further things we could potentially do in terms of assuring standards. One is if these providers are genuinely up to scratch they will want to assure the local PCT based on firm evidence of clinical outcomes that they are good. So there will be paper-based evidence that the PCT will need to ensure itself of before it sends any patient abroad. Secondly, what has happened and what could be drawn on as good practice for the PCTs is what happened with St Thomas's and Guy's Trust where, as you know, they are involved in an arrangement with the British Army on the Rhine of accrediting five hospitals there which treat British soldiers in Germany. The way that Tommy's and Guy's basically determined the standards were up to scratch was by sending some of their clinicians to German hospitals and making sure from a clinical point of view they were happy with the procedure, process and clinical governance issues. It may well be that is what we have to do when we accredit providers and, secondly, it may well be what the local PCT wants to do to act as a failsafe against lapses in clinical quality. The third and obvious thing which will need to happen is that the PCT will want, through the contracting process, to have a contract which ensures certain outcomes and standards and be able to hold the European-based provider to account if those standards are not met. I do not know whether that is helpful, but that is the line of thinking we have on this so far.

  62. I can understand that. I also understand you may not be able to give categoric answers but can I return to the question of costs. Travel, both for the patient and possibly a family member to help them and look after them. I think I am right in saying have there not been one or two, maybe a few more, patients already treated overseas.
  (Mr Milburn) Yes.

  63. Under the pilots and those already treated and possibly thereafter, will all the patients have all their travel costs paid for by the taxpayer, or will the patients and the family member or whoever have to make a contribution towards their travel costs?
  (Mr Milburn) We are looking at the legal position on this.

  64. In what way? If you wanted to, surely you just could, could you not?
  (Mr Milburn) I may have to change the law.

  65. To pay their travel costs?
  (Mr Milburn) Under the 1977 Act, I think it is, or the NHS Act, as you know the Act stipulates which services are provided free and which are not. It stipulates also those areas where the making and recovery of charges is expressly provided for in legislation. Transport is not mentioned, as far as I understand the legal advice we have had. What you have to do is apply the model we have in this country. The model we have in this country is by and large the patients find their own way to the hospital. What we do is help with low income families in particular. We are in a slightly different ball game, as you will appreciate, if we are having to put people not on a bus or in an ambulance or a taxi to take them to the local hospital but having to put them on a plane. So we will need to tread quite carefully in this area and the truth is today we do not have an answer to that question. We are looking at it carefully, of course we are. Just for your information, in discussions we have had with some of the European providers they are trying to suggest to us that what they would be prepared to do is not just offer treatment and after care as part of a package but also the cost of travel contained within the overall package. We have to make sure, again, that represents good value for money. In the end it will not be me who is running this scheme, it will be up to the local primary care trusts, that is what devolution means, they take the decisions, I do not, and they have to decide how to juggle their priorities and how to spend their money, and they will have to decide whether or not it represents good value for money. The guidance I think we will issue to them is that NHS reference costs probably provide the best benchmark. There are outliers, as you know, in NHS reference costs but there is a centre ground within the reference cost index which might suggest to a primary care trust what they ought to be looking at in terms of what represents good value for money. The issue of clinical standards is a very separate thing and I think we have some responsibilities there to make sure the providers are genuinely up to scratch.

  66. Have you done any estimate yet, or is it too early, about the likely value for money implications of this whole thing?
  (Mr Milburn) It depends in a sense on what the take-up is. If you ask me for my view on the take-up, I think it is pretty difficult to tell because we have not offered this in the past, but my suspicion is—a self-evident point—that the NHS at home, whether provided through the private sector, through the Concordat or through NHS hospitals, is and will remain the first choice for the overwhelming majority of NHS patients but there will be some patients who will want to go abroad. As you know, through the E112 system now in the last year there were around 1,100 patients we approved through quite a complex system. My guess is that there will be more than that who take advantage of the ECJ ruling. I do not know how many it is going to be but what I am absolutely determined to do is ensure that the people who get the advantage of treatment through the new system who could travel abroad do not do so to the disadvantage of other NHS patients. It is quite important the money for value test is applied.

  67. Something has just occurred to me as you were talking. As a result of what is happening now, in your mind are you doing it because you believe you have to because of the European Court of Justice ruling, or on reflection as a result of that are you now thinking that also the question of choice and helping with capacity problems in this country and bringing down waiting lists makes it a good idea? If the answer to those questions were to be yes and yes, logically there would be nothing to stop you looking further afield for certain serious medical conditions where there are not the medical capabilities in this country and send some people in certain circumstances to places like the United States for treatment. Would you consider that?
  (Mr Milburn) I am not sure we want to stick people with serious conditions on long transatlantic flights.

  68. No, but if there was no alternative?
  (Mr Milburn) Shall I tell you what I would prefer to do?

  69. Bring them here?
  (Mr Milburn) What I would prefer to do and what we are actively doing is, talking to colleagues in the States, talking to colleagues in Germany, Italy and Spain, and it is just far more sensible in the great scheme of things if there is spare capacity—for example, as you well know there is a surplus of doctors in Germany (I wish we have a surplus here, we have not)—if we could bring some of those doctors here and get them into the National Health Service providing treatment and care for NHS patients. That is a much more comfortable and convenient thing for the NHS patients. That is how I would prefer to deal with it. I do not think, frankly, I would want to get into the position where I send a whole lot of patients to America. I do not think that is on the agenda.

  Chairman: We have the world expert on PFI here in Mr Coates; the only person who understands PFI, so we need to talk to him. I will bring in Doug first.

Dr Naysmith

  70. I want to direct my first couple of questions to Mr Macpherson who represents the Treasury and there would be no reason for Mr Coates not to contribute but I think it is for the Treasury first. Alan can have a rest. When we are talking about PFI, and everyone is aware it is a controversial topic, it tends to focus around value for money and already this afternoon we have had it raised in that context. The comparison is often made between PFI schemes and other methods of funding. Last week at the public expenditure question session, evidence was given that showed the value for money benefits of PFI schemes tend to be fairly modest, about 1 to 2 per cent of scheme costs. The current public sector discount rate is 6 per cent and some critics of PFI schemes have said that is a bit too generous and therefore favours PFI schemes unfairly. There are a lot of people coming in with a lot more detailed questions but do you have any plans to set a lower rate?
  (Mr Macpherson) I think it is clear that we are currently reviewing our guidance on the investment appraisal. There is an excellent document called the "Green Book", which strangely is green, and this was last revised and published in 1997 and generally this has stood the test of time. If you go back in history to the first White Paper on the discount rate, it was in 1967, when the discount rate was set at 10 per cent. Then in the 1970s, in 1978, the discount rate was changed to five per cent real. That continued through most of the 80s and was set at six per cent in 1989. There are clearly a whole raft of issues around this.

  71. It has not changed since 1989?
  (Mr Macpherson) The discount rate has not changed since 1989. It has been reviewed a number of times during that period but, as I said, the government announced last year that we are reviewing the Green Book and as we do that we will review the discount rate.

  72. You say it has gone from 10 per cent to 6 per cent at various times, what difference would a one per cent reduction make to PFI schemes and their value for money?
  (Mr Macpherson) I am not best placed to comment on particular issues relating to the National Health Service. If you look across the public sector most PFI schemes actually have quite big benefits. I would be surprised if on average they were only round one per cent.

  73. It was said between one per cent and two per cent in an evidence session last week.
  (Mr Macpherson) It really depends on what you are doing across the piece on the appraisal guidance. The discount rate is one factor amongst many. If you look at projects, both public sector and private sector, what actually determines whether a project is value for money is only rarely the discount rate. Obviously if you change it by one per cent or two per cent it does have effects in terms of what the net present value, to use the jargon, is of that project. There are a number of issues round the treatment of taxation, round what you regard as the opportunity costs of public sector investment, which have to be taken into account. Certainly if you were to change the discount rate and leave everything else exactly the same then it is clear that that will change the return on certain projects.

  74. The one percentage point could have a very marked effect?
  (Mr Macpherson) I would be surprised if it was very marked.

  75. Mr Macpherson said he did not know how this applies to the National Health Service, he was not best placed, it is over to you, Mr Coates, what do you think about this?
  (Mr Coates) I think the evidence to the Committee last week was that it was between a one and two per cent difference. There is a parliamentary question coming up to be answered and the average over the last 20, or so, schemes is 1.7 per cent. It is value for money.

  76. If we move on to something else that came in in your memorandum to this inquiry, is it conceivable that only four out of 27 PFI schemes have been higher than the public sector comparator, in other words they were better?
  (Mr Coates) I would like to say something about how we approach these schemes and why we do value for money calculations. I think the implication in the question is that we somehow massage the figures or squeeze them a bit to make them work.

  77. Some people have alleged that.
  (Mr Coates) What we test our assumptions against is the National Health Service database of average building costs. We are absolutely confident that we are taking proper risk transfers in terms of cost in publicly procured schemes. Every quarter that database is uplifted and we rigorously test the schemes and put through the systems to make sure we do not over-egg the adjustment to the comparator. We are really looking at 12 to 13 to 14 per cent adjustment in terms of risk, which obviously squeezes down against the PFI option. We also now determine trusts that they must use a standard spreadsheet for allocating data so that they always use a compliant, consistent approach for calculating the value for money sums. We also take a very prudent approach in our department our and our colleagues are proud of the way they make sure they protect the public interest. They are always ensuring the trust themselves do not inflate figures to try and squeeze things through. Finally, of course, these risks are real, we are not making these numbers up. If you refer to the press reports on Laing Construction, they lost £60 million as a consequence of some PFI scheme and it was recently sold for £1. I have been around for a long time and I remember when Norfolk and Norwich was signed and we were told what a wonderful contractor Laing were, they were the best in the country and we should be very proud to use Laing. In terms of that particular contract because of PFI they have taken these risks and they are bearing the cost of them. We are not making this up because it sounds good.

  78. What is the difference between the four out of the 27 schemes that failed the value-for-money test?
  (Mr Coates) I think the answer to that is 1.7 per cent average.

  79. The average.
  (Mr Coates) Yes.

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