Select Committee on Health Appendices to the Minutes of Evidence


Supplementary evidence by the NHS Confederation (PS 29A)


Q95  How prepared is the private sector to absorb flexibility considerations for the long term future?

  There are significant costs in developing designs which are very flexible and the current system would tend to place these with the consortia. This provides a significant disincentive in a system that relies on competitive bidding. The risks that are associated with future changes to the building as a consequence of changes in health care are held by the NHS which presumably further reduces the incentive to the developers to incorporate flexibility. There are limits to the extent to which flexibility can be built into health care buildings but our impression is that more could be done and this is an area that would repay further thought and investment.

  The situation is worsened by the poor state, internationally, of thinking about the future pattern of health care and in particular almost complete silence on what role hospitals will play. The Department of Health has started some work in this area under Mr Wearmouth—Head of NHS Estates and the CNO. This is very welcome but the need is very urgent and it would have been helpful if this work has started some years ago.

How has some of the risk transfer not been particularly valid?

  The process used to establish what the risks of a project are, and how they should be valued, has varied considerably from one project to another. Different projects have used very different assumptions, without necessarily testing those assumptions through rigorous analysis and proper scrutiny. This increases the danger that risks are under-valued, over-valued, or even excluded from the analysis completely. For example, it is questionable whether all the risk involved in hospital construction has been given sufficient emphasis and value in risk transfer negotiations. It has been argued that by far the bigger part of the risk involved in building a hospital is to do with trying to anticipate the future demands on the building over its life. Yet this risk, which stays with the public sector, does not feature prominently in the analysis behind many projects.

  Conversely, some risks may be less significant than the value accorded to them in some projects might suggest. For example, as recent events on the railways have shown, when a vital public service is at stake, the project cannot be allowed to fail and the public sector effectively acts as guarantor of last resort. The risk being borne by the private sector is therefore arguably less than was first thought, a trend reflected in the fact that money markets are increasingly willing to lend to consortia at lower rates.

  Given that risk is often the deciding factor in the value-for-money analysis, the process used to identify it and establish its value needs to be as rigorous and robust as possible. In England the NHS Executive has set out a process involving risk assessment techniques such as probability analysis and the weighting and scoring of non-quantifiable factors. It has also recommended that the whole set of assumptions should be subject to sensitivity analysis to test their robustness. Universal compliance with this guidance would help ensure that the data informing the key negotiations on risk transfer is complete, accurate and transparent.

How can PFI be made more accountable and more obvious to the public?

  The public need to be reassured that:

    —  good value for money has been obtained;

    —  the ethos of the NHS has not been compromised; and

    —  the solution developed is fit for purpose.

  Areas where greater transparency is particularly necessary are: the assumptions being used to estimate and value risk (see above); the criteria which form part of the value for money assessment; and the public sector comparator. Sharing this information with key stakeholders such as patient groups and unions as early as possible in the process will help to increase accountability and to bolster public confidence that spending decisions are founded on thorough and robust evidence.

  Public sector bodies planning new projects could also play a part in ensuring that public debate about PFI is well-informed. In the current climate, it is very difficult to disentangle factors relating to planning from those relating to procurement methods. For example, opponents of a PFI project may argue that a reduction in bed numbers at a planned hospital has been caused by PFI. However, in keeping with Audit Commission guidance that planning should precede procurement, the truth should be that a decision on bed numbers is made before the question of whether to use traditional procurement or PFI is even considered. If public sector bodies were to put more emphasis on publicising their planning and involving the communities they serve, it may help to separate out planning from procurement issues and lead to a more informed public debate about both.

Interested in the Future Hospital Network. What has come out of the work so far?

  The Future Hospital Network is still in its start-up phase having begun in October 2002. In the four months since then, the network has been defining its work programme focused on supporting work that will ensure that new hospitals are fit for the future through a seminar programme and other shared learning. This work programme is covering:

    —  defining new models of care;

    —  developing the PPP partnership working;

    —  changing workforce needs;

    —  implications of ITC for workforce design;

    —  developing output specifications; and

    —  identifying how buildings should be designed to meet future needs.

  The Network covers 27 hospital trusts at all stages in developing new hospital facilities in England, Scotland and Northern Ireland.


Q935-937  Has the Confederation considered that if the health care system in this country increasingly becomes a mixed economy of provision, even though public funded, there is an argument that it then comes within the remit of the WTO? (This is an issue that was raised by Alyson Pollock in her oral evidence)

  There has in fact been a mixed economy in the NHS for a long time especially in primary care, mental health and learning disabilities. Professor Pollock has suggested that this brings health service provision within the remit of the WTO. There are some concerns that some very aggressive USA health care providers could start trying to operate in Europe and that their style of operation would be detrimental to health care systems. This is the concern of the Mexican and Canadian governments which is why we understand there has been some discussion of health services by the WTO. For the WTO rules to cover health care the Department of Health would need to agree that health was an internationally tradable service. Whilst opening the provider side to competition in the UK automatically means that it is open to firms in EU members it is not clear that this is the same as declaring health as an internationally tradable service. If health services were to come under the remit of WTO there would be a need for significant negotiation of the terms for this. Interestingly although the government has talked about increased plurality there has not to our knowledge been any formal notification of firms in other EU countries. The view of our expert advisor is that this position is probably untenable if not actually illegal.

30 January 2002

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