BMJ 2014;349:g5865 doi: 10.1136/bmj.g5865 (Published 30 September 2014)

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Head to Head

HEAD TO HEAD Is the private sector a good thing for the NHS? Richard Smith argues that private sector investment in new products and services is essential to maintain the NHS, but Clive Peedell believes that markets and the use of private providers in healthcare will increase costs and reduce the quality of care Richard Smith chair, Patients Know Best, Cambridge, UK, Clive Peedell consultant clinical oncologist, South Tees Hospitals NHS Foundation Trust, Middlesbrough, UK

Yes—Richard Smith The British public wants the NHS to continue to cover everybody, be free at the point of care, and provide equal quality of care for all. Severe financial constraints mean that these fundamental values are threatened, but the private sector can help sustain them. It can do so by continuing its present contribution, helping with the workload, bringing new skills, and contributing to competition.

Most general practices are in the private sector but see only NHS patients. This has been the case since the beginning of the NHS. Nobody doubts that general practice has been a good thing for the NHS, although the inverse care law—which says that those who need care the most get the least—is more true of general than hospital practice.1 General practice has also been highly variable in quality.2 Private companies that expand beyond single practices, often owned and run by GPs, are bringing higher quality care to underserved areas and ensuring more consistent quality across practices.3 To sustain the NHS it will be necessary to provide more services in the community, and larger companies with a greater capacity to invest will be more able to do this than traditional practices. But most importantly the private sector can supply new products and services. For example, it was the private sector that supplied general practitioners with electronic records years ahead of them arriving in hospitals, and now Patients Know Best, a company founded by a doctor and of which I’m the chair, is linking together records from practices, hospitals, and mental health services and placing patients in charge of them.4 This bottom up approach is succeeding where the top down, government controlled programme failed.

Reduced risk GPs are now in charge of commissioning, and the hope is that it will begin to work after 23 years of largely failing to deliver. Success will depend heavily on gathering high quality data and using it effectively. Private companies, including big American companies such as UnitedHealth, have much to offer in products and services. The NHS can benefit from the substantial investments made by these companies without having to make

the investment itself. That’s one reason why 54 of the 80 contracts awarded by clinical commissioning groups (CCGs) in 2014 were to non-NHS providers.5 The contracts covered diagnostics (19%), mental health (7%), and pharmacy (7%). Bexley CCG has outsourced non-invasive cardiac diagnostics to private companies and saved £1.3m over three years, improved patient satisfaction, and reduced waiting times from 18 to two weeks.6

CCGs can also share the risks of commissioning. For example, if a CCG is paying £Xm for a service it can contract with a private company to provide an equal or higher quality service for £0.9Xm; if it costs the private company more then it loses money, but if it can do it for less the company can keep the difference.

The private sector is supplying an increasing proportion of services, including those for general practice, acute care, mental health, and learning difficulties.7 The spend on non-NHS providers increased from £5.6bn (€7bn; $9bn, 2011-12 prices) in 2006 to £8.7bn in 2011-12. More than half of hip and knee replacements funded by the NHS are now done by the private sector,7 and private sector results are slightly better.8 Simon Stevens, the chief executive of NHS England, pointed out in 2005 that the care of an NHS patient is “a subtle blend of inputs from labour, product and capital markets.”9 A woman with cancer “visits her GP (mostly private for-profit contractors) who refers her for surgery (in an NHS hospital built by a for-profit construction company). She then has radiotherapy (using a privately built and possibly privately owned machine). She receives chemotherapy (manufactured by a for-profit pharmaceutical company), collects a prescription (dispensed at a for-profit chemist), and is visited by a Macmillan nurse (supplied by a charity).”9

Public does not mean better Successful organisations concentrate on their core business, which for hospitals means caring for patients. It thus makes sense to outsource catering, cleaning, and other non-core activities to the private sector. This has happened in many hospitals, and few propose reversing that process.

Correspondence to: R Smith [email protected], C Peedell [email protected] For personal use only: See rights and reprints


BMJ 2014;349:g5865 doi: 10.1136/bmj.g5865 (Published 30 September 2014)

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It’s often not appreciated that the NHS is unusual in having all its hospitals in the public sector. In most other developed countries, including Scandinavian countries, many hospitals are in the private sector. From the point of view of patients it makes no difference which sector the hospitals are in as their care is funded in the same way, as it would be in Britain; and many countries with private hospitals serving the public sector have better outcomes than the NHS.10

The presence of the private sector enhances competition. The King’s Fund reviewed the evidence on competition in the NHS and acknowledged that it is “contested.”11 Generally the evidence on the internal market in the 1990s was that the “impact was limited because the incentives were too weak and the constraints too strong.”11 It thus “had only limited impact,” but “the adverse consequences predicted by opponents of competition and choice had not materialised either.” The review observed that two econometric studies showed that death rates from myocardial infarction and other causes “fell more rapidly in hospitals located in more competitive markets.”11 The disruptive innovation that the NHS may need for survival is most likely to come from “new entrants,” who are usually in the private sector and increasingly from low income countries—for example, the surgeon and philanthropist Devi Shetty opening a hospital in England like his high volume, low cost hospital in Bangalore might dramatically reduce costs.12 Working with private companies rather than trying to exclude them will be important for sustaining the NHS, not just for now but for decades to come.

No—Clive Peedell Over the past 30 years successive UK governments have pursued a public services agenda based on market competition, consumer choice, and increasing use of the private sector.13 For the NHS, this started with Margaret Thatcher’s 1989 internal market, progressed with New Labour’s market based reforms, and culminated in the Health and Social Care Act 2012, which further opened up the NHS to external providers.14 The big idea is that the injection of the private sector into the NHS will stimulate market competition to deliver lower costs, greater innovation, increased quality, and greater responsiveness to patients. But public funding of non-NHS provided care is by definition privatisation,15 which is unpopular with the electorate. Politicians have therefore tried to justify this approach with the mantra, “It doesn’t matter who provides the service, as long as it is free at the point of use.” However, nothing could be further from the truth.

Problem of market failure Market failure is an inherent problem in healthcare. Kenneth Arrow, widely acknowledged as the father of health economics, identified how “uncertainty” in healthcare, both in predicting demand for services and in “the efficacy of treatment,” could lead to market failure.16 The fact that the evidence on price competition shows that it worsens the quality of patient care is a clear example of how serious the problem is.17 The transactional and complex nature of the healthcare market creates a burdensome and costly bureaucracy. Commercial contracts, accounting and legal services, commissioning support services, the commodification and coding of treatments, advertising and billing, along with the regulatory bodies required to oversee the market, drain billions of pounds from the NHS budget and away from frontline patient care. The parliamentary health select committee noted that the internal market increased For personal use only: See rights and reprints

the administration costs of the NHS from 5% to 14% of total NHS budget by 2005.18 Currently, this would amount to about £10bn a year of the NHS budget, although more conservative estimates put the figure at £4.5bn.19

Another problem is that private firms are profit maximisers, not cost minimisers. Strategies that bolster profitability such as reducing staffing levels and adjusting skill mix often worsen efficiency and reduce quality of care.20 Private sector “cherry picking” of profitable services can seriously destabilise the finances of NHS hospitals, which are left to manage less profitable and unprofitable services, reducing their ability to provide the full and comprehensive range of services to their local populations. Worse still, financial “failure regimens” mean that some hospitals are being forced to close, downgrade, or merge (as occurred with Lewisham and Greenwich NHS Trust), decimating local services, reducing patient choice, and destabilising local health economies. Some foundation trusts are responding to financial pressures by treating more private patients, risking the creation of a two tier system in which those with health insurance can get access to NHS beds and jump NHS queues.21 When profit margins fall, private companies exit from the market, such as when Concordia Health gave notice to pull out of a Kent medical practice this year. This leaves the NHS and the taxpayer to pick up the pieces. Marketisation and privatisation also make it harder to integrate services because patients have different parts of their care delivered by different providers. Staff transfers or “poaching” from NHS hospitals to private hospitals risks diluting vital expertise. This can also drive up locum and agency costs. Healthcare markets also promote “citizen consumerism,” when patients are encouraged to act like consumers through “patient choice” to stimulate market competition. But choice is possible only when there are other options and so it requires excess capacity in the system. Again, this is inefficient and wasteful in a single payer system like the NHS. The use of private providers in the NHS has also created a “revolving doors” culture between private health firms, politicians, think tanks, management consultants, and Department of Health civil servants.22 This gives the private sector greater influence over the policy making process, facilitating further privatisation.

Medical professionalism is undermined Market theory rejects the existence of the public service ethos and sees medical professionalism as a barrier to the proper functioning of the market. Medical professionalism is undermined because relations between doctors and patients depend on trust rather than contractual obligations of the market. It is no surprise that the American medical profession lost public support faster than any other profession during the rapid commercialisation of the US healthcare system in the 1980s.23 We should heed the words of the late Arnold Relman, former editor of the New England Journal of Medicine, who said: “The continued privatization of health care and the continued prevalence and intrusion of market forces in the practice of medicine will not only bankrupt the health care system, but also will inevitably undermine the ethical foundations of medical practice and dissolve the moral precepts that have historically defined the medical profession.”24


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Evidence rejects the idea of public funding of private care The argument supporting greater use of the private sector is entirely reliant on the private sector operating within a competitive market framework. However, since market failure is inherent in healthcare, it is not surprising that there is clear and consistent evidence that public funding of private care yields poor results.20 Healthcare services require proper long term strategic planning in order to meet the healthcare needs of the population and should not be left to the destructive forces of the market and the private sector. We should abolish the market and return the NHS to a publicly funded, publicly provided, and publicly accountable health service. Competing interests: Both authors have read and understood BMJ policy on declaration of interests and declare: RS is employed by UnitedHealth and has shares and share options. He runs a philanthropic programme in low and middle income countries for the company and has no responsibility for UnitedHealth (now Optum) in the UK or for any of the commercial activities of UnitedHealth. He also has equity in Patients Know Best, a company that links records from all parts of health and social care and gives control to patients. CP is coleader of the National Health Action Party, Member of BMA Council and cochair of the NHS Consultants’ Association, all of which have policies that oppose marketisation and privatisation of the NHS. The authors will debate this question at an event organised by the Medical Journalists’ Association in London on 3 October 2014. Provenance and peer review: Commissioned; not externally peer reviewed. 1 2 3

Williams H, White S, Senior M, Williams S, Davies B. On the quality variation of primary health care services: a test of the ‘inverse care law’ for general practice. Environ Plan A 2004;36:701-14. Improving the quality of primary care. King’s Fund, 2011. publications/improving-quality-care-general-practice. Soterious M. GP-led private company can take over 22 practices, watchdog rules. GP 2013 Aug 20. article/1207995.

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Al-Ubaydli M. Patients must have control of their medical records. BMJ 2012;345:e5575. Davies P. Is the great NHS sell-off under way? BMJ 2014;348:g2912. Manis K. BexleyViewpoint: how CCGs save money by choosing private sector over NHS. GP 2013 Feb 11. Arora A, Stoye G. Public payment and private provision: the changing landscape of health care in the 2000s. Nuffield Trust, 2013. Chard J, Kuczawski M, Black N, van der Meulen J. Outcomes of elective surgery undertaken in independent sector treatment centres and NHS providers in England: audit of patient outcomes in surgery. BMJ 2011;343:d6404. Stevens S. The NHS works. Prospect 2005 Feb. Davis K, Stremikis K, Squires D, Schoen C. Mirror, mirror on the wall, 2014 update: how the US health care system compares internationally. Commonwealth Fund, 2014. www., Ham C. Reforming the NHS from within: beyond hierarchy, inspection and markets. King’s Fund, 2014. Smith R. Lessons from the “Henry Ford of healthcare.” Aljazeera 2012 May 10. www. National Audit Office. Delivering public services through markets: principles for achieving value for money. 2012. services_through_markets.pdf. HM Government. 2012 Health and Social Care Act. 7/contents/enacted. Muschell J. Technical briefing note on privatization in health. WHO, 1995. http://apps. Arrow K. Uncertainty and the welfare economics of medical care. Am Econ Rev 1963 Dec. Dowler C. Price competition could raise death rates, experts warn. HSJ 2010 Dec 17. 5023349.article#.VBrA65UtDIU. Health Select Committee. Commissioning. Fourth report of session 2009-10. www. . Paton C. At what cost? Paying the price for the market in the NHS. Centre for Health and the Public Interest, 2014 . Woolhandler S, Himmelstein DU. Competition in a publicly funded healthcare system. BMJ 2005;335:1126. Watt N. Income from private patients soars at NHS hospital trusts. Guardian 2014 Aug 19. Alliance for Lobbying Transparency. Revolving door is unhealthy. Available www. Blendon R. The public’s view of the future of healthcare. JAMA 1988;259:3587-93. Relman AS. Medical professionalism in a commercialised health care market. JAMA 2007;298:2688-70.

Cite this as: BMJ 2014;349:g5865 © BMJ Publishing Group Ltd 2014


Is the private sector a good thing for the NHS?

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