NHS England questions cost of private hospital Covid deal

The head of NHS England has questioned whether a deal to pay private hospital providers to earmark capacity in case of a surge in Covid admissions represents “good value for money”.

Financial Times
January 13, 2022

Amanda Pritchard, head of NHS England, took the unusual step of seeking a direct instruction from Sajid Javid, health secretary, before proceeding with the contract which puts private hospitals on standby for the next three months.

Senior officials have a duty to ask for such “ministerial directions” when they are concerned a policy may not be a good use of public money but the right is exercised relatively rarely.

Under the contract, private hospitals will be paid a minimum of between £75m and £90m a month. 

In some circumstances, they would be paid a higher rate for work than the NHS even though they largely use the same medics.

“The NHS would normally only pay for activity actually delivered,” Pritchard said in the letter. 
“In giving a minimum income guarantee there is a material risk that the NHS pays for activity that is not performed.”

The agreement, which was announced on Monday, involves 10 hospital groups including Circle Health, BMI Healthcare, Ramsay, Spire and Nuffield Health. 

The providers have agreed to share capacity with the NHS in the event of NHS hospitals becoming overwhelmed.

In her letter, sent on January 7, Pritchard pointed out that private providers would get paid at least 10 per cent more than NHS hospitals for doing the same procedures. The higher payment would apply to work carried out beyond an agreed minimum income guarantee, and for more complex work such as cancer treatment.

Given that private hospitals rely on NHS medics to perform operations in their spare time, she warned that any outbreak of Covid would “limit capacity at NHS and IS [independent sector] sites”.

The deal is also, on a per-bed basis, “significantly more expensive than the equivalent cost of an NHS site with much less certainty on the potential staffed capacity”, she wrote.

Leonid Shapiro, analyst at consultancy Candesic, said private hospitals would have needed an incentive to sign up to the deal. He pointed out that private providers were doing very well out of demand from patients anxious to avoid long NHS waiting lists during the pandemic.

Private pay work is several times more profitable than NHS work so the real question is what private hospitals will lose from this deal,” he said. However, according to the terms of the contract, the companies will continue to treat private patients and retain the right to choose which cases to take on.

David Rowland, head of the Centre for Health and Public Interest think-tank, said it was “astonishing the NHS is being forced to sign up to a deal which its CEO knows is not value for money”.

“The secretary of state has emergency powers that should be used to dictate the private sector, not the other way around.”

Siva Anandaciva, chief policy analyst at the King’s Fund think-tank, said the most recent previous request for a direction from the head of the NHS that he could remember had occurred in March 2020.

At the time Simon Stevens had sought approval for breaching departmental expenditure limits to fund the increased costs of Covid-19. “The seeking of a ministerial direction for such a material issue doesn’t happen all that often,” he said.

The Independent Healthcare Providers Network said the new deal would “provide much needed additional capacity” to the health service and help to “bolster planned NHS care”, including the delivery of vital cancer treatment.

Originally published at https://www.ft.com on January 13, 2022.

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