Is treating private patients a net benefit to NHS Trusts? We may never know

In April 2022 draft NHS England planning guidance leaked to the Health Service Journal told NHS Trusts to grow their non-NHS commercial and overseas visitor income, stating that ‘Private patient services continue to be a significant source of material opportunity for the NHS.’

But research undertaken by the CHPI in 2018 showed that this was not necessarily true. Of the 41 Trusts which responded to requests for information, nine had made a loss from treating private patients in some or all of the years between 2010/11 and 2015/16, while four made significant losses on treating private patients over the whole period.

The question of whether, and to what extent, NHS Private Patient Units (PPUs) are profitable - and therefore a benefit NHS patients - was the crux of a case on a 2019 CHPI Freedom of Information request which was finally heard by the Information Rights Tribunal in May 2022. The hope was that this hearing would at last make it possible to find out whether PPUs are a net benefit to the NHS.

Background

Our research showed that in 2016 1,143 NHS hospital beds were set aside for private patients – equivalent to roughly 1% of the NHS’s total of 131,000 beds, or two average-sized hospitals. Revenue from PPUs had grown by 12% in real terms in the three years since 2012, when the Health and Social Care Act lifted the caps on how much private patient income NHS hospitals could earn, to a total of £596m – a figure that has continued to increase, as established PPUs have expanded, and more NHS Trusts have begun to provide private healthcare.

The table below shows the growth in PPU revenue of the top 5 NHS PPUs, showing an overall revenue growth of 24.2% in the four years leading up to the pandemic. Although revenues fell 36% during 2020/21, NHS Trusts still earned £210m from treating private patients in that year, when the system was under its greatest strain due to the pandemic.

Top 5 NHS Private Patient Units

In addition to these PPUs, many Trusts have entered into partnerships and joint ventures with the private sector. Manchester’s Christie Clinic is a joint-venture with HCA. In May 2022 Barts Health opened a new 55-bed private clinic in partnership with Nuffield Health. East Sussex NHS Trust took ownership of what was a Spire run private healthcare facility, and has run it as a PPU since April 2022. Similarly, when Circle was ordered by the Competition and Markets Authority to dispose of its hospital in Bath as part of its merger with BMI Healthcare, the facility was purchased by Royal United Hospitals Bath NHS Trust to expand its private patient service.

Profits

But unlike almost any other business, we can’t tell how profitable NHS Private Patient Units actually are. While NHS Trusts are legally obliged to publish the amount of income they get from treating private patients, the profit margin they make on this income - the net benefit to NHS patients - is treated as commercially confidential.

This makes it nearly impossible to verify whether PPUs are fulfilling their core function of creating more money for NHS patients, or whether they in fact they make no profit or even lose money by treating private patients - draining money, clinical staff, facilities and attention away from their core function.

What is more, even a profitable-looking PPU can be a net drain. Imagine a simplified scenario where you divert 10 doctors from their NHS case-load to focus on private patients, for this to be a benefit to the NHS you would need to hire at least 11 more doctors with the profits.

But the NHS has an acute staffing crisis, so not only do NHS trusts not have doctors to spare. but any extras they could hire are poached from the same limited pool as all their neighbouring Trusts. The same limits apply to beds and facilities, even if a Trust generates a healthy profit: what use is that until the Trust has enough capital investment budget to build a new ward to replace the capacity lost to private patients?

A key test of these issues is presented by the PPU of the Royal Marsden NHS Trust, which alone made up 15% of the entire market in NHS PPUs in 2015/16.

The Royal Marsden

In 2019 the CHPI asked the Trust to set out how much of the Trust's private patient income is available as a surplus for NHS care. This was in part because the Trust had made the statement in its accounts that "The margin delivered on our private patient income remains a vital source of support for NHS services to patients." We thought it important and reasonable that the Trust should be able to back up its public assertions about the benefit of PPUs to the NHS by publishing that margin.

However, the Trust refused to answer, arguing that to disclose how much profit it makes from private patient services would critically undermine its ability to compete with other providers for this business. Should Marsden Private Care’s profit margins be disclosed, the Trust argued, they would be immediately seized upon and deployed by competing providers, and by the insurance companies that foot the bill for most private patients, and used as a lever to force the Trust to lower its prices, reducing its profits. And this would have a knock-on effect on its core NHS services to the point where the Trust argued that by publishing this profit margin would require it to make cuts to NHS care and would impact on the overall ‘fight against cancer’.

While there is little doubt that RMT’s PPU is profitable, the size of its profit matters. From a national stand-point, we need to know how profitable the largest PPU in the country really is to see whether it balances out losses incurred by other Trusts. We also need to know how far the profits are invested for the benefit of NHS patients.

Moreover, while the Trust says that income from its PPU is reinvested back into the NHS, that isn’t wholly true - a significant portion is dedicated to expanding the PPU itself. Thus in April 2022 the Trust opened a new site for its private patient services on Cavendish Square, 2.5 miles from its main site, in a Grade II listed building adjoining the Royal Society of Medicine. The Trust’s press release says the site will ‘initially’ be available for both NHS and private patients, but the Full Business Case says it is ‘intended as a Private Patient only service’. The Managing Director of Royal Marsden Private Care, Shams Maladwala, even added that the new site will be aimed at the ‘worried well, as well as cancer patients’.

Entering any market is risky. The question is whether the pay-off is worth the risk. The new site was estimated to require £15m of capital investment, and ‘payback’ was estimated at 6-7 years. But the business case was written before the disruption of the pandemic, which led to a six-month delay to the opening of the site; and if, contrary to what the Business Case says, the new facilities will be used to treat NHS patients too, it will take even longer for this investment of taxpayer’s money in private healthcare to come good.

That is, if some unforeseen or unmanaged risk does not sink the venture in the meantime. One of the greatest risks, according to the Cavendish Square Business Case, is its clientele - 29% of RMT’s private patient revenue (which is 9% of the Trust’s entire revenue) comes from the Kuwaiti Embassy and Kuwait Oil, a total of £38.7m in 2019/20. However in December 2020 of that year the Trust’s board minutes show that the embassy owed the Trust £12.9m, with £2.9m of that debt more than a year old. RMT’s most recent board minutes, from March 2022, show total private patient debt more than six-months old to be about £41m. As the business case notes, the fate of this London NHS Trust, and all its patients, is now inextricably tied to ‘Gulf volatility’ and ‘changes in government’ in Kuwait.

It is also worth noting that the heavy reliance on private patients from abroad also works against the most common defence of private medicine. Proponents of private healthcare often argue that any patient who pays for their own care is one less patient on the waiting list, and so in fact is a benefit to the taxpayer. But this argument breaks down when private providers and NHS Trusts start hunting abroad for people to treat, adding to the burden on our health system when it is already under significant strain. The Royal Marsden's 5-Year plan outlines plans to explore satellite centres abroad to drive new referrals into cancer treatment, diagnostics and genetic testing, helping it to break into the China and Russia markets to diversify its over-dependence on the Gulf States.

A spokesperson for The Royal Marsden NHS Foundation Trust said: "The Royal Marsden is first and foremost an NHS hospital. The integrated model of care at The Royal Marsden allows us to reinvest income from Private Care into the frontline hospital services, for the benefit of the NHS. The amount of private patient debt written off by the Trust is 0.1 per cent of total Trust income. It is pertinent to state that our share of income from the Kuwait region is reflective of the London private care market.”

Judgement

There are many risks and drawbacks to developing a private healthcare business, but how are taxpayers and policymakers supposed to judge whether NHS Trusts investing in private healthcare is a good idea, without knowing how profitable that might be?

After a three-day Information Tribunal hearing the panel of judges agreed with RMT that to disclose the profit margins of Royal Marsden Private Care would be likely to cause the Trust commercial prejudice, and that the public interest lay in withholding the information because of the potential impact not just on the Trust’s private business, but on its core NHS services too.

As we argued in our closing statements, the Trust:

Has grown so reliant on this income stream that even to disclose one of the most basic financial measures would now put it in mortal jeopardy.

The very size and scale of services it delivers to fee-paying patients, rather than free-at-the point of use, is exactly what it claims should protect it from scrutiny. The more reliant it becomes on non-NHS income, the less public transparency the Trust will tolerate.

This is backwards. The more reliance on this funding, the more scrutiny necessary.

Unfortunately, the Tribunal and the Trust disagree. So it seems that transparency and scrutiny will not come through Freedom of Information requests. The Royal Marsden can continue to make bold claims about how vital private patient profits are to its NHS work, without providing any evidence to back this up. We are required to take it on trust that Private Patient units are a net benefit to the NHS.

Which brings us back to the NHSE guidance that tells NHS Trusts to expand PPU services, because they ‘continue to be a significant source of material opportunity for the NHS.’ We requested any reports or data which provide evidential support for this statement and were told: ‘NHS England does not hold any recorded information that pertains to the net benefit that private patients have in the NHS.’ It seems not even NHSE has evidence to show that, once all the costs are accounted for, Private Patient Units are a a benefit to the NHS.

The statement that PPUs are an opportunity for the NHS was removed in the final version of the guidance, but the instruction to expand them remains. Why NHS England is pursuing this policy in the absence of any evidence for it is a question to which the six million NHS patients on the waiting lists deserve an answer. In the meantime, the Royal Marsden will continue to be as transparent about its private patient unit as the bare minimum it is required to by law, and nothing more.