Smoke and Mirrors: NHS England’s ‘totally transparent’ multi-billion pound deal with the private hospital industry

Sid Ryan | January 17, 2022 | Blog

The National Audit Office report on lessons learnt from the pandemic stressed the importance of transparency when contracting with the private sector, stating that “transparency should be used as a control when other measures, such as competition are not in place.’

Sound advice, but considering that, despite promises to the contrary, NHS England still hasn’t even attempted to be transparent about its last round of contracts with the private sector, we can’t place much hope in the plans for another set of contracts announced last week providing any significant help for the NHS, let alone being good value for money.

Unlike many of the backroom deals struck by the government in the early months of the pandemic, the contract between the NHS and the private hospital sector to provide additional facilities and staff to help the COVID response was promoted by Ministers as being a totally transparent arrangement, underpinned by open book accounting and independent audit.

That remarkable contract, arranged in haste in March 2020, involved the NHS purchasing the entire capacity of the private hospital sector for up to 12 months, during which time the NHS would cover all the sector’s operating costs, regardless of how many NHS patients were actually treated.

Both NHS England and the Independent Healthcare Provider Network (IHPN), which represents the private hospital companies in the UK, anticipated that Parliament and the public might not be happy to hand a blank cheque to a group of multi-national healthcare companies with no guaranteed activity in return. They therefore agreed that all services should be provided at cost, that no-profit should be made from the deal, and that “Open book” accounting and external auditors will verify the public funds being deployed”.

The accountancy firm KPMG was employed at a cost of £11m to examine the books of the 27 private companies who were parties to the deal, and the then Chief Executive of NHS England, Simon Stevens, confirmed to the Public Accounts Committee that the arrangements would be ‘totally transparent’.

What actually happened: Smoke, mirrors, and obfuscation.

Almost as soon as the contract was signed, Parliament and the media began to put NHS England’s promise of total transparency to the test. A total of some 61 Parliamentary Questions were submitted to Ministers seeking detail on the cost of the contract to the taxpayer, and the number of patients treated. But very quickly the commitment to openness began to wane, Ministers insisting that they were unable to provide details on the amounts paid to individual providers under the contract.

The Public Accounts Committee noted forcefully in one of its inquiries into the government’s COVID response to the pandemic that “Despite the open book accounting arrangements in the contract, NHSE would not provide even a rough estimate of costs” and insisted that NHSE write to the committee as soon as possible “with information on the cost of private hospital contracts, how these have been used.”

Yet the full costs of the contract and the activity undertaken still remain hidden from view.

In spite of the absence of any formal reports on the performance of the contract by the government or NHSE we have been able to establish through a detailed analysis of NHS activity data that the 27 private hospital companies delivered 43% less NHS-funded healthcare than they did in the in the twelve months before the pandemic.

In terms of the total cost of the contract, although the contracts were signed and weekly advance-payments started over a year and a half ago, it was not until mid-November this year that we found that NHSE paid £2.02 billion to the private companies under the contract. This is because NHS England stopped publishing its routine monthly financial transparency data – its spending on all contracts over £25k – in March 2020, without notice or explanation, and only began to do so again after legal action was threatened by the Good Law Project.

This £2.02 bn is unlikely to be the full picture. As of January 2022, NHSE has only published records up to March 2021, and so is still nine months behind on publication of its expenditure data. This gap will contain the results of all the disputed payments, which appear to have been embroiled in argument and arbitration for months.

Ghosted by the Government

Our attempts to test the commitment to full transparency by making use of the Freedom of Information Act have all been frustrated by NHS England and the Department for Health and Social Care in a way which seems clearly to have breached various provisions of the Act. We’ve asked for the contracts themselves, – which according to transparency guidelines should already be public – so we can understand precisely what services were to be provided, and if the companies were subject to any performance targets or penalties. We have also asked for invoices, reconciliation, reports and final payments, in order to see whether the taxpayer funded more the more questionable elements of these companies’ ‘operating costs’ such as executive pay, bonuses and interest on corporate debt.

The private providers didn’t just get their operating expenses paid by the government under this deal. They could also apply for capital funding to invest in their hospitals, so we have requested records of this spending too. And we’ve asked for NHS England’s correspondence with the IHPN to understand how this extraordinary and seemingly very generous deal was negotiated.

Despite some requests being overdue by six-times the legal time limit, the Information Commissioner’s Office (ICO) appears powerless to intervene: across six FOI requests we’ve issued seven complaints to the ICO; NHSE has ignored two informal requests by the Commissioner to provide a response to our FOIs, and has been served one formal ICO Decision Notice, but its unexplained delays continue. NHSE seems just as willing to ignore the regulator as it does us.

The tactic of ‘ghosting’ journalists, researchers and citizens making legal requests for information is especially pernicious. If public bodies refuse information requests, at least the requester can continue along the appeals procedure, but if authorities simply ignore them there is nothing that even the Information Commissioner can do except to continue to plead for a response.

It has been 21 months since the original £2bn deal was signed, ten months since it ended, and 38 weeks since we lawfully requested it, with no indication that NHSE intends to release even the contract, let alone provide a full account of its policy decisions.

Begin round two

So when NHSE announced on the 10th of January that it had negotiated a new COVID surge deal, we had to be skeptical. In this instance, however, further detail did emerge, three days later, in an extraordinary letter from CEO of NHSE, Amada Pritchard, to Secretary of State for Health and Social Care, Sajid Javid MP. The letter requests a ministerial direction on the new deal, in essence because NHSE’s CEO has such grave concerns about the risks involved that she cannot sign-off on it alone.

While the details are complex, the core issue is that the private providers wanted a guaranteed minimum income, a bonus if they delivered more healthcare than expected, and an additional premium on top of the standard NHS tariff if they were to provide more complex care than they normally provide, such as cancer treatments.

These ‘pre-surge’ ‘standby’ arrangements are expected to cost £75m-95million per month, between the 10th January and 31st March. But if the contract triggers ‘surge arrangements’, where the providers will be given a week to deliver up to 100% of their capacity, the contract could cost around £175m per month.

However, as the letter notes, private hospitals are not staffed to look after seriously ill patients 24/7. Although surge arrangements could provide 5,600 physical beds, it is estimated only 2,000-3,000 of these could be staffed. The letter acknowledges that ‘on a per bed basis this is significantly more expensive than the equivalent cost of an NHS site with ‘much less certainty on the potential staffed capacity’ and that there are further logistical challenges to transferring care between NHS facilities and 150 private sites.

Mr Javid replies: “I recognise the managing public money issues that these arrangements cause for you as the accounting officer. […]  I am directing you as accounting officer that you may take forward this scheme with immediate effect, managing the identified risks as best you can.”

This deal seems like a very dubious proposition. Our research into the previous iteration of the private sector contracts shows a poor track-record in delivering COVID support, and even the CEO of NHS England has severe misgivings about value for money and the private sector’s ability to deliver. Yet private providers appear to have have strong-armed the NHS into taking on risks it is uncomfortable with, despite emergency powers available to the Secretary of State allowing him to compel these companies to do what’s necessary to protect against the pandemic.

If the first round of COVID contracts was a good deal for the taxpayer, we would know by now, and the fact we don’t doesn’t inspire much confidence in round two. Although the scale of the crisis means many tough policy choices are going to be imperfect, as the National Audit Office recommends, transparency about them is a key safeguard. NHSE and DHSC have not reiterated their commitment to transparency for this new round of contracts, and if our experience so far is any indication of their commitment to open-government would expect to be able to provide a full analysis of the costs and benefits sometime in 2024.

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Sid Ryan

Sid Ryan is a health policy researcher and journalist with a specialism in information law.See all posts by Sid Ryan