Treating private patients in NHS hospitals – benefit or cost?

This article was first published in the HSJ - 13 March 2018

An independent investigation is needed into whether trusts are getting significant net additions to their income from treating private patients, and whether the drive to set aside yet further beds for private patients should be allowed to continue.

This winter’s hospital beds crisis raises two important questions about a little-discussed legacy of the 2012 Health and Social Care Act – the raising of the limit on what NHS hospitals can earn from treating private patients from 2 per cent to 49 per cent of their total income.

As a result some 1,140 beds are set aside, across some 90 NHS hospitals, for private patients, and more are planned. Does this help NHS hospital finances, as the proponents of the Act expected? And does it adversely affect NHS patients, as opponents of the Act feared?

The idea behind lifting the cap was that NHS hospital trusts would in future be competing for patients with each other and with private hospital providers, and should be free to maximise the revenues they could get from any patients who could afford to pay to be treated privately, or who had private medical insurance. It was expected that private patient income would become an increasingly important source of trust revenues.

Practical reality

In practice, as a new CHPI report by Dr Sarah Walpole shows, this has not happened. The big increase in NHS funding under the Blair and Brown governments had led to a rapid decline in NHS waiting times for elective surgery, and they remained low during the first years of the coalition government. Since it was to avoid waiting that most patients had sought private care, demand fell off, while the financial crisis left some relatively affluent patients less able or willing to pay for private care.

The CHPI report shows, first, that the treatment of private patients is highly concentrated in a small handful of NHS hospitals, mainly in London, where it forms a significant part of their income; but also, second, that many hospital trusts, perhaps even including some of these, are unable to say whether they make a profit from it

As a result, between 2009-10 and 2014-15 the number of treatments (“finished consultant episodes”) for private patients in NHS hospitals actually fell by 10 per cent, and only began to pick up again in 2015-16. Income from this smaller number of treatments rose, however, from £433m in 2009-10, to £596m in 2015-16, a rise of 38 per cent in current terms.

This was still a drop in the ocean of total NHS hospital trust income from patient care (£596m out of £67bn, or 1 per cent). But with spending on the NHS now effectively frozen, while patient numbers and costs are inexorably rising, hospital trusts have been under pressure to look for all possible ways of increasing income and have been strongly encouraged to see private patients as an important potential source.

According to the market analysts LaingBuisson, between 2013 and 2015 six new dedicated Private Patient Units were opened in NHS hospitals across England, and in 2016 six more were being planned by NHS hospitals in London, and another six to eight outside the capital.

Many, if not most, of these PPUs were being planned as joint ventures with big foreign providers such as HCA, GHG and Ramsay, which are also among the top five owners of private hospitals in England, and already manage existing PPUs for NHS hospitals.

The prospects for some of these projects, especially outside London, may be problematic. In 2015 three PPUs, in Aintree, Maidstone and Plymouth, were closed for lack of demand, and the beds restored to full time use by NHS patients. But if NHS waiting times continue to rise at the rate seen in the last two years, demand for private beds could well rise again.

Yet the CHPI report shows, first, that the treatment of private patients is highly concentrated in a small handful of NHS hospitals, mainly in London, where it forms a significant part of their income; but also, second, that many hospital trusts, perhaps even including some of these, are unable to say whether they make a profit from it.

Some trusts said the information was commercially confidential, but others said they didn’t keep separate cost data for private patients, and so couldn’t say whether treating them was profitable.

And where trusts were able and willing to provide data it showed that treating private patients had sometimes actually led to losses: one hospital had lost £18m on the treatment of private patients over the six years to 2015-16, representing a subsidy from taxpayers to relatively affluent individuals and insurers. In 2015-16, too, debts totalling £1.5m owed by private patients to 10 hospitals were written off as unrecoverable.

So whether the 60 per cent of NHS hospital trusts which treat private patients break even on this work, let alone make a major surplus over what they could earn from treating NHS patients, is currently unknown. An independent investigation is needed into whether trusts are getting significant net additions to their income from treating private patients, and whether the drive to set aside yet further beds for private patients should be allowed to continue.

Impact on NHS patients

The impact on NHS patients also needs further study. NHS bed numbers have been cut to one of the lowest levels per head of population in Europe. If many NHS hospitals were able to fill 20 per cent of their beds with private patients, let alone 49 per cent, it would be impossible to admit all the NHS patients who need admission.

We need to know how far NHS patients are suffering from even longer waits for treatment due to the setting aside of beds in Private Patient Units. (It would be interesting to know, for example, whether any beds in PPUs have remained empty during the recent hospital beds crisis.)

And given the acute shortage of capital funds being made available to the NHS, forcing care to be moved out of hospitals into the community in accordance with the Five Year Forward View, a further question needs to be asked.

LaingBuisson reported in 2016 that there were plans to provide new or expanded facilities for private patients at the Kings College, Royal Marsden, Royal Brompton and Harefield, St George’s, Great Ormond Street, and Chelsea and Westminster NHS foundation trust hospitals in London. We need to know how these plans are being funded, and how far this use of scarce resources is justified.