22 September 2006
Health Secretary Patricia Hewitt has removed the symbolic ceiling on private sector involvement in the NHS – but has also conceded an important element of finance policy that experts say will curtail the potential profits of private providers.
The moves came as the Department of Health prepared for two 24-hour strikes as union members protest against the outsourcing of NHS Logistics to parcel firm DHL.
In a lecture to the Institute for Public Policy Research on September 19, Hewitt said: 'We don't need to set arbitrary targets or limits for one provider or another.' Instead choice and payment by results meant patients and GPs would decide the future shape of NHS provision.
Her comment was widely taken to be a reference to her predecessor John Reid's statement that 'up to 15%' of elective NHS treatments would be provided by the private sector. The same limit appeared in the 2004 NHS Improvement Plan.
Speaking to journalists after her speech, Hewitt implied that the move also meant an end to minimum levels of private sector involvement, the most controversial of which concerns the centrally procured independent sector treatment centres.
The centres were paid set fees, regardless of the volume of work done. This week the Conservatives claimed the ISTCs performed only an average of 73% of the work they were paid for.
But Hewitt also made what Mike Dixon, chair of the NHS Alliance, which represents primary care trusts, described as 'a welcome modification' to her department's plans for private sector involvement.
According to the Alliance, the DoH had planned to offer new providers an incentive to take on treatments previously performed in hospital by paying them the full payment-by-results tariff, even though that is based on much higher hospital costs.
Following protests from the NHS Alliance – which argued that price fixing would undermine the economic incentive to shift care to the community – Hewitt told Public Finance that out-of-hospital providers would be paid locally determined, and often lower, prices.
'The DoH thought they wouldn't attract new private providers if they paid under-the-tariff prices for services in the community,' Dixon told PF. 'But they've now made a welcome modification which makes much more sense at a time when the NHS is trying to become more cost-efficient.'
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