NHS examines new deal with private hospitals to clear waiting lists

Private hospitals taken over by the government during the Covid-19 crisis are in talks about extending the arrangement for up to two years, as the NHS attempts to relieve growing pressure on patient waiting lists.

Although more of the capacity has been used since mid-May as the peak of the pandemic passed in the UK, a significant proportion of the 8,000 beds supplied by 26 private hospital groups, including HCA International, BMI/Circle Healthcare, Ramsay Healthcare, Spire Healthcare and Care UK went largely unused as the health service coped with the surge in patients suffering from the disease.

But with the NHS now facing a possible patient backlog of almost 10m by Christmas, the government is in discussions with the private healthcare providers about a new deal that could have lasting implications for Britain’s private healthcare sector.

One option being discussed is for NHS England to maintain the existing deal — struck in March and running until the end of this month — until August. This would mean the government continuing to pay all operating costs for the private hospitals including rent, external interest payments and staff. Industry sources estimated the value of the deal could be between £100m and £125m a week.

However, NHS England is also considering a less comprehensive agreement under which the health service would book out a majority of private hospital beds for between eight months and two years, according to two healthcare executives briefed on the discussions.

Under this plan, individual agreements could be struck on a regional basis, limited to certain times of day, or cover only some specialities. For example, all hip and knee replacements in a particular area of the country could be outsourced to private hospitals — a model that is already being used in some regions of the country. 

Healthcare in Britain is funded through general taxation but patients can choose to beat long waiting lists to see NHS consultants who also work in private hospitals. About 40 per cent of these pay through private medical insurance, provided by employers, and a further 30 per cent are paid for by the NHS through the so-called “choose and book” system, which allows people to choose to be treated in a private hospital at the state’s expense. 

Spire Healthcare, the second largest private hospital chain in Britain, said it was “ready to engage in a bold national agreement, regional and locally adapted to need, to drive down waiting lists nationally, whether through an extension of the existing 14-week contract or another mechanism”.

Any extension of the current deal or the new so-called “block booking” contract, where the NHS buys up most of private hospitals’ capacity, could have potentially far-reaching consequences, paving the way for an increase in the involvement of private hospitals in the NHS on a more permanent basis. 

Siva Anandaciva, chief analyst at the King’s Fund, a think-tank, said many private hospitals relied on NHS consultants to carry out work, so extending the deal with the private sector may not substantially increase operating and consultant capacity in some specialities, because “you can’t double count staff”.

It may also deplete NHS finances as some of the income that would usually go to state hospitals would go instead to the private sector even though they would be stuck with the same fixed costs.

NHS work already accounts for more than 80 per cent of Ramsay’s revenues, and around 40 per cent for BMI/Circle and Spire. 

While independent hospitals would benefit from a secure government-backed income stream, private medical insurance patients who have traditionally been their core customers — as well as patients tempted to beat waiting lists by paying for their own treatment — may struggle to get prompt service if state-funded patients were treated ahead of them.

Medical consultants — many of whom work in both the NHS and private hospitals — would also need to be brought on board. 

Ian McDermott, a knee surgeon and co-vice-chairman of the Federation of Independent Practitioners Organisations, said the deal with private hospitals had secured the financial interests of the private hospital groups, while private consultants — including surgeons and radiologists — and private patients “had been thrown to the wind”. Private doctors and private physiotherapists had been unable to work during the crisis, even though most still had to pay rent and overheads, he said.

KPMG acted as the independent assessor on the deal, which came as a relief to private hospital companies struggling with plummeting revenues as patients stayed away and treatments were cancelled.

In March, Spire warned it risked breaching banking covenants and suspended its dividend. It has agreed a covenant waiver with its banks on its £425m senior facility for its next two tests at the end of June and December.

NHS England said it was “a mark of success” that some of the private sector capacity had not been needed. Private hospitals “are now increasingly playing their part in bringing NHS services back safely”, it added.

The Department for Health and Social Care said it was still working with NHS regions to understand their needs and that this would inform future discussions with the private sector in general.


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