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Is the battle of the “Private patient income cap” for non-NHS work actually a battle Labour wishes to win?
One of the first rules in life is that you should be prepared to fight your battles to the hilt, but you should pick the right battles first. The cardinal assumption of Labour’s policy is that it embraces the market. From this, everything in the Health and Social Care Act (2012) has flowed, including awarding procurement contracts to the private sector through competitive tendering, insolvency regimes of ‘failing’ hospitals, and the need for an economic regulator with teeth.
Ed Miliband has made it clear in his ‘One Nation Economy‘ that he doesn’t wish to see the private sector at war with the public sector or vice-versa. To this end, he appears aspire to a promised land where unionised workforces are relevant also to the private sector, enforcing decent working conditions for employees, perhaps through a ‘living wage‘. This obviously has consequences for the ‘One Nation Society‘. Despite Miliband having fired some shots at overzealous corporates, he has previously emphasised the need for corporates to act like good citizens, like members of Unions, with no ‘vested interests‘. This of course is the ‘One Nation political process‘.
The NHS is an important institution for Labour, and Labour is consistently a number of % points ahead of the Conservatives on the NHS, despite the rather boombastic hate-filled speeches coming from the Conservative Party. The argument of ‘public good, private bad’ is argued by some to be outdated, whereas others feel that it is more important than ever to ‘fight for the NHS’. Burnham has been quoting Nye Bevan to ‘motivate the troops’, against the backdrop of a £2.4 bn reorganisation which can only lead to a fragmented, privatised NHS.
Nurses, healthcare assistants and doctors form the backbone of the NHS, a vast majority are a member of a Union of some sort, and some of these also want to do private work, it is argued. Labour wishes to propose a narrative where it wishes to protect NHS values, but the history of Labour involving the private sector is not new, with the private finance initiatives, independent sector treatment centres, and “NHS global”. Drawing on analogies with other sectors, the hospital is not just a place where you get treatment; people go there to improve a sense of wellbeing. Hard-nosed business analysts might argue that this is not a million miles away from a top-notch cinema, where most of the money is not made from displaying the film but selling the popcorn.
It is difficult to argue against the idea that the NHS itself shows great diversity at secondary care level. For example, there are district general hospitals in the community, NHS Foundation Trusts, and “tertiary referral” centres where difficult cases from NHS Foundation Trusts (or cases from abroad) might become referred. They will all have medical Doctors doing varying degrees of acute versus chronic work, and practice-oriented work compared to academic research-oriented work, for example. It can be argued that certain tertiary unit hospitals, such as Great Ormond Street, Moorfields Eye Hospital, the Royal Marsden, or the National Hospital for Neurology and Neurosurgery, see complicated cases with a unique capacity for research and innovation, which is even hard to compete with on the global stage. It is hard to describe that the case mix of the Royal Marsden for cancer and palliative care on the Fulham Road is the same as a busy unit such as Northwick Park on the Harrow Road in Middlesex.
There are various assumptions about the ‘exporting’ of care too. There has been a focus on US companies wishing to muscle in on the National Health Service, enabled perhaps through the US-EU Free Trade Treaty, but it is an escapable fact that there are many laboratories and medical firms of great expertise here in the UK, particularly in Cambridge and London, which provide really ground-breaking expertise in novel therapies and orphan drugs that can easily be exported. At the other end of this luxury end of the market is the value end, where high volume of very basic diagnostics can be done as a service theoretically for anyone in the world.
The current situation regarding the “private patient income cap” (more correctly an “income cap for non-NHS work“) in the Health and Social Care Act, through s. 164(1)(2A), is described as follows:
An NHS foundation trust does not fulfil its principal purpose unless, in each financial year, its total income from the provision of goods and services for the purposes of the health service in England is greater than its total income from the provision of goods and services for any other purposes.
This figure, that the patient income from non-NHS sources must not be above 49% effectively, is nowhere near the ‘cap’ in previous incarnations of the law in this jurisdiction, and indeed many Foundation Trusts do not have a figure anywhere like 50% of private income. This has been interpreted as a “cap”, and provides an emotional campaigning tool regarding the NHS ‘going into private hands’, but has been there in some forms for several years. The problem with the notion of a “cap” is that it all too easily can be interpreted as a target, where hospitals try to ‘compete’ for which can generate the most income from non-NHS sources, and don’t wish to be ‘the odd one out’. A parallel with this might be how Universities have, between themselves, set the level of their tuition fees. The cap itself seems arbitrarily selected, in that conceivably there could be no cap at all. The actual purpose of the cap might be symbolic, in signifying that NHS hospitals cannot under law allocate all their resources into doing non-NHS work.
Mark Britnell at KPMG has previously given two possible justifications for allowing NHS Foundation Trusts to generate non-NHS income: that is, so that the income can be pumped back into the NHS to improve facilities and to encourage innovation.
The problem with the argument proposing a subsidiary source of funding, it can be led to the conclusion that those hospitals which do not have a private source of income produce worse patient care than those who do. This is a very powerful, and dangerous, signal.
Without a guarantee that there is a minimum spend on NHS care (for example on staffing), it is possible that money might get siphoned off into the private sector, and ‘private patients’ on NHS sites might be ‘queue jumping’ and ‘competing’ for the time of NHS doctors and nurses on site.
On the other hand, it might be good for the patient that skilled NHS doctors are also available on site to deal with complex problems of private patients, as they are all competent in acute medicine, and it also allows NHS doctors to work for NHS institutions rather than to work entirely for the public sector.
The first offering through this improved patient care argument is that this is addressing ‘patient choice’, in other words if patients want private-sector clinical care on a NHS site they should be allowed that opportunity. This might be akin to allowing schoolchildren the opportunity to attend a ‘free school’ in the education system. The second offering is that ‘best practice’ innovation can filter down into all areas of an organisation, and there is an assumption that increased innovation can improve more effective care for patients.
The main problem with this argument is that there can be subtle barriers in transfer of knowledge and innovation within any NHS organisation. These barriers, indeed, are likely to be exacerbated, if there are physical barriers between NHS and private patients in any ‘NHS hospital’, for example they are on different wards.
Andy Burnham and Labour, when they hopefully come into government on May 8th 2015, will have to prioritise what they actually want to do in reality for the NHS. It is likely that, if he can capture the “anti-privatisation” mood music of the country, he will be in government at all. Of course, if Labour remains in opposition, all of this is irrelevant.
A battle which Burnham can presumably attempt to win is for the Secretary of State to offer a universal, comprehensive, free-at-the-point-of-need service in the NHS. If Burnham had really wanted to do this, some say, he would have ‘signed up’ to Lord Owen’s ‘amended duties and powers Bill’ in the House of Lords. As it happens, Ed Miliband has signed up to it, albeit in a Daily Mirror article.
It then becomes a question of priorities. In repealing the Health and Social Care Act (2012), it is all very well for Burnham to champion taming the beast of competition which some might say was unleashed in some form towards the end of the Labour government. Nonetheless, if Burnham champions the ‘NHS Preferred Provider‘, he is still assuming a rôle for the market, and all that necessitates as described in the first paragraph.
It might be unworkable to reduce the cap in a phased manner, or bureaucratically to stipulate that a Trust such as Moorfields goes from 15% to 4% in three years. The management board will have to have some certainty in their business plans, and it is hard not to see this interference as Statist, if it is the case that there has never been any detriment to NHS patient care. Simon Burns MP of the current Government has long argued that there is no actual evidence for any detriment in NHS patient care through uplifting the private income cap.
In aspiring to reduce the cap to ‘single figures’ as Burnham appears to want to do, it could appear that Burnham wishes punitively to fetter the activities of individual NHS Foundation Trusts. Any Trust doing groundbreaking work, such as a novel treatment for macular degeneration in Moorfields Eye Hospital, may find this unnecessary and disproportionate.
There is currently no statutory cap for safe staffing levels, and some might say that this is a more worthy focus of all Governments to improve patient care in the NHS. In striving for consistency in policy, one might wonder why a statutory cap for private income has been imposed nationally, but no definition of safe staffing levels.
On the other hand, the “democratic deficit” may have widened through a £2.4 bn ‘top down reorganisation’, which no-one appears to have voted for. Hunt has often been keen to state that he no longer has direct responsibility for the affairs of individual trusts, and campaigners might feel it is a step too far to see NHS Foundation Trusts ‘doing more private work’.
If NHS Foundation Trusts do more private work, and this is clearly to the detriment of NHS patients, the case for reducing massively the private income cap would be much easier. However, given the diversity of work taking place in the NHS, it can be argued that imposing a statutory cap at all is not an appropriate solution.
Reducing the Private patient income cap is going to be enormously popular with many in the public, but this could turn out to be a battle which Labour may wish it never began to fight.
Dr Paul Charlson’s ‘sunny uplands’ merit further scrutiny
Private Practice or General Practice?
Dr Paul Charlson recently has done an excellent article in Pulse on setting up non-NHS services. In this article, Dr Charlson presents ‘private practice’ as possible “sunny uplands” for both the doctor and the patient, and this of course should be welcomed in principle (being rather generous though my preference is for a completely socialist NHS!)
However, the substantive points in this article certainly do merit further attention in my view, and actually I’m not entirely convinced that many GPs are dying to embrace private practice, when they’re literally so busy and devoted in their dayjob on the front line of the NHS.
A GP when he (or she) proposes a new treatment for a patient should ideally give a clear description of the pros and cons of that treatment for his/her own patient. Therefore, a GP should not ideally only give the proposed benefits of a statin to lower cholesterol – ideally, there has to be mention of some side effects however relatively uncommon (such as muscle weakness). The idea is to give the patient enough information such that they can make the decision with informed consent. In fairness to Dr Paul Charlson, his advice is front-loaded with this bit of important advice: “Non-NHS services are easier to set up than NHS services, but they can cost a significant amount to set up because there are often training and advertising costs involved. There can also be conflicts of interest, as GPs are not allowed to provide many private services directly to their patients. You need to be careful in this regard, but there are ways to separate the partnership from other businesses, such as setting up a limited company.”
Precautions advised by the BMA which Dr Charlson has not mentioned
I do not think that Dr Charlson has deliberately missed out these details to be mischievous. I think Dr Charlson covered as many points as he could, given the constraints of the length of the article. However, the BMA gives further advice about what services can be set up by GPs acting privately in this way (link).
“There are some services that are not available on the NHS, or only in very limited circumstances, for instance cosmetic procedures, some advanced dermatology procedures and osteopathy. GPs can set up private practice to provide these services, although they must not be treating their practices’ registered patients. Where GPs wish to start such a private practice, and they are aware that some of their own patients have requested the service, we would advise that they write to the Director of Primary Care Services in their Primary Care Trust to seek agreement to provide the service to any patient as it is not available on the NHS.”
“The Codes of Conduct for private practice in England, Scotland and Wales explicitly state that consultants should not, in the course of their NHS duties, initiate discussions about providing private services for NHS patients. It is not acceptable, therefore, for doctors to suggest to patients who are placed on a waiting list for NHS treatment that the treatment could be provided quicker on a private basis. It is also inappropriate for consultants to raise the issue of private practice obliquely, for example by handing the patient a business card containing the address of both the NHS hospital and the doctor’s private consulting rooms or adding the private clinic address to the NHS letterhead.”
Potential conflict between patient care and maximisation of shareholder dividend under English law
Therefore, Dr Paul Charlson could perhaps be less coy about the precautions a NHS GP should ideally take in setting up private services. Dr Charlson correctly identifies the private limited company as an appropriate vehicle for running this private business entity, “that the directors need not be the same as the GP partnership – the profits and losses are dealt with separately, it is a completely independent organisation – and it is even better if this company operates from different premises”. The main advantage from the business sense is that the members of the practice cannot be sued individually; only the private limited company can be sued, and critically they have limited liability. Under section 172 Companies Act, the purpose obligated under law is for directors to promote “success” of the company, i.e. to maximise shareholder dividend for the company; there is a strong academic argument that the General Medical Council needs to ensure that decisions are made for the patient’s benefit clinically and not for the shareholder’s benefit financially. I suspect that the GP scenario is not going to be as difficult to regulate as referrals made by Circle Plc to Healthcare Plc (taking examples at-random), to ensure that referrals are made on the basis of clinical need not financial benefit for the companies involved.
The burden of setting up a private limited company
Dr Charlson should ideally say something at this point about the fact that incorporation of a company in English law does require production of a basic constitution of that company for it to be incorporated, and to be approved by Companies House. Whilst it is relatively easy to do this, especially with the help of bespoke company formation companies who can do much of this virtually automatically, without the need to invoke big legal fees, you are actually advised by Business Link to seek advice as to whether incorporation is ‘right for you’. This is because, to maintain an entity on the Companies House register, subsequent filings are required, and if these are not maintained, there can be hefty fines, or Companies House can force the company to be dissolved. Dr Charlson’s failure to mention this is not as severe as failing to mention a potential side-effect in a hysterectomy operation, such as accidental damage to local organs, but these considerations are certainly worth bearing in mind for a GP wishing to set up an independent private limited company. Finally, a critical aspect of running any successful business, ranging from a small/medium enterprise to a large international multinational, is that a chief accounting officer or accountant should decide upon “the correct allocation of resources“; how much time, energy and money does a GP wish to devote to this, or should he or she invest in a business manager to do this? Business managers of course cost money in themselves.
Alternative business ‘media’
The article in Pulse is further confusing in that Dr Charlson does not explain why a private limited company is the best vehicle for the business entity compared to a limited liability partnership, for example; in English law, you have to avoid becoming a partnership under the 1890 Partnership Act, and here clients will be subject to unlimited liability. The Partnership Act sets up a default code for partners with a mutual interest in business, but interestingly partnerships can be set up in the absence of an explicit partnership agreement. Under s.24(1), partners are entitled to share equally in the profits of the business, so therefore, in the absence of incorporation particularly, legal advice might be most welcome to ensure that these private GPs have not inadvertently set up a partnership in law. As an analogy, to extend my example earlier, an ideal GP would advise his patient about the possible ‘alternatives’ to his proposed statin, and briefly mention their risks and advantages (e.g. healthy diet – also contains nutrients and vitamins, with risk of severe side effects of statins such as rhabdomyolysis.)
Client care, the client letter and costs
Finally, the Solicitors Regulation Authority, for example, gives very clear guidance to solicitors in their chapter on ‘client care’, and there are similarities to the advice given to the BMA’s guidance regarding principles to consider when drafting a contract for private patients. A contract or letter of engagement for private patients should clarify: (a) what the fees are and exactly what they cover, (b) who will be involved in patient care i.e. any other doctors and health professionals, (c) Whether the patient (or their insurer) will be billed separately for their services, or as part of an overall package. If the patient is paying through a third-party insurer, the contract should state that insurers do not always cover 100% of the fees and that the patient will be liable to pay any shortfall, (d) Terms of business, such as payment methods, when payment is required, interest charges on late payments (for example, where payment is not made within two months), and the clinic’s cancellation policy. Solicitors are advised to keep communication channels open, which might impact on costs for the client in a legal case. You can see the exact relevance to this for a private GP and his/her patient, when unforeseen events occurs in a management plan of a doctor, and the GP has to change course (but only after discussion with the patient).
I overall feel that it is good that GPs are being introduced to ‘market forces’, but, if they feel they are not being renumerated on the NHS adequately, or the NHS is not the right vehicle for them to further their career aspirations, or simply because this Government is forcing them to, these GPs who wish to go into the private limited company world, they need to learn ‘how to play with the big boys’.
