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A private view


29 October 2010

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A statement can easily become an orthodoxy
without ever having been true. We often hear that the
government's white paper Equity and Excellence, published in
July, will inextricably lead to vast swathes of the NHS falling
into the hands of private companies. But if that's right, why
aren't firms more excited? Even those that should benefit
the most, such as consultancy group Tribal, are hardly
effusive. "We're interested in this… but we're cautious about

A statement can easily become an orthodoxy
without ever having been true. We often hear that the
government's white paper Equity and Excellence, published in
July, will inextricably lead to vast swathes of the NHS falling
into the hands of private companies. But if that's right, why
aren't firms more excited? Even those that should benefit
the most, such as consultancy group Tribal, are hardly
effusive. "We're interested in this… but we're cautious about
A statement can easily become an orthodoxy
without ever having been true. We often hear that the
government's white paper Equity and Excellence, published in
July, will inextricably lead to vast swathes of the NHS falling
into the hands of private companies. But if that's right, why
aren't firms more excited? Even those that should benefit
the most, such as consultancy group Tribal, are hardly
effusive. "We're interested in this… but we're cautious about
its potential," say Tribal's Business Development Director,
Kingsley Manning.

The white paper is undoubtedly radical, albeit light on
detail. Particularly eye-popping are proposals to dismantle
all primary care trusts (PCTs) and strategic health
authorities by 2013 to "reduce NHS management costs
by more than 45%". In their place, England's GPs will be
organised, on a statutory basis, into consortia responsible for
buying the bulk of healthcare services for patients.

No one doubts that these changes could, in theory, lead to
extra work for private companies. GP consortia may choose to
outsource their commissioning functions to consultants like Tribal or KPMG, for example. And firms that provide backoffice
and other support services to GPs could expect a hike
in demand as the medics struggle with the huge new workload
that has suddenly been dumped in their laps.

"The phone is ringing a lot," says Bart Johnson, Chief
Executive of Assura Medical Limited, a management company
that forms 50:50 joint ventures with general practices. "There
are a lot of soft issues that are going to be facing these new GP
consortia, and we're well placed to advise as we've spent the
past four years learning these lessons."

Most private sector players, however, are circumspect. One
reason is that we've been here before: the Blair government
repeatedly promised businesses opportunities in the NHS,
only to lose its bottle over the inevitable political fallout.
Not only does coalition health secretary Andrew Lansley
face similar anti-privatisation heat from Liberal Democrat
backbenchers, but he's also under fire from fellow Tories,
peeved that the NHS has been sheltered from spending cuts.

At the same time, Mr Lansley has announced that the
vast majority of NHS managers are going to be sacked and
criticised independent providers and consultants for being
"wasteful". These are precisely the same people that are
supposed to help make the white paper a reality. It is going
to require a Herculean act of political strength to push the
white paper through. Faced with cautious GPs and a public
startled by healthcare reform conspicuously absent from any
political manifesto, it is questionable whether Mr Lansley
now has that power.

Even if we assume that the health secretary can turn the
white paper into successful legislation, there are further
reasons for the private sector to be downbeat. For years,
companies have been developing and selling services to the
NHS. They have established relationships with the people
who buy those services – PCTs – and come to understand
their needs.

"[Firms] recognise that out of the 150 PCTs, some
were open to new markets and some were closed," says
Professor Paul Corrigan, a former special adviser to the Blair
government on health, currently a consultant. "But over
time, discussion and opportunity were moving more into the
first group and more deals were being made.

"Now the government is proposing to completely scrap
the very people who make a market and to replace them
with buyers of services who do not exist. As far as most of the
private sector is concerned, this closes the market down for
the next two years."

Even if they can go on to win GP clients, the early
indications are that profit margins will be very tight indeed.
One Whitehall insider told GP Business that the anticipated
budget for commissioning services is "something around
the £8-£10 per patient, per year mark". Firms will have to
find a profit margin in that measley figure, while fending
off competition from PCTs that are planning to morph into
social enterprise-style agencies.

Indeed, Dr Nigel Watson, chair of the GPs' Commiteee's commissioning and service development
subcommittee, and Chief Executive of Wessex Local
Medical Committee, told Pulse magazine he was already
in discussions with PCTs.

"The advantages are there are a lot of skills within PCTs,"
he said. "I think it would be a disaster for the health service
to make all these people redundant, put them into private
companies to be sold back to the health service at increased
rates … I've discussed it with all PCTs in my area and said I
think this is the way we need to go."

It can't be written off: there is undoubtedly signficant
potential for the private sector in the white paper. But it is
not the gold mine for the private sector the national media
would have us believe. The devil, as we shall see in coming
months, will be in the detail.

The white paper – key points
Commissioning:
• Statutory-based GP commissioning consortia to commission
most healthcare services, including secondary and
community care
• Every GP consortia will include an accountable officer, and
be held to account by an NHS Commissioning Board and, to
some extent, the relevant local authority
• Every GP practice will be a member of a consortia
• GP consortia will shadow PCTs/SHAs in 2011/12 and take full
responsibility in 2012/13
• Several top-down activity based targets (including the
18-week waiting list) have been removed and replaced with
outcome based targets
Healthare services:
• Government will encourage the development of the "largest
and most vibrant social enterprise sector in the world"
• All NHS trusts to become foundation trusts within three years
• Where a trust is unviable it may be put into administration
by the health secretary
• There will be a level playing field for patients to choose
between providers
Regulation:
• There will be a retrenchment of government influence in
day-to-day running of the NHS with Monitor to become an
economic regulator. It will:
• Promote competition and apply competition law
• Set prices for NHS services. Tariffs will be switched from
the current average cost of a procedure to the cost of bestpractice
excellent care
• Intervene in the event of failure
• Regulate "all" NHS providers of care (it is currently unclear as
to whether this includes independent providers of NHS care)
• Care and Quality Commission will be the quality
inspectorate for all providers

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