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HSMC Viewpoint

June 2015

Mark Exworthy

Although there was some debate about NHS privatisation in the recent general election campaign, it was perhaps surprising that more prominence was given to one of the key aspects of the controversial 2012 Health and Social Act. This formalised the opportunity for greater freedom for NHS Foundation Trusts (FTs) to earn up to 49% of their income from non-NHS sources –the so-called `private income’ cap. [In April 2015, the Labour Party did propose a “cap of 2% on work for private patients as a proportion of total income, unless they meet strict safeguards to ensure NHS patients are put first”]. The cap was set at 49% to ensure that NHS income (of FTs) was always larger than non-NHS income. NHS Trusts which do not have Foundation Trust status operate under different rules. The (actual or anticipated) effect has been hotly debated; arguably, it is another move towards an increasingly privatised NHS or alternatively, it is an essential way to underpin core NHS services.

As NHS funding will be under severe pressure for the foreseeable future, growth in income from non-NHS sources might seem attractive to NHS Foundation Trusts. The sources include:

  • Activities which accrue user fees (eg. car parking),
  • Commercial partnerships (eg. collaboration with pharmaceutical businesses, intellectual property exploitation),
  • Commercial ventures (eg. wholly owned enterprises, clinical trials),
  • Commercial activities (eg. land sales, letting retail space on hospital grounds),
  • Clinical services (eg. private patient units, international medical tourists), and
  • Services to other agencies (eg. to local government, education and training, research).

Car parking charges at NHS sites and private patients treated by the NHS have always generated significant media comment but there have been important developments in the growth of other sources before and since the 2012 Act. Also, the so-called freedoms of the 2012 Act have not simply been exploited by the `usual suspects’ of NHS organisations. It might be expected that only well-known hospitals (such as Great Ormond Street or Moorfields) would be able to generate significant amounts of non-NHS income. Whilst these examples may expect to prompt most column inches, many other Trusts have also been developing strategies to exploit their clinical and/or geographical advantages. Various examples are now evident of the ways in which NHS Foundation Trusts are exercising their entrepreneurial `freedom.’ For example:

No Trust has reached near its 49% cap ….yet. Whilst some leading Trusts have earned over 20%, many others will remain in low single percentage figures (around 2-4%). Nonetheless, with tight margins, even a few percentage points may equate to several million pounds for the average-sized Trust. However, although the lure of such income is appealing to Trusts, the amount actually generated might be much smaller. Equally, the negative consequences of this income have yet to be fully felt; these might include financial losses on certain ventures, the opportunity costs, and damage to the public service ethos of an increasingly pervasive commercialisation of the NHS.

The NHS has always had a somewhat ambivalent attitude towards `private income’; note, for example, GPs as independent contractors and the use of NHS pay beds [1]. However, the scale of current financial pressures might indicate new strategies during this Parliament. Furthermore, public attitudes seem to be changing in relation to private provision of health services by private providers, and so the public might support more entrepreneurial behaviour by NHS Foundation Trusts.

Given the ambiguity of the term privatisation, such claims are either hard to verify and/or subject to interpretation. Yet, this policy development points to a new era of entrepreneurialism in the NHS; impacts (including dysfunctional consequences) will need to be carefully assessed. NHS Foundation Trusts will need to steer a fine line between retaining core NHS values and meeting the financial challenges of austerity. Indeed, this is what they have been doing in the era of austerity.

1.Greener, I. (2011) `The case-study as history.’ Chapter 5 (pp.77-94) in Exworthy, M. et al (eds) Shaping health policy: case-study methods and analysis. Bristol; Policy Press