Privatisation and fragmentation of the NHS has resulted in a debt that we continue to service

The NHS is in danger of collapse as private profiteers bite off more and more of the service.

Proletarian writers

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Proletarian writers

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Changes in hospital policy to allow privatisation of services have had far reaching impact on quality of health care, workforce structure and staff morale. As discussed in a previous article, privatisation of the NHS has crept in by stealth following round after round of changes which have allowed bite-sized chunks of the NHS to be handed over to private control. (See ‘End in sight for National Health Service’, Proletarian, August 2006)

Increasingly, NHS, and therefore taxpayers’, money is paying for care provided by others, thereby removing healthcare from government control, transferring accountability away from the public to shareholders, and leading to services being withdrawn and introduction of more charges.

Privatisation of health services has been costly to both Primary Care Trusts and Hospital Trusts. In addition, government policy has been specifically designed to benefit private companies at the expense of the NHS.

Ten years ago, the Conservative Party started to create a market system within the NHS which translated all aspects of health care into units that could be bought and sold. An internal market was created by placing most of the health budget in the hands of GPs or local Primary Care Trusts (PCTs) made up of groups of GPs. GP fund holders then ‘purchased’ services from hospitals.

This purchaser/provider split and the market system have cost the taxpayer millions of pounds in contracts, billing and legal fees. Prior to the split, transactions and administration costs were kept to a minimum because the NHS was being run as a single cohesive unit with one budget. Since the split, these costs have risen from 6 percent to 12 percent of the NHS budget.

Once the internal market was developed, the government was able to establish new lines upon which money would pass from the PCTs to hospitals. Payment by results was introduced rapidly to cover over 80 percent of hospital work by April 2006 despite strong objections. This scheme means that, instead of receiving an annual fixed budget, hospitals are paid for the actual number of patients treated.

Fragmentation and competition

The effects of this scheme are multitudinous. It immediately caused conflict between the PCT (purchaser) and the hospital trust (provider), as hospitals worked flat out to secure more money, while GPs tried to cut costs by referring fewer patients.

The unpredictability of their financial situation made it impossible for hospital trusts to plan their services. In addition, the situation encouraged hospital trusts to compete with one another for patients. This competition inevitably focussed on treating patients with less complex conditions, who could be pushed through the system quicker. Competition was fierce, with increasingly large amounts of taxpayers’ money spent on advertising.

Competition continued to grow when private treatment centres were opened (so called Independent Sector Treatment Centres or ISTCs). Patients opting to have their operation in a private treatment centre took with them the funding provided by the PCT and so leaked money out of the NHS, thus worsening the financial situation of hospital trusts.

This ever-growing competition between hospitals is driving further fragmentation within the NHS as each individual unit is fighting its own battle. While the NHS operated as one cohesive unit with one budget, there could be some flexibility, with money being moved around to where it was most needed. The current system means that some trusts are getting into increasing debt while others that have been historically cheaper to run (eg, because of their location) are generating profits.

Of all the government-inspired policies, the Private Finance Initiatives (PFIs) have had the most devastating financial impact on hospital trusts, with a number of trusts becoming bankrupt as a result.

Private profit, public debt

The building and maintenance of new hospitals and wings are contracted to a consortia of private businesses (architects, builders, lawyers, commercial enterprises, caterers, etc) thereby allowing the government to avoid having to spend money on hospital building and maintenance, while the responsibility for paying the PFI companies back rests with the hospital trusts. Once the building is completed, a hospital trust is tied into a long contract (up to 30 years), during which it has to rent the hospital and services such as catering, cleaning and maintenance from the consortium at hugely inflated prices.

The Daily Telegraph of August 2006 reported that one consortium charged a trust £333 to change a light switch. Kevin Coyne (head of health for Amicus) described having a PFI hospital as “equivalent to an NHS trust having a massive 30-year mortgage, except the terms are worse than you’d get from any high-street bank and even when it’s all paid off, you still might not own the house”.

In Norfolk and Norwich, a PFI made gains of £95m, tripling its original expected rate of return from 19 percent to 60 percent.

Having entered into these deceptive contracts, trusts are forced to pay up or to face hefty fines for early termination (£257m in the case of N&N). The Queen Elizabeth Hospital in Woolwich announced that it had become bankrupt after paying £9m per year more to its PFI than it would have done it if it had built its new hospital in the traditional manner.

Similar contracts, called Local Improvement Finance Trust (LIFT) schemes, are being forced upon Primary Care Trusts for building and maintaining GP practices. As with PFI hospitals, these projects are costing GPs up to eight times more than traditional ways of building. For example, two LIFT projects in Newham cater to just 9 percent of the population but have taken up to 28 percent of the PCT’s budget.

Although there are many other examples of how privatisation results directly in a financial loss for the NHS and represents poor value for money, the two schemes outlined above account for much of the ‘black hole’ in the NHS budget. Trusts are forced to squeeze services elsewhere to make up the deficit, which is why so many problems have recently arisen in the quality of healthcare provision.

The NHS has spent over £6bn on an unpopular programme to update and computerise all health record systems called ‘Connect for Health’. Medical staff voiced grave concerns over such a large expenditure on new computers and software when hospital wards were being shut down and members of staff were being laid off.

Furthermore, the original contractors failed to deliver, and a succession of IT firms have attempted to complete the mammoth task, each in turn taking a substantial bite out a cash-strapped NHS while delivering very little. As a result, despite going way over budget, the NHS has been left with a computer network and records system which is half-baked and ineffectual.

Service cuts

Service cuts have been widespread, and the following are only a handful of examples:

1. Increasingly, PCTs are refusing to commission operations and treatment of some conditions from hospital trusts. Camden PCT’s list of “low priority treatments” which GPs are not allowed to refer to a consultant includes cancerous skin conditions, varicose veins, asthma, grommet surgery, carpel tunnel surgery, minor skin surgery, various cosmetic surgery, gender reassignment surgery, viral warts, eczema, acne and psoriasis.

GPs seeking to refer for these conditions will be simply overruled. Unlucky patients are left with a choice of abandoning treatment or being forced to turn to the private sector.

2. According to the Daily Telegraph of August 2007, the number of maternity beds has fallen by up to 40 percent in some areas. Since Labour came to power in 1997, there has been an 18 percent reduction in the number of maternity beds for every 100,000 people, equivalent to 2,000 beds over 10 years.

This has not been balanced by an increase in home births, since only 2 percent of women gave birth at home in 2006/7. The number of midwives employed by the NHS has not matched the rise in live births, with live births rising by 12.5 percent but the number of midwives increasing by only 4.5 percent.

3. With catering subcontracted to private firms, food is of poor quality and is often locked away in fridges and freezers to prevent “unauthorised consumption” and thus ensure the highest profit margin possible.

In one south London hospital in 2007, hot meals ceased to be served at dinner in order to cut catering costs. Patients are instead offered sandwiches and soup. This is a good example of how short sighted a profit-driven agenda is, since the loss of nutritional intake places patients at greater risk of infection, delayed wound healing and slower rehabilitation, and an extended hospital stay is very expensive.

In addition, dieticians and doctors are forced to prescribe expensive nutritional drinks and supplements. A patient who finds himself hungry outside dinner hours may find it very difficult to gain access to food unless they have relatives to buy or bring food in.

4. Ward-based services such as physiotherapy, wound care nurse specialists and regular phlebotomy services are all being cut.

5. Many community-based services, widely available only a few years ago, are being cut, including community nurses, healthcare visitors for newborn babies, care packages (food, cleaning and shopping for the elderly or physically frail), chiropody clinics, funding for residential and nursing homes, out-of-hospital equipment to aid early discharge such as home mobility equipment (rails, raises, mattresses) and medical equipment (nebulisers, vacuum wound drainage systems).

This is despite the fact that continued hospital stay is by far the more expensive option.

6. Reconfiguration has resulted in numerous community hospitals closing. Community hospitals have traditionally played an important role in caring for patients with chronic illnesses and patients needing higher levels of social care. Having lost this service, such patients are being handed over to social services, where means testing determines the level of care provided.

Community nursing is not expanding fast enough, and therefore it will fall to private providers to pick up care that a PCT says it cannot afford. The case for having fewer community hospitals relies partly on the claim that delivering ‘care in the community’ is more cost-effective. Some early studies show the reverse, however, and have demonstrated that procedures performed by GPs rather than hospital doctors cost more.

7. Another aspect of reconfiguration is the transfer of some specialist services carried out by district general hospitals to larger hospitals, forcing patients to travel further for treatment. Although it may be beneficial for some services to be concentrated in large specialist centres, such as complex cancer operations, for example, this does not apply to maternity services or to A&E, where time is of the essence.

Furthermore, some hospitals may operate an A&E department despite having lost many of the specialist services that might well be needed by their patients, such as vascular surgery, trauma surgery, interventional cardiology and intensive care, thereby putting patients at risk while they wait hours for transfer to the closest specialist centre for life-saving surgery.

8. Smaller hospitals have been merged into groups to form Trusts. In the process of merging, services previously carried out on all sites have been reconfigured so that quite often only one of the hospital sites retains an A&E department or facilities for elective surgery etc. The loss of specialities at the remaining sites poses a problem for managing complex patients who may have multiple-speciality problems or those who are admitted with one problem who then develop a different condition unfamiliar to the admitting doctors.

It is now commonplace for patients to be transferred between sites by ambulance for a simple review by a doctor in another specialty not available on their own site. In some cases, seriously unwell patients are transferred after a delay in diagnosis.

According to the Royal College of Physicians, what the majority of patients require from a local hospital is acute general surgery, an A&E department, resident anaesthetic cover, intensive care and cardiac care – exactly what a typical district general hospital used to provide!

Research has shown that, in fact, running larger hospitals is not more cost effective. Facilities of 100-200 beds are as economically efficient as a hospital can get.

9. In some areas, non-emergency ambulance services are being taken over by private firms. There are examples of patients waiting up to nine hours to be picked up by a private ambulance, with hospital staff resorting to deliberately classifying patients as more seriously unwell than they are in order to secure an NHS ambulance.

Squeezing the workforce dry

Hospital trusts are now forced to recuperate money from their own workforce. More than 20,000 jobs have been cut in recent years as managers struggle to bring the NHS finances back into balance. (See Daily Telegraph, op cit)

For some time, the ‘lower tiers’ of the hospital workforce such as hospital cleaners, porters and kitchen staff, have felt the brunt of changes. As managers have increasingly parcelled off services (such as catering and cleaning) to private companies, their employees have found themselves in the uncomfortable position of being discharged by their NHS employers only to be re-employed by private firms for a lower wage and worse conditions (eg, loss of NHS pension and holiday entitlements, as in the case of the Hillingdon Hospital Workers, who fought their landmark struggle on just these issues some ten years ago).

Following increased funding for training over the last 10 years, newly-qualified healthcare visitors, physiotherapists and midwives are finding it impossible to secure jobs due to recent drastic cuts. In August 2007, the Daily Telegraph reported that 5,000 newly qualified nurses and half of the 2,413 newly-qualified physiotherapists faced unemployment, with hospital vacancies at their lowest in 10 years.

Those lucky enough to be in employment are experiencing below-inflation salary increases, essentially pay cuts. The relatively low salaries of nurses have always contrasted with the stressful and demanding nature of their work.

Despite working under such difficult conditions, many members of staff work beyond the call of duty by staying on late and managing situations they are not trained for. Nurses in particular are being asked to take on more patients, as well as taking on non-clinical tasks formerly carried out by support staff, such as mopping up spills, feeding patients etc. The result is that health workers are being blackmailed by their strong sense of ethical and moral responsibilities for their patients to fill the gaps left by deliberate mismanagement and cost-cutting with a view to privatisation. While the majority of patients continue to experience good quality of care, there will come a breaking point at which the system will collapse.

Demands placed on dangerously-overstretched staff do, unsurprisingly, sometimes give rise to mistakes and complications, which are potentially catastrophic to the individual patients and workers involved. This in turn leads, directly or indirectly, to disillusioned staff leaving the NHS. Temporary workers are often employed in order to attain minimum acceptable levels of care. Unfortunately, inexperienced locum staff are unfamiliar with their wards and often lack many of the expected skills of a permanent member of staff, as well as – ironically – being more expensive to employ.

Alongside the pressure on nursing staff, power is increasingly being prised from the hands of senior doctors, with the result that managers are happier to develop strategies to recoup money from the upper tiers of the workforce.

Newly-qualified doctors have also been hard hit by cutbacks. Traditional financial support in the form of free hospital accommodation in the first year of service, free hospital parking for staff, free lunches at teaching sessions and funding for travel and study are all under attack.

Consultants are being asked to redefine their job plans and, despite heavy workloads, to reduce their “programmed activities” (they are paid for each programmed activity such as an operating session, a ward round or a clinic). In surgery, it has become commonplace for consultant surgeons to find their operating time being taken away from them because it is so expensive to run a theatre.

Again, however, this has revealed itself to be an extremely short-sighted measure, since increasing waiting lists result in trusts being fined for not meeting waiting list targets. The trusts are then forced to pay consultants to perform extra services (operations, endoscopies, clinics) out of hours or to turn to the private sector.

In addition, managers have realised that it is much cheaper to employ a nurse or practitioner to carry out relatively simple tasks previously allocated to junior doctors in training. This has led to a noticeable rise in the number of nurse specialists (nurse endoscopists, nurse GPs, surgical practitioners). Official data on the work pattern of family doctors show more consultations are now done by telephone and one in three patients sees a nurse instead of a doctor.

Although nurses can be trained to perform a procedure to a basic standard, what they lack is the medical training which allows them to assess the patient as a whole and to cope with complex scenarios and medical complications. These scenarios may be less common in some contexts, but in general practice the potential for missed diagnoses is clear and has not been adequately addressed. In addition, simple cases allocated to nurse specialists, especially in surgery, further removes training opportunities from junior doctors.

An increasing number of hospital trusts are saving money by removing trained medical secretaries and using cheaper services abroad. The loss of a direct interface between the doctors and secretaries often results in an inefficient system with significant documentation errors.

Primary care

Primary care involves non-hospital services and is largely dominated by GPs, but also includes health visitors, community nurses etc.

In 2006, the government introduced the ‘alternative provider of medical services’ contract to allow large multinational companies to bid for and take over the running of GP services. With an average of 2,000 patients under the care of each GP, and the average practice comprising three GPs, each contract results in the transfer of the care of 6,000 patients into the hands of private.

GPs working within the NHS control a budget to cover the running costs of the surgery, staff wages and hospital services for their patients. What remains is taken as their salary, but, working within the NHS, they are legally accountable to their patients so that, by and large, clinical decisions are still driven by concern for the welfare of patients.

If working for a private company, GPs would be accountable to shareholders, and clinical decision-making would be driven by profit. There will be inevitable cuts in services deemed unprofitable to fund, while staff will be employed on the cheap (locum doctors and nurses who are unfamiliar with the territory, resulting in the loss of traditional GP-community ties). Finally, although GPs are also allowed to bid on the open market to run surgeries, they are outflanked by the experienced, cut-throat larger private firms.

Also in 2006, the government opened up the market for private companies to take over the important role of health services commissioning from PCTs. This allows private companies to decide on the behalf of their patients what type of treatments they will provide funding for and also to whom they will choose to provide these treatments.

This puts private companies right at the heart of the local NHS, allowing them to decide how the budget is spent and further removing public accountability. There are obvious conflicts of interest with private firms purchasing services and treatments from their own private treatment centres.

Since 2005, traditional components of PCT services such as district nursing and health visitors have been handed over to the private sector. Community nurses have been encouraged to leave the NHS, set up social enterprises and then sell their services back to the NHS, leaving the latter with increased administration costs and reduced flexibility, while PCTs lose control over another part of their budget.

In June 2006, despite 84 percent of staff voting in a union ballot against this shift in employer, the move was forced through. Staff were concerned that inexperienced nurses forming social enterprises were easy prey for private companies to take over.

The gradual unbundling of the once-powerful PCT will leave a skeleton service composed of compulsory GP duties. Services previously taken for granted such as district nursing, community nursing, out-of-hours GP cover and immunisation are being removed from the remit of the PCT, forcing patients to resort to the private sector or to present to A&E departments with minor ailments. In Cornwall, out-of-hours GP cover in one practice was taken over by a private company, Serco, which missed all its targets, including those for emergencies and urgent home visits.

Secondary care

Secondary care is treatment provided after a patient has been referred by their GP. This has traditionally been carried out by specialists in hospital.

By January 2006, and at a cost of £1.7bn, 25 Independent Sector Treatment Centres (ISTCs) were operational. These centres carry out some of the work provided by hospitals, usually straightforward treatments such as cataract operations, hernia repair and hip replacement surgery. The catch is that they are run by private companies who have signed contracts with the NHS to carry out these services at a fixed price – whether the work is completed or not.

Although it was initially claimed that independent centres would ease the workload for the NHS and help reduce waiting times, the result has been quite different. In July 2006, a report by parliament’s Health Select Committee found that the ISTCs made very little impact on waiting lists and, in fact, the recent reduction in waiting lists resulted from NHS Trusts working harder.

In addition, ‘cherry picking’ by the ISTCs, whereby less complex and more profitable work is carried out by the private centre, means that hospital trusts lose their income from routine work while left to provide more expensive care such as emergency admissions, and chronic disease. Training opportunities for junior doctors, are further jeopardised.

As well as not having the claimed positive effect on waiting lists, ISTCs do not provide value for money. By signing fixed-rate contracts, they are paid even if they do not complete their expected number of operations. In one treatment centre in Oxfordshire, the ISTC performed only 93 out of the contracted 572 procedures, costing the NHS 600 percent more than if it had carried out the procedures itself. Meanwhile, the expenses of procedural complications and long-term follow up are invariably left to the NHS, as with all private care in the UK.

When taking into account the fact that these private clinics only take on simple cases, use temporary staff and do not train junior surgeons, each operation carried out by an ISTC costs the NHS 30 percent more than if it had been carried out in an NHS hospital.

The government is now set to roll out new Clinical Assessment, Treatment and Support centres (CATS) and Integrated Care Assessment and Treatment Services (ICATS). These units straddle GPs and hospitals by offering assessment, diagnosis and some treatment in specialities such as ear, nose and throat (ENT), gynaecology, orthopaedics, rheumatology and urology. The centres are largely run by private companies, therefore generating clear conflicts of interest.

Patients seen in CATS are referred to independent-sector treatment centres in preference to NHS hospitals for their secondary care. This disparity is further compounded by CATS ‘cherry picking’ less complex cases to their own ISTCs, while diverting more complex and chronic patients back to the NHS. The chief executive at the Royal Bolton hospital estimates that 50 percent of the hospital’s workload could be lost to CATS and ICATS, equating to £3.7m in lost income and possibly 130 lost jobs.

With no evidence that CATS and ICATS will improve accessibility, value for money or quality of care, these centres are being seen as merely another opportunity for PCTs to appear to cut costs while in reality not only costing more (while providing guaranteed profits for shareholders), but also pushing the thinly-veiled agenda of complete NHS privatisation still further.


Privatised health care costs more to run. There are huge transaction costs from billing, drawing up contracts and litigation. In the USA, where private healthcare is very developed, the country spends 16 percent of its GDP on health, yet more that 45 million Americans lack any health insurance at all. In the UK, even today, half that is spent on health but the NHS covers everyone. And in Cuba, where no privateers are admitted and the health service is run as a single entity, a better level of service is provided at a fraction of the cost of the NHS.

The current spin and smokescreen over the condition of the NHS is so developed that the public are led to believe that the reduced quality in their health care results from an antiquated and inefficient state-run system. This type of propaganda is then used by the government to justify further privatisation.

Labour health ministers are clear in stating their aim of breaking up ‘state monopoly’ and open gateways for the entry of the private sector. Health policies are drawn up to make private companies more competitive. Taxpayers’ money, meant to fund the NHS, is then diverted from PCTs and hospital trusts into private enterprises – at great loss when compared to funding services in the traditional manner. Increasing percentages of the NHS budget (15 percent by 2009, close to £14bn, and rising) are compulsorily earmarked for private purchasing under centrally-imposed targets by the NHS Plan (2003). This is under the false promise and dogmatically preached mantra that marketisation = efficiency.

We have had ample proof that universal, quality health care cannot be provided by private business. With PFIs and ISTCs, we end up paying inflated prices for substandard services whose only measure of ‘efficiency’ is generating healthy profit margins for private companies, rather than healthy patients in a healthy society, which becomes an incidental by-product to the central mission of self-aggrandisement of capital. With PFIs, sick patients are not very cost effective and therefore the only way that companies can increase their profit margins is to cut corners and reduce the provision of services to a minimum.

The solution to providing good quality, universal health care is to return to a comprehensive and integrated health system run by the state which is able to plan to meet all its needs at the best value for money. The great strengths of the NHS have always been cooperation and service and not competition and profit.

The service was only provided in the first place because the Soviet Union had set up a system of free health care for all workers and peasants – and the bourgeoisie in this country thought it would be advisable to provide the same if they didn’t want to be overthrown. They provided the NHS as a cheap centralised system which was so efficient, despite concessions made to capitalist interests, that Britain became a world leader in healthcare provision. However, as soon as the capitalists started eying the NHS with a view to extracting fast bucks and inserting their greedy snouts into the system, the service started to degenerate and is now in danger of collapse.

The experience of socialist countries shows that comprehensive, inclusive and efficient health (and education) services are not just a utopian dream – they are eminently possible, but only in a society characterised by the social ownership of the means of production; a society where production is aimed at meeting people’s needs, rather than generating private profit – that is, a socialist society.

The fight for socialism is a fight for human progress, a fight against the appalling consequences of the domination of capital, and a fight for a better quality of life. The British working class must fight tooth and nail to preserve the NHS, but we must also bear in mind that only socialism will offer us a quality of life that is truly consistent with what modern technology makes possible.