Hinchingbrooke and Circle – What Next for Outsourcing in the NHS?

With Circle Healthcare announcing that they are pulling out of their contract to run Hinchingbrooke Hospital, what are the implications for private sector involvement generally in the sector?

Some observers are still bullish.  Andrew Haldenby, who heads up respected think tank Reform wrote this in the Spectator last week saying all is still positive about private sector involvement in the NHS, which frankly is a load of absolute nonsense. He says, “competition is at the heart of the NHS England Five Year Forward View (5YFV), which all major political parties have supported.”

That is an interesting statement given (as we reported here) that the 41 page FYFV document does not contain the words competition or competitive once! It does not cover the issue of private involvement at all.

Now that may be because Simon Stephens, the new head of NHS England, is a smart political operator himself. He may well be hedging his bets with an election round the corner – why commit yourself one way or another on the private sector issue until you know which way the political wind is blowing? What has been interesting is the Conservative Party’s reticence to speak up in favour of private sector involvement, so Stephens is probably right to be cautious.

But two truths which this has exposed are that there is no magic wand for turning round failing hospitals, and private firms need profit to survive. The naïve view that outsourcers are intrinsically “better” than public sector organisations has been shown – yet again – to be untrue. That is not to say that outsourcing is never worthwhile; but it is not a panacea. Here is the brilliant Roy Lilley commenting.

“The private sector brings no magic. They bring a hard-nose and an eye for reality. On their lips there may be honey-words about their staff and customers but at the end of the day they have to make a margin, pay dividends or reinvest in the business. But, and it is the biggest 'but'; no margin, no point in being in the business.”

What about commissioners and procurement people in the NHS? Will the Circle experience change their approach? Whilst it may not lead to overt change in the strategic direction, it will undoubtedly make them more cautious about private providers, more risk averse and more concerned about issues such as exit clauses and financial stability. We might also assume that the public will feel even less convinced of the private provision argument now, so commissioners may well (and not unreasonably) want to reflect that in their decisions.

Add to this the withdrawal of Serco from its health business last year, and one other major provider which has quietly restructured because of its disappointing progress in winning NHS work, and the market doesn't look very healthy either. So all in all, we see a pretty bleak few years ahead for private health providers in terms of major, core work at least.

However, as the FYFV does point out, we need some radically different approaches if the NHS is not to run out of money again – and repeatedly. My personal view is that there will one day be more private involvement in the NHS, one way or another, and it will eventually be seen as a positive. However, I suspect a period of retrenchment, and perhaps consideration of some different models, will be needed before that growth takes place.

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First Voice

  1. David Lawson:

    In terms of hospital services we are seeing a growing trend of private sector involvement/ partnership but more on a service by service basis. Not so much in the direct provision of clinical staff/ outsourcing of a clinical service but in the provision/ ongoing running of facilities such as satellite units in the community (renal, respiratory, radiotherapy etc) and on-site (cardiology, orthopeadics). Medical device companies are also looking for opportunities to move away from selling “boxes” to providing “services”, working with clinical teams to be more efficient, improve patient pathways/ clinical practice to reduce length of stay and improve the patient experience. The debate around private sector involvement in the NHS is often a polarised zero sum discussion and ignores the examples of partnership between the two. This trend also links well with previous articles on the importance of contract management.

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