PRIVATE HEALTH A SPECIAL REPORT: Trusts take care to lure private finance

A new guide for NHS Trusts confirms serious role for private sector finance, says Anne Shaw

A new guide to the Private Finance Initiative for NHS Trusts published last week confirms the Government's determination that the health service should seek private sector finance for capital projects such as buildings and equipment.

As reported in The Independent, the Initiative also spells out the requirement by trusts to accept tenders from private companies for services, opening the door to private enterprise running areas such as pathology or radiography and even nursing care within state-owned hospitals.

The Department of Health said the aim of the guide was to get more private capital for new buildings and equipment while passing more of the risks and responsibilities to private sector partners.

The private sector has inves-ted heavily in modern technology, which often provides faster and more efficient treatments for a wide range of conditions. These facilities can be shared with NHS patients, thereby spreading the benefit and cost of the investment, and include computerised tomography (CTT) scanners, mammography, hydrotherapy pools, osteoporosis and sports injury clinics and in-vitro fertilisation.

Under existing arrangements, equipment and facilities may be owned either by the private company and leased out to the trust for the use of NHS patients or owned by the trust and managed by the investing company. In this case the management company would be paid a fee and time reserved for the use of private patients.

The new PFI guidelines are expected to increase dramatically privatisation within the NHS and, taken to its logical conclusion, the initiative means that companies could build hospitals and lease them out to the NHS and at the same time contract out the running of the hospital and its services - including nursing - to other private companies.

Alan Langlands, chief executive of the NHS, said: "We are promoting the PFI in the NHS in order to encourage the use of private sector expertise and capital. We want to obtain best value for money and we want to transfer risk to the private sector.

"The cost-effectiveness of NHS services has already increased as a result of implementing a range of PFI projects - from magnetic resonance imaging to residential accommodation.

"It is also apparent that the increasing scale and scope of NHS PFI projects places us at the forefront of the initiative. I want the momentum which the NHS has achieved to continue."

Construction companies, including Tarmac and Laing, are teaming up with health care companies to bid for contracts. To date more than 40 privately financed NHS projects have been approved with a total capital value of more than £100 million.

Co-operation between the private and public sectors on infrastructure has been flourishing over several years and many of the early agreements have involved the leasing of NHS land to private operators to develop and manage health-care facilities.

In one recent deal, BUPA has been chosen by the Hastings and Rother NHS Trust to develop a 35-bed independent private facility in the grounds of the Conquest Hospital in Hastings. BUPA intends to invest £4 million in building and running the unit.

Back on the wards, seven and a half million people are now covered by private medical insurance and, according to the Independent Healthcare Association, one in five non-urgent medical operations is now carried out privately. But while the number of beds in private hospitals has risen to around 11,520, compared with just over 7,000 in 1980, private patients are also returning to the private wings of NHS hospitals.

As a result of the policy of the Labour government of 1974 and its Health Minister, Barbara Castle, to abolish paybeds in NHS hospitals, the number of paybeds declined from a high of 4,500 to 2,800 by the time the Tories were returned to power in 1979.

The 1988 Health and Medicines Act, however, extended the power of health authorities and the new NHS Trusts to earn revenue from private patients and by the end of last year, the Fitzhugh annual review of private medicine, reported at the end of last year that private patients were increasingly choosing to have treatment in paybeds in NHS hospitals rather than in fee-charging independent hospitals, mainly on the grounds of cost.

It reported that pay beds and private wings in NHS hospitals increased their income from private patients by 25 per cent over the previous year to a record £170m. Guy's Hospital in London earned £7.5m from private patients, an increase of 70 per cent on the previous year. But the increase was at the expense of independent hospitals, where growth rates of 1.9 per cent were the lowest for 10 years.

According to the latest edition of Laing's Review of Private Healthcare, the principal engine for growth for the private acute healthcare sector has been private medical insurance. But in order to extend the market, many operators have introduced special low-cost packages which may set a ceiling on how much they pay out making NHS paybeds an attractive option when cover does not run to one of the more expensive private hospitals.

For example WPA launched its Maple plan in 1993 which covered treatment in NHS beds only and Norwich Union's TrustCare policy limits patients to treatment in NHS trust hospitals.

Insurers such as Legal & General and Swiss Life are now gearing up for the cut in state sickness benefits on April 13 when incapacity benefit replaces sickness and invalidity benefit. The change will save the Government about £2bn over the next three years by reducing the number of people who qualify and the amounts paid to those who do qualify. Claimants will face a tough new medical test of their ability to work and successful applicants may not only find the amount they receive reduced but may have to pay tax on it.

Ray Parrish, senior marketing adviser of Swiss Life (UK) said: "In the light of these changes, anyone who hasn't already done so would be prudent to review their long-term sickness provision as a matter of priority."