In many people's minds there are still two kinds of health care in Britain - free and paid for. Yet the degree of co-operation between the private sector and the NHS has always been more significant than is often realised.

In 1994/5, for instance, the NHS purchased more than pounds 500 million of health care from non-NHS providers, a 48 per cent increase on the year before.

Mr John Murphy of the NHS Executive says: "We recognise the contribution of the private sector in the provision of health care in the UK and we are committed to purchasing healthcare as efficiently and effectively as possible, whether from the public or the private sector.

"Cost-effective co-operation between the NHS and the independent sector increases the range of options to patients, GPs and health service managers."

Of course, the process is not a one-way street. Trusts can not only buy from the private sector, they are free to sell services or beds back. In 1994/5 the income to the NHS from private patients was pounds 193.5 million.

It is now seven years since the Government gave the green light to the concept of a mixed economy in its White Paper Working for Patients. That was followed by the Private Finance Initiative, aimed at encouraging the use of private capital and expertise in public sector developments.

Although more than pounds 2 million of health PFI schemes have been signed in the past three years, the bulk has been for small projects such as incinerators or car parks, despite the Government's drive to see new NHS hospitals built using private finance.

Large capital projects are in the pipeline: plans for a new 246-bed wing incorporating children's services, a patient hotel and other private facilities at St James's University Hospital in Leeds - better known as Jimmy's - have been given Government approval.

Progress for schemes of this magnitude has been much slower than expected, partly, because of the bureaucracy involved, and partly because bankers were concerned that the Government might not shoulder responsibility for any debts incurred by a Trust.

Even so, many people, both in the NHS and the private sector, can see real opportunities ahead. Yet many are also aware that some problems still need to be resolved. Kingsley Manning, managing director of Newchurch and Co, the management consultancy which runs the PFI database for the NHS, says these are both cultural and contractual.

"One major area of tension is over control and access to patients. Healthcare is about treating people and providing health service, and people in Trusts, not unreasonably, see that as their business.

In the meantime, however, a variety of joint ventures are up and running well. Lister Bestcare, specialists in joint venturing with the NHS, have installed new magnetic resonance imagers at six NHS hospitals.

Mr Barry Williams, the company's general manager, marketing and new business, explains what happens: "We put up all the capital and work with the Trust on the design of the building, the equipment, the staffing. We discuss operational policies and clinical protocols. A consultant, employed by the Trust, leads the service, which ensures the quality is there. Then we go out and sell the service to neighbouring NHS Trusts, commerce and industry.

"Having an MRI widens the portfolio of services the hospital can offer and because we have a surplus sharing arrangement with them, it brings them in extra revenue. They have no financial exposure whatever - what they pay for the service is what they would have paid anyway."

Lister Bestcare have also built a new endoscopy suite at the West Middlesex University NHS Trust in West London, which opened in 1993. Dr Stephen Kane, the Trust's clinical director of medicine says: "The partnership gave us excellent facilities compared with what we had and we can now provide a very high-quality service. However, as you'd expect in any partnership there can be the occasional tensions. We're still discussing who is responsible for upgrading what."

Another example of how the NHS and the private sector are working side by side - literally - can be found in Chertsey, where St Peter's Hospital NHS Trust and the private Runnymede Hospital have a special relationship.

Mr Stephen Fash, chief executive of St Peter's says arrangements like this can work very well. "The private operator leases the land, finances the building and equipping of the private facility and enters into an agreement with the NHS hospital.

"I gain because all my resources can be devoted to NHS patients, the consultants who do private work don't have to go off campus so they are available if we need them, and we get a share of the profits."