£5.8bn of NHS work being advertised to private sector
By Gill Plimmer and Sarah Neville

About £5.8bn of NHS work is being advertised to the private sector in moves that are slowly transforming the nature of healthcare in Britain.

The number of live tenders – advertised contracts not yet awarded – is up 14 per cent on the same period last year when deals with a value of £5.1bn were advertised, according to research by Bain, the consultancy, for the Financial Times.

Not all of the work will go to commercial operators and there are signs that the pace of contract awards has disappointed many companies in the healthcare market despite Andy Burnham, the shadow health secretary, warning that “privatisation is being forced through at pace and scale”.

But the increase in volumes suggests outsourcing is becoming more “pervasive”, according to Christian Mazzi, head of health at Bain, the management consultants, who pointed to a “growing comfort” with outsourcing across Britain.
The volume of deals has also surged, from 160 last year to 213 in 2014, as everything from prison healthcare to adult substance misuse services are put out to tender.

This includes the largest outsourcing deal for patient services in NHS history – the £1.2bn tender to provide all cancer treatment facilities including radiotherapy, breast screening, nursing and surgery in Staffordshire and Stoke.

The Staffordshire deal is striking not just because of its scale but because it represents a shift away from individual contracts for services such as pathology and towards the provision of an entire service area. “Instead of tendering for single services such as eye cataracts or pathology, you tender for an entire set of services; an entire population,” said Dr Mazzi.

The increase has been driven by financial pressures and the Health and Social Care Act, which came into force in 2012. This – along with new European Union procurement laws – has given greater clarity on procurement to local authorities and the 112 clinical commissioning groups that are responsible for procuring about 70 per cent of the NHS budget.

Despite the increase there have been severe setbacks for commercial operators. The takeover of Hinchingbrooke hospital in Cambridgeshire by Aim-listed Circle Healthcare in 2012 had raised hopes that more would follow but instead hospital privatisations have proved politically toxic.

Competitions to run Weston Hospital in Somerset and George Eliot Hospital NHS Trust in Warwickshire were abruptly cancelled earlier this year, costing companies including Circle and Care UK thousands of pounds in bid costs.

A series of scandals surrounding outsourced government contracts has also dented confidence and led to some being taken back in-house.
Serco has agreed to pull out of a contract running out-of-hours GP services in Cornwall after it was found to have manipulated data. Its performance on a £140m contract running community care services in Suffolk, involving the transfer of 1,030 NHS nurses and medics, was also criticised.

With the opposition Labour party stepping up its anti-privatisation rhetoric ahead of the election, there are fears that a potential change of government could slow down outsourcing awards for the next 12 months.

Andy Burnham, shadow health secretary, this week called for a stop to the “indefensible” contracting out of NHS services to the private sector and warned that “privatisation is being forced through at pace and scale”.

Many of the contracts are in mental healthcare, which has been open to investment from the private sector from the 1980s and is now almost fully privatised.

Experts suggest that the NHS may follow this trajectory with a slow but steady progress towards private sector involvement.
Simon Stevens, the new chief executive of NHS England, is known to be more open than his predecessor to the role of competition in health services.

However, Mr Burnham added “These new figures show Labour is right to warn that soaring numbers of contracts are now tendered. NHS commissioners feel compelled to put every contract out to the open market – they and competition lawyers know that private providers can challenge for every NHS contract. This is precisely the forced tendering I’ve called on the NHS to halt.”
The Department of Health said: “Local doctors and nurses have the power to make sure patients get the best NHS care no matter who provides it. Charities, social enterprises and independent providers play an important part in providing NHS care – and have done for many years.”