Competition on everything including price is not only the most practical solution to the growing pressures facing the NHS, it is also virtually inevitable, according to the chief executive of the UK’s largest private healthcare provider.
It has been a rocky few months for the private healthcare industry. The political row over the private sector-friendly elements of the Health and Social Care Bill has escalated to near-crisis level, the bill has stalled, and heavyweights on both sides of the Commons are queueing up to condemn private sector “cherry picking” of NHS patients.
So you might expect Adrian Fawcett, chief executive officer of General Healthcare Group, the biggest private healthcare provider in the UK, to feel less than optimistic about his company’s prospects for business with the NHS. If so, he hides it well.
“At a macro level,” he tells HSJ, “I’m more excited than ever about what the healthcare marketplace and healthcare reforms mean for the future.”
The main reasons for his confidence are financial, not political. He believes the unprecedented savings targets the Department of Health has set for the NHS – 4 per cent per year, or £20bn by 2015 – are a “massive understatement”, and to keep pace with demand the service would actually need annual savings “nearer 8 per cent”.
For the next few years, he expects the problems posed by a growing and ageing population, as well as demand for the latest medical advances, to be compounded by global commodity prices. He suggests higher oil prices will disproportionately affect the healthcare sector, which depends on plastics and imports – both affected by increases in oil prices. High cotton prices will also drive up the cost of bandages and other medical consumables.
He does not believe the NHS’s quality, innovation, productivity and prevention drive can raise productivity enough to neutralise these pressures. “If you look at the healthcare system in the UK, there’s no recent history or evidence of efficiency being absolutely delivered,” he says.
Supply and demand
Healthcare in the UK must either see an increase in private provision and funding, or accept unsatisfied demand, Mr Fawcett concludes. “What better marketplace could you be in as a healthcare provider [than one] where the demand and need for your product and service is rising irrespective of what you do?
“We’re now only arguing how best to configure to deliver it, and how that’s paid for. And it is almost untenable to find a 10 year programme that satisfies this demand out of tax take alone. Therefore we need to increase our sources of funding, and I think these reforms are the starting point [for] making that happen.”
Mr Fawcett is not the only private healthcare chief executive who has remained confident his sector will benefit from the reforms, despite the government “pausing” the passage of the Health Bill and promising that private sector involvement will not be allowed to destabilise NHS services. As HSJ reported last week, in a survey of 20 private sector chief executives, 70 per cent expected the government to partially or completely follow through on its reform commitments.
For his part, Mr Fawcett thinks the government’s current “listening exercise” to consider changes to the bill may produce a slower reform timetable, but not a major change of direction. Those aspects of the bill most important to private providers – namely, the opening up of a large number of NHS services to competition from “any qualified provider”, and the transformation of Monitor to an economic regulator – he expects to come through relatively unscathed. “You will see,” he insists, “with the advent of an empowered sector regulator, competition opening up to deliver higher standards of patient care.”
He rejects arguments that competition could undermine the viability of hospitals providing essential services, such as accident and emergency, by allowing private providers to cherry pick routine elective work.
He says that in areas where long term private investment would consider going in, there is little “danger of damaging core services and facilities offered by the NHS”.
“If you look at London, I think there is plenty of capacity for the private sector to be part of the London mix without damaging core services, because the demand on the existing facilities in many areas is greater than [the amount of service they] can actually provide.”
Part of Monitor’s role in areas such as the capital should be to ensure that the A&E infrastructure is “supported by good general surgery and theatre wards behind it and that the level of competition in the marketplace doesn’t end up disrupting that”, he explains.
He also maintains that where competition is introduced providers must be allowed to compete on price, not just on the level of service. Health economist critics of price competition say it has been shown to drive down quality, and the government has already removed all reference to “maximum tariff” prices from the bill, in an effort to prove that it will not introduce competition on price.
Mr Fawcett says he can understand why, during the early stages of reform, providers would be allowed only to compete on service quality. But he says it would be “madness not to end up where price became part of the equation”. When the costs of providing healthcare already vary so widely in the UK, “why insist on having only one price?”
So, if the reforms do deliver the opportunities Mr Fawcett anticipates for the private sector, what will be his strategy for taking advantage of them? To begin with, he says, he would focus on mobilising GHG’s share of the estimated 30-40 per cent spare capacity in the English private healthcare sector to target NHS patients. He anticipates this spare capacity would increasingly “be promoted directly to the general public and [NHS] commissioners as available”.
Long term investment
To maximise its ability to capture NHS demand, GHG would invest in everything from communications materials to medical equipment, consultant training, beds and wards.
However, new facilities would only be brought on stream when GHG could be certain the NHS was set for a long term relationship with private providers. “Once it’s formalised and we’ve got some experience and confidence that there’s stability in the system, private companies like my own would have no hesitation in investing in long term capital assets specifically for NHS service provision,” he says.
Rising demand for healthcare in the UK will easily outstrip the private sector’s current spare capacity, he explains. That investment could mean buying or building hospitals, he says, or his “big passion” for GHG – going “on-site with the NHS”. “The NHS has got a large estate of facilities already,” he explains. “What would stop us, in that scenario, not investing in new swanky facilities down the road, but reconfiguring or investing on the same sites as the NHS and creating real medical hubs? That would be a full unison of the private sector with the NHS.”
And would GHG be interested in taking over a financially struggling NHS trust? “We would have to look at each one on its own merits,” he replies. He would have to be certain the company was not taking on something “unfixable”, but emphasises it was something to discuss with the DH and NHS directly, “to see if there was the opportunity for a stronger partnership as a result”.
While Mr Fawcett remains bullish about the reforms, he says: “There is enough nervousness and political agenda behind this reform that I wouldn’t be investing further at this stage. I’m hoping to be much better informed in 12 weeks’ time.”
Progress requires the nation to change its mindset about the NHS and start considering it as an asset, not a treasure, Mr Fawcett concludes.
“We mustn’t look at it as a treasure, because treasures go up in value as a result of becoming obsolete and [gaining] rarity value. Assets go up in value because they become more interesting and useful.”