NHS guarantees private sector at least £225m to reserve capacity in case of new covid surge

The monthly payments under the new national deal, detailed in a letter published late yesterday, will be between £75m and £90m each month until April to reserve the capacity. But if a major surge occurs and the capacity has to be released, the payments are likely to double to £175m a month.

Both scenarios would leave the NHS “exposed financially”, NHSE chief executive Amanda Pritchard has warned, and the arrangement creates “a material risk that the NHS pays for activity that is not performed”.

The national deal was announced on Monday but the financial details of the contract were only revealed in a letter from Ms Pritchard to health and social care secretary Sajid Javid late yesterday. Ms Pritchard explained in the letter that the deal had been agreed in a response to ministers’ request to “maximise the use of independent sector bed capacity across England”.

The agreement was made between NHSE and several private providers who will reserve and then potentially supply capacity to mitigate the impact on elective work if the NHS saw a surge in admissions.

Ms Pritchard writes: “The ISPs… could provide around 5,600 physical beds in surge if required. It is estimated that approximately 2,000 to 3,000 of these beds could be staffed (subject to staff absence levels) but the ISPs cannot confirm this to us.”

She adds: “In return for the commitment to stop their private work and make their resources available to the NHS at short notice if required, the IS providers have asked that we guarantee each of them a minimum level of NHS income for the period of the contract [and that] if the NHS requires surge to be activated (where ISPs stop private sector work to create capacity for sole use of the NHS) we pay for the affected facilities and staff on a not-for-profit cost recovery basis.”

She writes the service will “mitigate this risk” by setting the “minimum income guarantee” or “MIG” at “90 per cent of the value of NHS work delivered in the relevant facilities in the best four weeks between October and December 2021.”

Ms Pritchard continues: “We have also agreed a 10 per cent premium to the standard NHS tariff for all work above the value of the MIG, and further premium additions for all more complex work (such as cancer) to incentivise the relevant ISPs to delivery activity that would not normally be done by ISPs because they deem it not profitable at standard NHS tariffs.”

The value of the deal to reserve capacity is estimated by NHSE “at between £75-90 million a month”. This amount, claims Ms Pritchard, is “below what we might reasonably assume the NHS would commission through the IS in a normal winter period where surge is not required.”

However, if a surge did occur and the IS capacity had to be used, then Ms Pritchard says payments would be likely to total “around £175 million a month”.

Ms Pritchard warns: “On a per bed basis this is significantly more expensive than the equivalent cost of an NHS site with much less certainty on the potential staffed capacity. There are also logistical challenges that need to be surmounted to facilitate the transfer and care of patients between NHS systems and around 150 IS sites across England.”

Using capacity is “a last resort”, says NHSE

Because of these risks, the NHSE CEO writes: “These surge arrangements are considered as contingency arrangements, to be implemented in extremis, given the potential cost and uncertainty involved.”

Ms Pritchard also warns the deal might not prove effective. She tells Mr Javid: “The independent sector is not typically used for medical bed capacity and its staffing model does not easily support significant 7/7 staffed bed capacity.

“It is therefore not possible to be sure what additional effective medical bed capacity would be available and we assume that core NHS staff will be fully stretched at this point to staff core acute sites and any surge capacity on those sites. There is also likely to be material levels of staff absence due to covid infection that will further limit capacity at NHS and IS sites.”

The NHSE CEO says the NHS would “be exposed financially” by the deal with independent sector, “particularly if surge arrangements are triggered”.

She adds: “Given the uncertainty concerning value for money of the proposed approach I am therefore seeking a ministerial direction.”

She writes that Mr Javid may judge that “given the immediate impact of the omicron variant there is not time available to perform further analysis, design alternative arrangements or agree improved arrangements. You may also take the view that if we do nothing or delay, the risk that pressure will grow on the NHS leading to omicron overwhelming local systems is unacceptable. Such risks manifesting would result in significant cancellation of elective care.”

She then asks for a “a ministerial direction that you are content for NHSE to proceed with these arrangements”.

Javid: I am directing you [to] take forward this scheme

In his reply, Mr Javid writes: “I recognise the managing public money issues that these arrangements cause for you as the accounting officer. However… I believe the need to protect NHS services and prevent a further reduction in NHS capacity are compelling reasons to justify their introduction… I am directing you as accounting officer that you may take forward this scheme with immediate effect, managing the identified risks as best you can.”

Those firms included in the deal are Practice Plus Group, Spire Healthcare, Nuffield Health, Circle Health Group, Ramsay Health Care UK, Healthcare Management Trust, One Healthcare, Horder Healthcare, Aspen Healthcare, and KIMS Hospital.