NHS hospitals looking to increase their private work can run into sticky political and publicity-related situations. So how far can they go, asks Alison Moore

Depending on your point of view, it is either a nice little earner or the NHS's dirty little secret.

Private work done in NHS hospitals brings in around£400m a year, which can be used to support NHS work. For those hospitals that do a lot of private work it is an important source of income which can help support specialist clinical teams.

In the last 10 years Labour has done remarkably little to touch this sector; the only exception being foundation trusts, which have their private income capped. Income has stagnated over the last couple of years - it may even have declined a little in 2006-07 - mainly because the self-pay sector of the private market has been weak.

But as NHS finances tighten some trusts may be looking towards expanding their private work.

NHS Confederation policy director Nigel Edwards feels there is interest in increasing private work but there are many factors limiting development - the foundation trust cap; the weak private market; and reduced prices charged by some private hospitals.

But some trusts have increased their private work. Swindon and Marlborough trust, for example, increased the size of its private wing two years ago and has been keen to market it more widely and further develop services. 'We are a real success story,' says finance director Charlotte Moar. 'We have doubled our turnover in the last two years.'

Addenbrooke's in Cambridge has also expressed an interest in increasing private work, including IVF services.

London's Royal Free Hampstead trust chief executive Andrew Way says the trust is interested in increasing its private tertiary work - the sort of specialist work which draws in patients from overseas - provided it continues to benefit NHS patients. This can be through the extra income the trust gets; contribution to overheads through using and paying for spare space and capacity; and the opportunity for specialists to see a wider range of patients and conditions.

He describes the hospital's private work as 'a business within a business÷ There is an opportunity for England plc and its health service to compete in the international healthcare market.

'We are competing with the US, Italy and Germany. We are actively marketing these services.'

Hidden rules

But are the boundaries of what NHS hospitals are allowed to offer private patients clear? Over the last year, at least two trusts have run into trouble with the Department of Health for promoting private work.

Hammersmith Hospitals trust was forced to withdraw a scheme offering low-risk pregnant women one-to-one care with a midwife. Women and their partners could pay£4,000 for round-the-clock contact with the midwife; women at higher risk of complications were given the same contact, although not with a specified midwife, free of charge.

But the scheme was criticised by the Commons health select committee, which said it 'provides cut-price private care within an NHS hospital. That is unacceptable.' NHS Confederation chief executive Gill Morgan said the scheme made it uncomfortable, and the hospital was told to withdraw it by the Department of Health.

More recently, Northampton General Hospital trust chief executive Andrew Riley wrote to local GPs pointing out the hospital would perform various operations for a fee, if patients did not want to wait until the PCT would pay for it.

Cash-strapped Northampton teaching primary care trust had stopped paying for some minor procedures and had introduced a minimum wait of four-and-a-half months for other routine surgery, pushing it into the next financial year. Mr Riley told a local paper that wards might have to be closed if the work was not forthcoming.

However, the letter was withdrawn under pressure from NHS East Midlands.

So are there hidden rules here? Cynics would say the main one is to do whatever private work you like - but do not get it into the papers and do not link it to financial problems in the NHS. If the hospital had a well-established private practice and less obvious marketing, it would probably had got away with it.

There do seem to be grey areas but legal advice - and an eye to how it would play with the DoH - can probably overcome this, says one commentator.

Certainly, quicker treatment is on offer, even if hospitals are coy about putting it that directly: websites tend to refer to 'the convenience of choosing the timing of your treatment' and 'prompt access' rather than 'pay to jump the queue'. But, as Mr Way points out, queue-jumping in this way is permitted so his trust will provide it, as long as it does not compromise the care of NHS patients..

But what about services that the NHS provides but where there are long waiting lists (and maybe time affects prognosis)? One example of this would be IVF, where some NHS units accept self-funded patients while they wait for NHS funding to become available.

What hospitals can offer without much criticism is areas that the NHS has withdrawn from. The health select committee also looked at a dermatology clinic in Harrogate, which offered procedures which the NHS in the area would not fund. It escaped without much criticism.

But some years ago a number of hospitals were forced to stop charging for some antenatal classes because they were viewed to be normal NHS provision.

Private hospitals have been buoyed by the explosion in cosmetic surgery over the last decade, points out Philip Blackburn, senior economist at healthcare market experts Laing and Buisson. Many NHS hospitals may not have the expertise or desire to go into this area, but for those that do there is probably money to be made.

The private arm of Oxford Radcliffe Hospitals trust even offers NHS staff 10 per cent off cosmetic surgery. As they would not be able to get their Botox or boob jobs on the NHS, the conflicts of interests would seem to be less.

Another area would be the enhanced services the NHS is never going to offer. For example, at least one hospital will provide a DVD of your unborn child, at a cost of£200. The scan to produce this is carried out by fetal medicine consultants in the early evening. You can also have your unborn child's sex determined and have additional scans.

Care without prejudice

But if the NHS does not believe these are a medical priority - or part of its core business - should it put time and effort into providing them to paying patients, even if doctors are doing the work in their own time?

Hospitals that do private work say the profit is used to support NHS work. But it is not just about profits being used to improve NHS patient care. Private work has to be done in a way which does not compromise care for NHS patients. The DoH guidance is quite clear that services for private patients 'should not prejudice the interests of NHS patients'.

And this raises issues of how it is carried out. Many trusts will put on separate operating lists for private patients, although in some cases they will be added on to an NHS list - or, allegedly, even put at the start of a list (which makes it less likely their operation will be cancelled).

Some hospitals try to provide dedicated theatres, beds and staff so there is no obvious conflict with NHS demands. But that is not always possible or appropriate for some procedures and some patients will end up on NHS wards or in an NHS intensive care unit. Does this potentially conflict with providing the best possible care to NHS patients?

It is a grey area - but then the NHS's involvement in private work is always going to be difficult for those who think in black and white.

Income cap

One of the concessions to outraged Labour backbenchers when foundation trusts were set up was over private work.

Foundation trusts are capped at the percentage of income earned from private work in the year ending March 2003: this was to prevent them developing into private hospitals which do a bit of NHS work on the side. But since then the NHS has changed dramatically, and in some cases trusts are seeing falling demand for services and excess space. The percentage of income which they get from private practice may also have changed since that time.

Some trusts have been exploring ways of getting round the cap. Ways which have been looked at include setting up a third-party organisation to do the work, which would then channel profits back into the trust; and 'outsourcing' private practice and charging an inflated amount for the space, operating theatres and other facilities used for this work.

Both of these methods have problems. The third-party organisation would need to be entirely separate from the main trust. If the trust appeared to control it, then there is a risk it would have to be consolidated into the trust's accounts. The 'rent' model could incur VAT.

Jeremy Roper, a partner at commercial law firm Beachcroft, says there is always the danger that Monitor will see their actions as being against the spirit of the 2003 Act which established them. 'You could not have any confidence before you started down this road that Monitor would say it was okay,' he says. 'That is why there has been relatively little movement by trusts so far.'

Monitor responds: 'The cap is legally binding and we would consider it a serious breach of a foundation trust's terms of authorisation if they attempted to circumvent it.'

Foundation Trust Network director Sue Slipman says the issue of the cap has been raised with government but there is no sign of a change to current regulations. The cap could prevent some foundations developing in the entrepreneurial way that was intended, she says..

In extreme cases the cap is even affecting trusts' willingness to press ahead with foundation applications. Great Ormond Street Hospital trust has recently delayed its application, in part because of this.

The trust has built a new wing with facilities for both NHS and private patients over the last few years, which has added to its costs. It planned to meet some of the increased costs by more private patient work, most of which is for international patients from countries which cannot provide the same care themselves.

The trust currently gets just over 10 per cent of its income from private work and would like to increase this to 12-13 per cent. But it faces a cap at 9.4 per cent once it becomes a foundation.

The trust is looking at establishing a community interest company which would carry out its private work and then channel profits back into the NHS side. But this would need to be legally separate from the trust.

'We have to find a way through but it does not seem too clear at the moment how this would work,' says Great Ormond Street international and private patient service manager Sven Bunn. 'We are committed to becoming a foundation trust at some stage but the private patient income cap is a significant problem for us.'