independent sector regulation:

Regulation has been one of the boom industries of the past 15 years. Every time Margaret Thatcher sold off a nationalised industry, a new regulatory body was born. And the Labour government has continued the trend. The Commission for Health Improvement, charged with inspecting NHS services, has been launched and its chair and chief executive appointed.

Legislation to set up regional commissions for care standards to inspect nursing and residential care homes, hitherto the responsibility of health and local authorities respectively, has been passed. And the government - backed by a recent report of the Commons health select committee - has published a consultative document putting forward its plans for regulating private and voluntary healthcare.1,2

This proposes the creation of yet another new body, responsible for this third leg, as it were, of the government's regulatory tripod for health and social care.

Is this one leg too many? Has the time come to apply birth control to the birth of regulatory bodies? There are a number of reasons for asking these questions. Regulation and inspection require skilled staff. One common complaint - across regulatory systems - is the variability in the quality of those carrying out inspections.3,4.

And regulation is expensive.5 Apart from the running costs of the regulatory body itself, there are the compliance costs of meeting standards.

In addition, inspection teams are usually composed of precisely those professionals who would otherwise be delivering services to the public: if, say, a consultant is going round inspecting on behalf of one of the new regulatory bodies, he or she will not be available to treat patients. Hence the case for challenging each new proposal.

The strongest argument for creating a new regulatory body for the independent sector of healthcare is that the government's plans for setting up commissions for care standards have produced a regulatory vacuum. The regulation of independent healthcare is, historically, a by-product of the regulation of nursing homes. Legislation for monitoring private and voluntary healthcare - notably the 1984 Registered Homes Act - is built on the 1927 Nursing Homes Registration Act.

Health authorities registered and inspected independent hospitals as part of their wider responsibilities for nursing homes. With responsibility for nursing homes being transferred to the new commissions for care standards, the independent healthcare sector has in effect been left a regulatory orphan.

Moreover, the change has given new visibility to acknowledged weaknesses in the system, weaknesses on which those giving evidence to the health select committee - the Department of Health, the NHS Confederation, and the Independent Healthcare Association - were broadly agreed. These weaknesses are that few HAs have enough independent hospitals in their area to justify building up a specialised inspection staff; the interpretation of regulations varies widely; and standards devised primarily for nursing homes may not be appropriate for hospitals delivering acute care.

Also, the select committee argued that the existing regulatory system leaves scope for the exploitation of the public by clinics offering cosmetic surgery and a variety of other treatments.

But before examining the proposals for filling this regulatory vacuum, there is a question that must be addressed. Is there really any need for public regulation? In the case of nursing and residential care homes, the case for regulation rests on the vulnerability of the clients: the fact that many are frail or confused. Hence the general acceptance of the need to regulate. In the case of CHI, the case for regulation rests on the fact that the government has a responsibility for ensuring that those locked into the NHS receive quality care. In the case of acute care in the independent sector, these arguments have much less force. No one is compelled to use the independent sector: using it involves an act of free choice.

Far from being exceptionally vulnerable, private patients tend to have more resources and a greater capacity to look after their own interests than the rest of the population.

Add to this the fact that the General Medical Council and other professional bodies are now playing a more active role in ensuring the continued competence of their members, including those providing services in the independent sector, and the case for public regulation seems to be weak.

Why, nevertheless, does there appear to be a general consensus that public regulation is required? In part, it rests on the general proposition that purchasing healthcare is different from buying other goods or services insofar as there is an asymmetry of knowledge between professional providers and patients and that the consequences of making a wrong choice may be irretrievable and damaging. It also rests on the heterogeneity of the independent sector. Acute care - mainly but not exclusively elective surgery - accounts for the bulk of the sector: some£2.35bn is spent on acute care and 850,000 operations a year are carried out in the independent sector.

The independent sector does also cater for more vulnerable populations: it now provides about 20 per cent of all acute psychiatric care. These facilities are inspected by the Mental Health Act Commission, but the focus of its visits is on patients detained under the 1983 Mental Health Act - although its reports also illuminate standards more generally.

Finally, there is the small but growing number of clinics - which so concerned the select committee - offering to make their clients slimmer, more attractive or more sexually potent. Compared with the mainstream independent hospitals, this latter group is marginal and the evidence about its activities is fragmentary at best. But, to judge from the committee's report, it generates a disproportionate amount of political concern.

If some form of regulation is thought to be required, a great many issues remain to be resolved. Who should do it? How far should the scope of regulation go? And what should be the regulatory style?

One parsimonious option, in line with a policy of controlling the proliferation of regulatory bodies, would be to make one of the two new commissions already set up responsible for the independent healthcare sector. The independent sector itself strongly argues for regulation by CHI and is prepared to pay the costs involved. And given that it is NHS consultants who do most of the work in the independent sector - a key point to which we return below - there is a certain logic to this approach: the same standards should surely be applied to the work of consultants wherever it happens to be carried out.

But this option has been rejected by the government - backed by the select committee - on the grounds that CHI is not a regulatory body in the full sense: it does not register or license hospitals, and its sanctions operate through the managerial hierarchy of the NHS. Equally important, CHI's main task - the inspection of NHS facilities - is daunting enough without taking on any additional responsibilities.

Conversely, the argument against handing over responsibility to the regional commissions for care standards is that regulating nursing and residential care homes requires very different skills and definitions of standards from those required in the case of acute healthcare - although there is an overlap in the case of psychiatric provision. Further, the new commissions will have a sufficiently daunting task in reconciling two different regulatory styles and traditions - those of nurses and social workers - without taking on any new responsibilities.

So the creation of a third regulatory commission appears to be as inevitable as it is regrettable. The select committee suggested that its structure should mirror that of the commissions for care standards - with regional offices and shared support facilities.

This compromise option offers the prospect of an eventual merger, as well as possible savings in administrative costs. But its appeal depends crucially on decisions about the scope of regulation. The independent healthcare sector, as defined under existing regulations, is small: there are only 230 independent hospital clinics and a further 64 independent psychiatric hospitals.

In contrast, there are roughly 20,000 nursing and residential care homes. So the regulatory task is, compared with that of the other two commissions, minuscule: setting up regional offices would be both redundant and incompatible with Labour's emphasis on cutting management costs.

The picture, and balance of arguments, would change if the scope of regulation were to be extended. The government's consultation document leaves this an open question: it invites views on whether the scope of regulation should be extended to cover premises used either 'wholly or mainly by doctors for consultation or by dentists for treatment' or 'by members of the professions supplementary to medicine, by those practising complementary medicine or for cosmetic treatments outside the current regulations'. The answer here should, surely, be an emphatic no.

If all such premises had to be registered and inspected, it would require a large new bureaucracy, with inspectors patrolling Harley Street and searching through the Yellow Pages to check on every osteopath or physiotherapist.

Fortunately, there are other policy options for consumer protection: strengthening professional self-regulation, tightening up the protection of professional titles and perhaps the use of the Trades Description Act to catch operators who make excessive claims for their skills. So far, then, the argument would suggest a mini-commission for the independent sector. But the process of shrinking it can be carried one step further. Almost two-thirds of the beds in the independent acute sector are in hospitals owned by the four major groups, Nuffield and BUPA among them (see box).

Regulation in these cases could therefore take the form of making sure that the groups have the machinery and policies required to maintain quality, on the model of clinical governance in the NHS and using the same standards. Of course, this also means checking that the machinery is working and that policies are being implemented in individual hospitals.

But it does not necessarily mean perpetuating the existing requirement for a minimum of two inspections a year, as proposed by the government's consultative document. A more flexible policy, on the model of the Housing Corporation's regulatory system, may be more appropriate: fewer inspections if all is going well, more inspections if alarm bells start ringing, so concentrating resources on high risks.4

In all this, there is one crucial element. No regulatory system is better than the information system on which it is based. If the outgoing system of regulating independent hospitals and nursing homes is feeble, it is largely because it does not generate any information about the activities of those being regulated: a point overlooked in the standard criticisms of the system.

The regulators do not even know how many operations or other interventions are carried out, by whom or on whom. This data is generated by an occasional national survey commissioned from academics.

Far less do the regulators know the rates of re-admissions or the number of patients transferred to NHS hospitals. Nor can they compare the activities of individual consultants in private practice and in the NHS, to establish whether they are applying the same standards of appropriateness and care.

The last point is crucial. Any new regulatory machinery should start from the realisation that the independent sector - despite health secretary Frank Dobson's tendency to treat it as an irrelevant irritation - is part of the wider healthcare delivery system in the UK.

The same doctors - NHS consultants - operate in both the private and public arenas.

If we are to move towards ensuring quality by regularly and systematically assessing the performance of doctors - precisely the thrust of current policies - then it is a nonsense to pretend the activities in the private sector are irrelevant.

On the one hand, the independent sector should be judged by the same standards as the NHS. On the other, the NHS should be willing to have its performance compared with that of the independent sector.

Patricia Day is senior research fellow of the centre for the analysis of social policy at Bath University. Rudolf Klein, emeritus professor of social policy, is a senior associate of the King's Fund.

Key points

The government's proposal to set up a new regulatory body for the private and voluntary sectors is regrettable.

The major hospital groups in the private sector could undertake some system of clinical governance.

Whatever form regulation takes, it must be supported by much better information on the private sector, including consultants' activity rates and rates of re-admission and numbers of transfers to NHS hospitals.


1 Commons health select committee. The Regulation of Private and Other Independent Health Care - fifth report, session 1998-99. HMSO HCC 281- 1, 1999.

2 NHS Executive. Regulating Private and Voluntary Healthcare: a consultation document. Department of Health, 1999.

3 Day P, Klein R, Redmayne S. Why Regulate? Regulating residential care for elderly people. Bristol: The Policy Press, 1996.

4 Day P, Henderson D, Klein R. Home Rules: regulation and accountability in social housing. Joseph Rowntree Foundation, 1993.

5 Hood C, Scott, James O, Jones G, Travers T. Regulation Inside Government. Oxford University Press, 1999.