By MJ Coutts
Last week saw the major NHS contractor, NHS Direct, announce their desire to renege on a number of contracts, for the delivery of the governments new non emergency phone number, ‘’111’’. With their contractual geographic scope covering over 34% of the population, and other regions plagued by long waiting times, it appears that the Tory government has committed an enormous faux pas with its rollout.
As reported in the Express on 2 August 2013, over 250,000 extra cases have been referred, by 111, to accident and emergency for ailments such as aches, sweating and insect bites, in the period following the services commencement. The main reasons cited for these farcical referrals lie in the risk of getting a diagnosis wrong, poor training structures and underinvestment.
Having worked within the Medical Malpractice Insurance industry, I understand the dilemma surrounding cost per risk of a mis-diagnosis versus revenue generated. The NHS Litigation Authority (NHS LA, a part of the NHS) provides Medical Malpractice insurance to national health care professionals and companies. This is determined through a relatively fixed formula of percentage of annual revenue, in many cases undercutting the private market for insurance. These contracts require a three-year lock up period, where the NHS LA has sole discretion about changes in annual premiums. As a public body, the NHS LA will cover NHS Direct.
The 111 line occupies a space in the healthcare market of extreme risk, this is due to the ‘’Out of Hours’’, component and potential of providing the wrong diagnosis, for a potentially fatal disease. Some insurance firms in the UK and global Med Mal insurance market refuse to provide this type of insurance because of its extreme risk. Over the past thirty years, the UKs litigation environment has become increasingly difficult to manage and enormously inflated pay- outs have occurred. A report by MPs in April 2013, has shown an increase of 11%, from 2012-2013, to £17.5bn, for clinical negligence claims, and a UK record set for largest individual claim of over £10mn. It is important to note that the reason for these vast figures, equivalent to 11% of the NHSs annual budget, will have been inflated to account for all possible outcomes and, due to the nature of clinical negligence claims, can be spread out over a 10-15 year range.
These enormous figures have the ability to shock, and certainly outline the potential cost of a misdiagnosis by a private provider, with premiums topping £1mn in some cases, a large case has the ability to destroy business confidence. As a result, it is certainly understandable that spurious A&E referrals are occurring.
NHS Direct had racked up £26mn of debt prior to their announcement of a pull out of the 111 line. Their main concerns have centred on a divergence of increased service requirements and reduced remuneration per call (from £20 to £7-£8). The move to a pay per call basis does not reflect the time it takes to actually answer the call, diagnose and suggest remedies. In the aforementioned Express article, examples of teenagers with only 2 weeks worth of training, have come to light. This suggests profit pressures are being prioritised at the detriment to service. Prior to the break up of the 111 services predecessor, run solely by NHS Direct, these problems did not occur. It Is worth noting that despite NHS Directs problems, their competitors (GP commissioning groups, ambulance trusts and private companies) have not yet complained of the same issues.
It is extremely difficult to determine price points for the NHS, the application of market principles to a public good are notoriously difficult economic questions. Andrew Lansbury and Stephen Hunts dogged attempts at reforming the NHS in a Conservative vision, have certainly gained momentum in a quest for greater market participation.
Companies like Circle (which runs the only UK NHS hospital), Virgin and BMI Healthcare, have all benefitted enormously from the governments surge in contract tendering. The largest tender to date will be a £1bn contract for health care services, including end of life care for older people in Cambridgeshire and Peterborough. All of this has occurred through the Health and Social Care Act, which came into force this year, giving commissioners far more clarity surrounding the ground rules for procurement.
As an economist, I understand the value of open markets and how private sector organisations are traditionally seen as far more efficient users of capital. However, it remains to be seen whether or not the public private partnership can truly regain the public’s confidence. As recent demonstrations in incompetence; by Serco’s tagging scandal and G4S’s Olympic security scandal show. A private company entering into a public contract will have to work extremely hard to convince the public of its benefit.
The UK has a unique relationship with the NHS, and the prospect of having to pay for healthcare would be enough to bring down a government, let alone a partisan coalition. Through a recent study, 50% of GPs suggest, that in time, and due to the current NHSs financial problems, primary care services will require patient payment. It is clear that the government will not have an easy ride with their NHS plans.
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