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Hill House, Great Bourton, BANBURY Oxon. OX17 1QH, www.nhsca.org
Tel. and Fax: 01295 750407
e-mail: drjcdavis at hotmail dot com

August 15, 2007

Dr. Brian Day, MD
President-elect, Canadian Medical Association
1867 Alta Vista Drive
Ottawa, Ontario
K1G 3Y6

Dear Dr. Day and colleagues:

We write on behalf of a group of British doctors committed to a strong and sustainable National Health Service. As such we support a publicly-funded and publicly-delivered health care system that fosters collaboration rather than a market-based model that demands competition.

We represent practising physicians in all specialities. As such we are only too familiar with health system privatization and would like to share our experiences with you. Two years ago we wrote to Canadian Medical Association then-president-elect Dr. Ruth Collins-Nakai about the dangers of private sector involvement in health care. Our hope was that our colleagues in Canada could learn from our country’s mistakes and reject market-style policies leading to privatisation.

However, we hear that the current leadership of the CMA is advocating more, not less, private sector involvement. Those in support of privatisation often cite the ‘English Experiment’ as proof that the private sector can “save” public health care. They point to significant reductions in waitlists since the reforms were established. However, that is hardly surprising given that health spending has more that doubled since 1997. The reality is that money has been lavished on politically sensitive wait-lists for elective surgery through expensive and unsustainable deals with the private sector. This has been to the detriment of many patients with more long term needs. And shortened waitlists are but one part of the health care picture.

A wider perspective reveals a more problematic portrait. Your counterpart in the UK – the British Medical Association – recently voted at its annual meeting to oppose payment-by-results because it has not worked out as planned. The BMA has repeatedly voiced its opposition to the competitive model and two years ago passed a unanimous resolution that “more emphasis should be placed on collaboration as opposed to competition.” Now, some politicians are beginning to lose their appetite for increased privatization. Scotland and Wales recently examined the evidence and decided to move further away from market based reforms. Indeed Scotland has already abolished the artificial separation between purchaser and provider, which is the Trojan horse allowing in privatisation in its various forms. And, just last month, in a clear break with the past, Britain’s new Health Secretary Alan Johnson, announced that he would halt expansion of NHS contracts with the private sector. The reality is that since we last wrote, health care turmoil in the UK has escalated with private sector involvement causing much of the chaos we predicted.

Our troubles stem from three major UK reforms – payment by results (PbR), the increasing use of the private sector to deliver NHS care and the so-called “patient choice” agenda.

Payment by results (PbR), or what you may call patient-focussed or activity-based funding, is a misnomer since payment is not by results but by volume. It shifted NHS hospitals from a globally-funded system in which they received a guaranteed level of funding to a ‘results-based’ model where funding is provided based on volume and type of service provided. This shift – begun three years ago – has resulted in so many perverse incentives and unintended consequences that its future is now in doubt. One downside particularly relevant to you is the fact that PbR may lead to unnecessary admissions. Although emergency visits have only increased by three per cent in the UK, admissions from emergency have gone up by 18 per cent in those hospitals funded by PbR.

A senior Labour politician recently stated that there is now a move against PbR because it counters efforts to reduce health inequalities between rich and poor. By treating health care as a commodity, PbR creates profitable and unprofitable patients and services. Naturally, the private sector, whose first duty is toward its shareholders, selects fit patients for high volume simple procedures, leaving the medically complex and expensive care to the NHS. The result is overdiagnosis and overtreatment of some patients and neglect and undertreatment of others. Particularly vulnerable are people who have chronic care needs or physical and/or learning disabilities. Right now children’s hospitals and orthopaedic services in the UK are under threat of closure as the complex work they do fails to turn a profit.

On the efficiency front, PbR has, ironically, resulted in less efficiency as greatly increased administrative costs add up for coding, billing, accounting, advertising, and combating fraud. A 2006 study published in Health Policy comparing transaction costs before and after PbR found that while costs per procedure went down, overall costs went up due to the higher costs for price negotiation, data collection, monitoring and enforcement.

We have also seen the increasing use of private companies to deliver NHS care (‘plurality’). This initiative was initially introduced in order to support the NHS where it lacked capacity. However it rapidly moved to using the private sector to compete with local NHS facilities, diverting patients and thus income away from the public service. Private care is delivered in “independent sector treatment centres” (ISTCs) which are usually owned and staffed by foreign commercial concerns, and which use contracted-out support staff.

ISTCs typically undertake limited surgical procedures – mainly hip replacements and cataracts. They do not have intensive care or high dependency units, so patients who get into trouble end up in an NHS facility. Also, ISTCs do only limited follow up and no teaching or training. At the same time, the NHS does not receive any extra for the teaching and training element of its work, being told that it was ‘too complicated’ to factor it into the overall budget. This unequal treatment creates a very uneven playing field. Making the field bumpier yet is an arrangement whereby private clinics or ISTCs receive guaranteed funding no matter how many patients they serve while NHS facilities operate under the ‘payment by results’ model. In other words, while NHS hospitals must compete for patients to ensure an adequate revenue stream, private clinics are assured stable funding until at least 2008.

It has become increasingly clear that ISTCs provide poor value for the money spent. This was proven recently when £8 million went to one ISTC over three years for work not done.

More serious, are concerns about patient safety at ISTCs. In a 2006 House of Commons Health Committee report on ISTCs both the Royal College of Surgeons and the BMA voiced concerns about the quality of care in ISTCs. And in a 2006 survey by the BMA of clinical directors in the NHS working in orthopaedics, ophthalmology and anesthetics, two thirds reported that patients had returned to NHS for after-care with higher readmission rates from ISTCs than from NHS-run clinics. In fact there is now talk of a class action suit against one ISTC over failed orthopaedic prostheses.

When health system reforms began, government justified the creation of private clinics as a way of promoting patient choice. Yet here is another area where we have seen serious shortcomings. At the moment patient choice in the UK refers to patients being offered five different places to have elective treatment, one of which must be a private provider. This diversion of money to private clinics is destabilising local public services. If that destabilization leads to the closure of local public services, then patients will have lost the choice that is really important to them – good comprehensive services located close to where they live.

In addition, a study commissioned by the UK Department of Health found that people did not want to select a hospital while they were seriously ill, preferring that such decision be made by a trusted family doctor. What’s more the public has indicated that it has no desire to ‘shop around’ for a hospital but values, above all, a good local hospital. It is this system of hospitals that is now in jeopardy.

Finally, most new NHS facilities have been built under PFI (known to you as Public Private Partnerships or P3s). PFI saddles hospitals with large long term debts at a time when their income is becoming more uncertain because of PbR. Much of the financial difficulty they experience is because they must pay their PFI debts out of their PbR profits – if they have any. One hospital had to borrow the first payment of £54 million it owed the private contractor involved in the PFI deal.

In closing, we must conclude that neither payment by results, the increased use of the private sector nor the ‘patient choice’ agenda have proved their worth. On the contrary, they have resulted in a destabilized and damaged public service. The government has sought to introduce a set of policies for which there is no evidence, policies which are incoherent and contradictory. These policies have fragmented health care, discouraged collaboration between healthcare professionals, and wasted money. This is why patients, the public and healthcare workers are seriously worried. From our UK perspective we have tried these policies and they have proved a mistake. We urge you to learn from our experience and to re-consider.

We welcome any opportunity to have a meaningful dialogue and exchange of ideas about these vital issues.

Yours sincerely,

(Original signed by)

DR. JACKY DAVIS, Consultant Radiologist, NHSCA Co-Chair, Founding member, Keep Our NHS Public

DR. PETER FISHER, Consultant Physician, NHSCA President