The Labour Government is planning to increase the outsourcing of NHS care to the private sector as a means of bringing down waiting lists. But David Rowland argues that eye care offers a cautionary tale about the hidden costs and short-sightedness of outsourcing health care to the private sector. The results of such a policy can lead to distorted financial incentives, patients in most need of treatment not receiving it, and NHS hospitals losing their expertise for dealing with more complex cases.
The plan to increase the use of the private sector to deliver NHS care remains one of the most controversial aspects of the new Government’s health policy. In the run-up to the election Labour’s new secretary of state for health was adamant that sending NHS patients to the private sector for treatment would be a key tool in bringing down in bringing down waiting times, and that those who opposed it were ideologues.
As is often the case when it comes to the debate about NHS privatisation, arguments from both sides tend to be couched in ideological terms rather than backed by hard evidence. Our two recent studies into the outsourcing of NHS cataract care have attempted to fill this data gap by undertaking a detailed analysis of spending by the NHS on eye care services, a survey of almost 200 ophthalmologists and an assessment of the income and activity of 50 NHS hospital eye care departments. What we found reveals significant public interest concerns which the new government should take notice of before further extending the outsourcing of NHS care to the private sector.
We witnessed evidence of what health economists call “supplier induced” demand or the phenomenon that healthcare was being delivered not because it benefits patients, but because it benefits the companies or individuals providing the care.
Supplier induced demand rather than planned care for the local population
To start with, we witnessed evidence of what health economists call “supplier induced” demand or the phenomenon that healthcare was being delivered not because it benefits patients, but because it benefits the companies or individuals providing the care. Over the past five years, five private companies – often backed by private equity investors – have established an astonishing 101 new cataract clinics across England.
These companies have set up these low cost clinics with the intention of providing cataract surgery which are mostly high volume low complexity operations which the NHS does not have the physical infrastructure to deliver. The funders of NHS services at local level (previously CCGs now ICBs) have not commissioned large volumes of services from these newly established private clinics in order to meet the needs of their local population.
During our research we were told that high street optometrists – the main source of NHS referrals for cataracts – had financial incentives to refer patients for cataract care to particular private sector clinics, rather than to the NHS.
Instead, the amount of cataract surgery which is carried out in a given area is driven by the “demand” of those deemed to be in need of surgery by referring clinicians – now mainly high street optometrist – even if these patients aren’t those most in need of care or those who have been waiting longest. And under this arrangement the local NHS will pay for the numbers of patients referred for cataract treatment even if this is more than they had budgeted for. Because the “gatekeeper” for access to cataract surgery in the NHS is now an optometrist working out of a high street business rather than a GP, building up a positive relationship with them is critical for these new market entrants. This is because they play an important role in determining whether a patient chooses the local NHS or a newly established private clinic.
During our research we were told that high street optometrists – the main source of NHS referrals for cataracts – had financial incentives to refer patients for cataract care to particular private sector clinics, rather than to the NHS, due to guarantees that the patient will be referred back to them for follow up work. The involvement of private companies has led to a large spike in the number of NHS funded cataract surgery taking place, increasing from around 400,000 in 2018/19 to 600,000 in 2022/2023, with all of the increase in NHS funded cataract provision taking place in the private sector. The private sector has now become the dominant provider of this form of care in just five years.
Outsourcing has potentially resulted in the NHS eye care budget being spent on those least in need
This growth has occurred without any consideration about the extent to which cataract surgery should be prioritised ahead of other more serious eye care diseases such as glaucoma and macular degeneration which have the potential to cause irreversible sight loss. In fact, our research shows that the overall proportion of the NHS eye care budget which was been spent on these other types of eye care diseases declined from 73 per cent to 64 per cent over the past five years and that waiting times for some of the most serious eye care diseases at NHS hospitals had increased.
We know from research carried out by the Health Foundation that those being treated for cataracts in the private sector tend to come from healthier, wealthier and whiter communities, potentially confirming the idea that large parts of the NHS eye care budget have once again been skewed in favour of the better-off parts of the population.
Without any detailed analysis of waiting times data, which NHS England has confirmed it hasn’t undertaken, the suspicion – as expressed by the President of the Royal College of Ophthalmologists – is that many of those accessing NHS funded cataract care in the private sector are those with mild forms of the disease rather than those “long waiters” who are more in need. We also know from research carried out by the Health Foundation that those being treated for cataracts in the private sector tend to come from healthier, wealthier and whiter communities, potentially confirming the idea that large parts of the NHS eye care budget have once again been skewed in favour of the better-off parts of the population.
Concerning evidence of “up-coding” in the provision of cataract surgery
We also found possible evidence of another phenomenon well known to health economists studying market based health systems, namely “upcoding” which had initially been identified by the Royal College of Ophthalmologists. Because the business model of most private sector companies delivering NHS cataract care is to focus on high volume, low complexity services, we were surprised to find that the provision of NHS funded complex cataract surgery had increased by 144 per cent over a five-year period, with all of this increase in complex surgery taking place in the private sector.
When NHS England examined this in 2022 they found that the increase in complex cataracts could not be explained by changes in the level of complexity of the patients being seen. Under the NHS tariff system a complex cataract procedure attracted a payment of £400 more than a simple operation.
We have not found any suggestions or evidence of fraud and it is possible that any increase in the number of complex cataracts recorded is to do with how the NHS coding system is used. Had the private sector companies been delivering the same rate of complex cataracts as the NHS (i.e. 13 per cent of all cataract income rather than between 18 per cent and 22 per cent) that this would have reduced the cost to the NHS by some £29 million over two years. Since this issue was identified, NHS England has sought to address this by reducing the payment differences between each of the codes for cataract care.
By offering higher rates of pay for fewer hours worked, private eye care companies have succeeded in luring NHS ophthalmologists to work in the private sector and have also recruited many other clinical staff – nurses, optometrists, scientists – to work in their clinics.
Outsourcing of eye care has led to the “hollowing out” of NHS eye care departments
A further consequence of the outsourcing of cataract care has been the significant negative impact on NHS eye care departments. Because there is only one pool of staff to deliver healthcare in both the NHS and the private sector, it has only been possible for the private sector to increase its output of cataract surgery by making use of those who work in NHS hospitals. By offering higher rates of pay for fewer hours worked, private eye care companies have succeeded in luring NHS ophthalmologists to work in the private sector and have also recruited many other clinical staff – nurses, optometrists, scientists – to work in their clinics.
This loss of staff to the private sector, on top of an estimated 21 per cent drop in cataract activity due to patients being referred to the private sector has left NHS eye care departments with fewer resources to treat more complex patients, including children and those needing emergency care. It has also meant that opportunities for those training to be consultant ophthalmologists have been badly affected. Trainees need to carry out large numbers of routine cataract surgery in order become fully competent and because this work often needs to take place under the supervision of consultants it mostly takes place within NHS hospitals. The NHS estimates that 47,000 cataract surgeries each year need to be set aside for the current number of trainees to gain their skills – yet our data shows that NHS hospitals are now doing around 37,000 fewer cataracts each year than 5 years ago.
Our survey of almost 200 ophthalmologists confirmed what we had found in our data analysis. When asked about the impact of outsourcing 70 per cent said that it had had a negative impact on their NHS eye care departments, 53 per cent said it had led to a negative impact on staffing, 46 per cent said that it impacted their ability to treat more complex patients, and 62 per cent said that it had a negative impact on staff training.
This research goes to confirm that the unplanned, poorly regulated use of the private sector leads to scarce resources being diverted away from NHS hospitals to the detriment of those patients most in need. The continuation of this type of outsourcing has the potential to leave the NHS as a poor service for poor people and to increase waste and inefficiency in the delivery of tax funded healthcare services.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.
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