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Empty promises: the impact of outsourcing on NHS services

Empty promises: the impact of outsourcing on NHS services

Lethbridge, Jane ORCID: 0000-0002-0094-9967 (2012) Empty promises: the impact of outsourcing on NHS services. Technical Report. UNISON, London, UK.

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Executive Summary:
Advocates of outsourcing NHS services to the private sector often make sweeping claims about the benefits of privatisation on the care received by patients. UNISON wanted to move the debate on to a firmer factual basis by examining research and materials produced over the recent period (5-10 years) to evaluate the impact of outsourcing on care. This project was commissioned by UNISON in September 2011 to examine the impact of outsourcing on the delivery of NHS services.

The process of contracting out of NHS services started in 1983 but was effectively limited to catering, cleaning and facilities management until the NHS Plan in 2000. The Private Finance Initiative was introduced in 1992 as a way of providing new investment into public sector infrastructure, without apparently increasing public spending. Since 2000, when the NHS Plan was launched by the New Labour government, contracting out of services has expanded to include clinical services and pathology services. Later White Papers have introduced competition into primary care and community health services. The sequence of changes shows that the contracting out of catering, cleaning and facilities management services was an initial stage in a longer process of contracting out many more NHS services.

This report has interpreted delivery of patient services as covering quality of patient care, outcomes of patient care, innovation in patient care and organisational arrangements that impact on patient care. The studies that have been reviewed used a range of quantitative and qualitative research methodologies, which capture both process and outcomes of patient care.

Cleaning was one of the first services to be contracted out in the NHS in the 1980s. During the decade of the 1990s, there was an increased incidence of hospital acquired infections, such as meticillin-resistant Staphylococcus aureus (MRSA) and C. difficile. These had an impact on the quality of patient care and the costs of treatment in the acute sector. A international study, published in 2002, established links between cleaning and hospital acquired infections (Murphy, 2002). In the last decade there has been an increased awareness among government auditors about the problems of improving cleaning practices in the NHS when specifications of cleaning contracts are difficult to change.

A series of studies show that the impact of the contracting out of cleaning services in the NHS results from the way in which the process of contracting out fragments cleaning activities from the rest of the hospital. When a service is contracted out, each activity, which is included as part of the service, is itemised as a separate task. This move away from a holistic to a fragmented approach creates a lack of continuity between cleaners, clinical staff, managers, patients and visitors and there is no shared sense of responsibility for cleanliness across the hospital. The relationship between cleaning staff and clinical staff is crucial for maintaining high standards of cleanliness in a hospital. There are also problems in drawing up contracts, with not enough attention paid to regular reviews of contracts, whether for in-house or external contractors. This experience has now influenced the devolved regional governments of the UK to abandon the use of compulsory competitive tendering for cleaning services.

Facilities Management:
There has been limited research into the effect of outsourcing facilities management on patient care. Macdonald, Price and Askham (2009), in a study that examined a group of hospitals trusts that had achieved high scores in Patient Environment Audits, looked at whether the contracting out of facilities management contributed to these scores. They found that there was no apparent difference between in-house or external contractor for facilities management. There are several limitations of this study. It did not look at why the majority of trusts had low Patient Environmental Audit scores, which might have highlighted external factors. There was no qualitative research with managers and clinical teams although this was a proposed second phase of the research. However, one conclusion is that there is a lack of evidence to show any positive effects of outsourcing facilities management.

GPs ‘Out of hours’ services
The contracting out of GP ‘out of hours’ service is an example of the contracting out of clinical services. In 2004, as part of a new General Medical Services contract, GPs were allowed to transfer the responsibility for ‘out of hours’ services to Primary Care Trusts (PCTs). For £6,000 per year, GPs could give overall responsibility to PCTs for seeing that providers complied with the Department of Health ‘National Quality Requirements’. 90% of GP practices gave up their responsibility for ‘out of hours’ services to the local Primary Care Trust (PCT) (Select Committee, 2010).

The National Audit Office (2006) found that the actual cost of the service was £9,500 and so the service had been under-costed. Several problems have been identified since 2004 that illustrate the problems of contracting out clinical services. The overall quality of services depends on the commissioning agency having strong monitoring processes and meeting regularly with providers. For providers, the provision of clinical staff has been one of the most problematic areas. For commercial providers, the processes of recruiting and selecting GPs have been inadequate in many cases. Information systems have often been unable to provide enough useful information about how ‘out of hours’ services are actually being delivered and do not allow access to services to be monitored effectively. There is little evidence that ‘out of hours’ services demonstrate equity of access. There is growing evidence to show that outsourcing of ‘out of hours’ services led to increased costs and poorer quality of care.

Independent Sector Treatment Centres (ISTCs)
The NHS Plan in 2000 increased investment in the NHS but part of the increased investment was to contract the private sector to provide clinical services. This included the creation of a network of Treatment Centres, described as a ‘network of fast-track surgery units’, which would reduce waiting lists. Some of the new treatment centres were to be run by the NHS and some by the private sector, which were called Independent Sector Treatment Centres (ISTCs). £700 million per year was to be invested into these new centres.

The results show that ISTCs did not have a significant impact on waiting lists. There is growing evidence to show that they do not provide value for money. Several ISTC contracts have been underused, with payments made to private providers for work which was not undertaken (Player & Leys, 2008) . It is also questionable whether they have been the source of innovation because of problems with staffing and a lack of integration into the NHS. One of the most serious criticisms is the problem of collecting data for ISTC performance so that it can be compared to NHS performance (Healthcare Commission, 2007). From the experience of ISTCs, the outsourcing of clinical services has been shown to be ineffective. It has also highlighted some more fundamental problems about data collection by private providers. As Player and Leys (2008) argue, the real significance of the ISTCs lies in seeing it as ‘a crucial step in the replacement of the NHS as an integrated public service by a healthcare market, in which private providers will play an steadily increasing role’ (Player & Leys, 2008:71).

Clinical services
The introduction of ‘Payment by Results’ and ‘Patient choice’ have contributed to the increased contracting out of NHS services. ‘Patient choice’ allows a patient to choose an NHS or independent sector provider for elective surgery. The creation of a set of tariffs, ‘Payment by Results’, for different treatments, has contributed to an increased degree of competition in the NHS, with growing involvement of the private sector. There have been several studies which have examined the relationship between increased competition and patient outcomes.

There has been extensive criticism of many of these studies because of their small samples and partial analysis. Even when conclusions are unclear, more competition is recommended, rather than questioning whether competition is necessary. However, the influence of these studies on health policy development in the NHS has been extensive, showing that health policy on competition and outsourcing draws from a very limited evidence base. The recent research on equity and choice (Zigante, 2011) shows that ‘choice’ is not beneficial for people on low incomes with lower levels of education. This has important implications for equity in the NHS.

Shared Services & IT
As well as outsourcing of catering, cleaning, facilities management and clinical services, there has been pressure to market test and outsource financial, administrative, human resources and IT services, called ‘shared services’. In 2004, the Gershon Review identified the potential for shared services to generate savings across government and the public sector. In response to this recommendation, the NHS set up a formal joint venture with Xansa in 2005 (now called Steria), building on the experience of the pilot initiative in 2001. NHS Shared Business Services main functions, under the original joint venture agreement included procurement accounting and finance services. They have also recently been successful in obtaining contracts for other services, such as family health services.

A National Audit Office report (2007) found that the implementation had involved a large and complex system, extensive cultural changes and that customer expectations rose over time. Initially there was a slow rate of take-up by NHS organisations and a lack of acceptance by users. Gradually, as other benefits became clearer, customer expectations started to increase, although it remains more complex than outsourcing a single service. Additional benefits included better management information, paperless transaction processing, faster transaction processes and savings on procurement costs. However, there have been reports of recent problems for GPs in the use of Shared Services, leading to delayed payments, patients being taken off GPs lists and delays in transferring patient notes (McNicoll, 2011). This indicates that there are still problems facing the NHS Shared Business Services project.

The most controversial failure of outsourcing technical expertise to the private sector was the introduction of a new IT system to the NHS. Started in 2002, the aim of the project ‘Introduction of a new IT system to the NHS’ was to set up the NHS Care Records Service so that health professionals could access relevant parts of patient records as well as X-rays, prescriptions and electronic booking (NAO, 2006). By 2006, several milestones had not been met and the cost of the project has also increased from an initial £12.5 billion to £20 billion (NAO, 2006). In 2008, the Public Accounts Committee found that the new system did not include any clinical functions so that the needs of clinical staff needs had not been met (PAC,2009). More widely, there was a lack of commitment by NHS staff. In October 2011, the Department of Health abandoned the project (Wright ,2011). The consistent criticism of the project was the lack of consultation and involvement of NHS staff in the design of the systems. The project was very costly and overran its budget. The expertise, which IT providers were supposed to bring to the project, was not shared in an effective way with NHS staff.

Voluntary/ third sector contracting
The extent to which services have been contracted by the NHS to the voluntary/ third sector is limited. There is a shortage of studies to assess the impact on patients. Much research is concerned with the impact of contracting on the voluntary sector itself and whether the sector provides value for money. Allen et al (2011) found that the third sector did not necessarily provide more innovative or effective care than the NHS. In some cases this was due to lack of resources. Third sector organisations are often more effective at working with local communities and hard to reach groups, although ways of harnessing this expertise in partnership with the NHS are still being developed. The contracting of NHS services to voluntary/ third sector organisations is still limited and the implications for NHS staff are unclear. Some organisations have strengths in relation to working with local communities or hard to reach groups but not all services provided are more effective or innovative.

In the last two years, the transfer of funding and commissioning of social care for adults from the NHS to local authorities has led to the contracting out of mental health services and services for people with learning disabilities by local authorities to voluntary and for-profit providers. These services were originally part of the NHS and so NHS staff have moved from the NHS and are now employed by voluntary or for-profit providers on TUPE conditions. This is likely to expand as community health services and public health functions are also moved to local authorities.

This project has identified a range of studies that have examined some aspects of outsourcing in the NHS and the effect on patient care. It is noticeable that much of the evidence demonstrates either the negative aspects of introducing competition into the provision of health care services or inconclusive results (Appendix A). A lack of data makes it difficult to assess the impact of contracted out services on accessibility of services and health outcomes. Overall, there is a lack of evidence to show that outsourcing leads to improved quality of patient care. The experience of outsourcing cleaning services shows that there was a negative impact on patient care. Outsourcing of clinical services through ISTCs and GPs ‘out of hours’ services shows some negative effects on patient care, poor value for money as well as evidence of inadequate monitoring and evaluation of the services. Although there is some evidence of the benefits of shared services, the experience of the NHS IT project was a clear failure of outsourcing.

The introduction of outsourcing to the NHS has identified the need for data collected to measure the quality of patient care after the contracting process. At the moment, a combination of academic research, research from regulatory agencies and trade union research provide the most effective way of gathering evidence of the impact of outsourcing into the quality of patient care. Many of these studies do not show any demonstrable benefits from outsourcing. Other academic studies have assessed the impact of competition on the NHS in a limited way, either using one service, or one health outcome. The conclusions are then applied to the whole of the NHS, as a way of justifying more competition. This research needs to be challenged because it is being used to justify continued competition and marketisation policies in the NHS.

In the light of the 2011 Health and Social Care Bill, currently going through Parliament, the findings of this review are significant. Outsourcing often has a negative effect on the quality of patient care. It affects how NHS workers work together to deliver care. Effective commissioning, regular reviews of contract specifications and monitoring of contracts require skills and experience. The experience of how ‘out of hours’ services were contracted out and the effect on patient care illustrates the problems when commissioners and providers are unaware of how to fulfil their responsibilities. In a re-organised NHS, where much commissioning experience, developed in Primary Care Trusts, will be lost, the likelihood of the new contracting systems affecting the quality of patient care will be even more likely.

Item Type: Monograph (Technical Report)
Uncontrolled Keywords: outsourcing, NHS, health services, privatisation
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Faculty / School / Research Centre / Research Group: Faculty of Business > Centre for Work and Employment Research (CREW) > Public Services International Research Unit (PSIRU)
Related URLs:
Last Modified: 17 May 2019 14:00

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