Private providers ‘should be paid less for less complex work’

By Lilian Anekwe

Independent sector treatment centres should be paid less to reflect the fact they treat less complex patients than NHS providers, according to leading health economists.

A national analysis of all elective procedures carried out in NHS hospitals and ISTCs showed that the NHS has been left to deal with the most complex elective procedures, prompting the researchers to urge the Department of Health to pay private providers less and create a ‘fair reimbursement system'.

Critics of private providers have often accused them of unfairly profiting from ISTC contracts by specialising in a small number of high volume procedures, such as hip replacements or cataract removals, and avoiding taking on more complex – and costly – operations.

A team at the University of York analysed hospital episode statistics for 30 different procedures performed on every NHS and private sector-treated patient in England in 2007/8.

Only 93,000, or 1.3%, of all elective procedures were carried out in ISTCs – fewer than the 250,000 per year originally anticipated by the DH, and far fewer than the 6.7 million carried out in NHS centres.

Researchers then compared the complexity of patients treated in four areas: age, the number of diagnoses recorded per patient, the number of procedures the patient underwent and the deprivation of the patient's residential area.

Across all 30 procedures - which account for more than 80% of ISTC work - patients treated in the private sector had significantly fewer recorded diagnoses, significantly fewer procedures and came from significantly less income-deprived areas.

According to the weighted mean differences between the groups, patients treated in ISTCs had on average 0.59 fewer diagnoses and 0.51 fewer procedures, and were on average 1.56-times less deprived than NHS-treated patients.

Under new contractual arrangements ISTCs will be paid according to the same Payment by Results tariff as NHS providers for particular types of operations.

But the researchers argued that paying private centres less, to reflect the less complex patients they treat, would be fairer.

Anne Mason, a research fellow at the University of York's centre for health economics, concluded in the August issue of the Journal of the Royal Society of Medicine: ‘In general, the NHS is treating more complex patients than private providers. If complexity drives costs, then a fair reimbursement system would require higher payments for NHS providers.'

A second analysis of coding quality found that 36% of all procedures were not properly coded. Ms Mason said: ‘If treatment centres don't code their work properly, it's impossible to assess what patient care has been delivered and, therefore, to hold private providers to account in their use of NHS funds.'

But Ms Mason defended ISTCs against accusations of creaming off the easiest patients. She told Pulse: ‘This provides evidence that private providers are undertaking less complex cases. However, it may be entirely appropriate that they do this – they may not have intensive care facilities to deal with complex cases – rather than this being evidence of "cream-skimming".'

JRSM, vol 103, no 8, pp 322-331.