latest health care news

30.08.17

Private firms on track to profit another £1bn from NHS hospitals

Private companies which run Private Finance Initiative (PFI) contracts to build and run NHS hospitals have made a staggering £831m in pre-tax profits over the past six years, and are poised to collect an eye-watering £1bn more in the next five years.

A report by the Centre for Health and the Public Interest (CHPI), which analysed accounting data from the Treasury and Companies House for the period from 2010 to 2015, found that if the NHS had not been dishing out profits on PFI schemes, hospital deficits would have been cut by a quarter over the past six-year period.

Instead, private companies have raked in large sums of money which has thereby not been available for patient care – and this trend is set to continue.

Over the next five years, around £973m in pre-tax profits will go to PFI companies, which is equivalent to almost a quarter (22%) of the extra money (£4.5bn) the government has promised to invest into the health service over the same period in real terms.

The scathing CHPI report also pinpointed cases of PFI schemes that are generating particularly high pre-tax profits for their operators.

Current figures indicate that around 8% of all the money which the NHS has paid to these companies has been in the form of pre-tax profits, but in some instances, this can be much greater. In 13 contracts, in fact, this figure ballooned to over 20%.

The company that holds the contract for University College Hospital London, for example, has profited almost £200m over the past 11 years out of £527m paid to the company by the NHS – or 31% of all the money paid to the firm by the trust. To put it into perspective, the hospital itself is valued at £292m.

The think tank also pointed to a monopoly within the system, with just eight companies owning or having equity stakes in 92% of all the companies holding PFI contracts with the health service. As a result, there is very little competition between those bidding to build and run hospitals under PFI schemes.

“This money was designated by Parliament to pay for patient care, not to pay dividends to a small number of investors,” CHPI co-chair Colin Leys told national press. “Given the extreme austerity in the NHS where patients are being denied treatment and waiting times for operations are rising, the government needs to take action to stop this leakage of taxpayer funds out of the NHS.”

To curtail excess profits, the centre recommended using public sector loans to buy-out PFI contracts, and taxing PFI companies to recoup some of the profits which have already been made.

The government should also exercise powers to cap the amount of profit that can be made by a private company which has an exclusive public sector deal with the NHS.

Profits made from sales of equity stakes should be shared, but the sales themselves should also have greater transparency to prevent the “unnoticed consolidation” of market power by a select handful of investors.

Existing contracts should also be renegotiated with private companies in order to cut down on the amount the NHS has to pay out.

“Finally, as we have noted in a previous report, the government should reconsider its use of the PFI and consider using public borrowing to fund new capital investment in hospitals,” the report concluded.

“This is likely to be much cheaper and will mean that less money for patient care will be wasted in payments to shareholders, which is particularly important when the NHS is going through the most austere decade in its history.”

(Top image c. georgeclerk)

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editor's comment

25/09/2017A hotbed of innovation

This edition of NHE comes hot on the heels of this year’s NHS Expo which, once again, proved to be a huge success at Manchester Central. A number of announcements were made during the event, with the health secretary naming the second wave of NHS digital pioneers, or ‘fast followers’, which follow the initial global digital exemplars who were revealed at the same show 12 months earlier.  Jeremy Hunt also stated that by the end of 2018 – the 70th birthday... read more >