Alex Massie: How hedge funds could cure our NHS

Andy Burnham argues that NHS privatisation is taking an unacceptable gamble with essential services. Picture: PA

Hinchingbrooke Health Care NHS Trust was named the best hospital in England last week. This might be of little interest to non-Cambridgeshire residents save for two facts. First, just three years ago, Hinchingbrooke was considered a “basket case”, not least because it had accumulated £40 million of debt. And second, because Hinchingbrooke is the only NHS hospital in Britain run by a private company.

The Cambridgeshire hospital, which serves a local population of 160,000, triumphed at the CHKS Top Hospitals Awards where, like its competitors, it was evaluated across 12 different indices of patient care and praised for its “outstanding performance”.

It has been a remarkable turnaround. A ten-year contract to run the hospital was awarded to the Circle Partnership two years ago at a time when even the Royal College of Surgeons conceded the hospital was “dysfunctional”. Among a long litany of failure, every target for meeting cancer treatments was missed and patients attending A&E routinely endured waits of more than four hours before being seen by a doctor.

All the usual suspects forecast ruin. Andy Burnham, the shadow health secretary, accused the coalition government of “taking an unacceptable gamble with essential services”. Unison officials complained that Circle was “putting patients at serious risk”. The union claimed that staffing numbers would be cut and patient care jeopardised as Circle sought to first balance Hinchingbrooke’s books and then, in time, make a profit.

Every single one of these gloomy predictions has proved incorrect. The hospital is flourishing. Savings have been made and Hinchingbrooke will break even this year. More importantly, patient care has also improved, not least because the hospital is being run more efficiently.

As a spokesman put it: “The biggest chunk of the savings was from improving quality. Bad quality care exposes you to lots more litigation for mistakes. Patients also stay longer than necessary or have to come back for further treatment.”

Cumbersome NHS bureaucracy meant it could cost £5,000 to replace a dishwasher; Hinchingbrooke bought one second hand for £99.

If Hinchingbrooke has become a better place to be treated, it has also become a better place to work. The two facts are not, surely, unconnected. Eleven of the 15 members of the hospital board are clinicians. Hinchingbrooke has become a model hospital in which clinical staff make decisions and respond to incentives. If and when the hospital makes a profit, staff will share the rewards.

The Circle Partnership is not quite a John Lewis-style mutual, since 50.1 per cent of the company is owned by hedge funds and other institutional investors, but the day-to-day running of medical operations is controlled by the clinicians, who own the remaining 49.9 per cent.

It would, of course, be simplistic to suggest all private involvement in the health service is, or must be, good. Private firms can be run badly too. Almost no-one actually claims private firms operating in the NHS are guaranteed to perform more efficiently than their public counterparts. This should be an argument about pragmatism, not an ideological commitment to private sector involvement in the NHS. Actually, the ideologues are those who reflexively oppose any private sector firm playing any part in the provision of health care – even when it plainly works.

This leaves leftists in the ludicrous position of preferring sub-standard health care that involves no private companies to better and more efficient care that does. This blinkered world view is made still more insufferable by the pious certainty and unearned superiority of its most fervent adherents. For them, it really is simple: public good, private bad and never mind any evidence to the contrary.

Meanwhile in Scotland, health secretary Alex Neil has instructed health boards to reduce still further the already tiny percentage of health spending allocated to private companies. Last year, that amounted to a trifling £28m, but even this modest private involvement proved too much for Mr Neil. He has insisted on approving any significant private sector contracts himself. Another example of how Scotland does things differently, I suppose. In England, the provision of essential public services is slowly being decentralised; in Scotland, the opposite approach is being taken, with yet more power concentrated in the hands of government. What works in practice is less important than what works in theory.

It is a choice between pragmatism and ideology, and the Scottish approach, like Ed Miliband’s, is to choose ideology. Hysterical accusations of betrayal or doom-laden warnings that allowing private firms to provide medical services will somehow “destroy” the NHS do nothing to help patients get the care they need. No-one proposes adopting an American model of healthcare, just as no-one on the reforming side of British politics favours ending the principle that care should be provided free at the point of use.

Patients are more interested, quite sensibly, in results not dogma. After all, private firms routinely run hospitals in France, Germany and any number of other countries with health services ranked more highly by the World Health Organisation than Britain’s.

A braver government than this would trumpet Hinchingbrooke’s transformation and see it as a model for other failing hospitals. It is, after all, close to the platonic ideal of the NHS: a hospital run by doctors and nurses for the benefit of patients, not bureaucrats. The scandal is that this is not more common, and that it is inconceivable in a Scotland still resisting the need for public sector reform.

The NHS, far from being the envy of the world, needs to be saved from itself, and Hinchingbrooke offers one possible way forward for an institution that is not so much too big to fail but too large to succeed.