How has the role of the private sector changed in UK health care?

The NHS is seen by many as a defining example of a publicly run health service, and polling shows there is still strong support for its founding principles, not least in terms of funding. But with the health service experiencing difficulties, this long read from Mark Dayan, Sally Gainsbury and Stuti Bagri explores how the role of the private sector has changed in UK health care.

Long read

Published: 16/05/2024

The UK has had a health system dominated by state funding and state provision for decades. It is seen globally as a defining example of a publicly run health service, and polling shows that this is a principle to which the people of the UK are deeply committed, at least in terms of funding.

But with serious problems with access to care, workforce relations and financial stability in the state-run health services, many have perceived, feared or argued for a greater role for the private sector. What has actually been happening here, in the long and the short term?

Private care within the NHS

In England, the amount of the NHS budget spent on hospitals, outpatients and mental health care in the private sector was first disaggregated from council and charity spending in 2013/14. Over the next two years to 2015/16, it rose significantly. This was associated with the shift of some community services to the private sector, and a growth in commissioning of mental health services here.

Until recently, private spending then remained largely consistent as a proportion of the total health budget. It is important to note, though, that the absolute amount has grown consistently. Keeping up with the slowly rising health budget means billions more are spent on private providers.

General practice, dentistry, community pharmacy and optometry – the areas that have been in private hands since the founding of the NHS – have seen little or no overall growth in spending.

General practice has remained stable as a proportion. Spending for dentistry and pharmacies has barely risen at all, and now accounts for a considerably smaller proportion of spending – with dentistry having seen a gradual shrinkage in the proportion of people who are genuinely covered by the NHS in practice, and a relentless drift to the private sector.

Since the pandemic, there has been a substantial growth in the amount spent by English NHS trusts purchasing private care. This will usually be to meet their obligations to provide planned care for patients referred to them, from diagnostics through to surgery. Urgent care remains almost entirely in the public sector. The trend is visible in the chart below, and contributed to a recovery of NHS spending in the private sector after the proportion dipped during the pandemic.

In real terms, trusts spent £1.66 billion on care contracted out in 2019/20, a year mostly before the pandemic struck in earnest, but this had risen to £3.12 billion by 2022/23. This likely reflects in part a drive for mental health trusts to take on the purchasing of private care, but above all the strong pressure to address hospital waiting lists as NHS trusts struggled to provide as much care as they managed before the pandemic. Spend by commissioners on the private sector rose by only 6%.

An updated analysis of activity trends for planned care in the private sector shows what this means in terms of the volume of activity in England, where we have aligned NHS and private sector data. The vast majority of planned hospital admissions in England – around 85% – are NHS patients in NHS hospitals. However, that has fallen from 88% before the pandemic, while the proportion of planned admissions accounted for by NHS patients in private hospitals has risen from 5.6% before the pandemic to 7.5% in 2022/23. 

Remarkably, and demonstrating the problems returning to providing as much care in the wake of the pandemic, NHS trusts provided fewer planned hospital admissions in 2022/23 than before the pandemic, despite higher funding and a large increase in staff.

From 2023/24, the year which ended in April with no accounts yet published, an Elective Recovery Fund specified targets for local bodies holding NHS funding to increase the amount of treatment delivered, and guidance instructed more inclusion of private providers in local plans. Quarterly NHS England figures, analysed and published by the Independent Healthcare Providers Network (IHPN), suggest a further marked expansion in private care paid for by the NHS, showing that the volume of privately provided care on the NHS hit new highs of more than 100,000 a week several times since last summer. The IHPN say that this is “an increase of, on average, more than 30,000 patients per week since the dataset began publication in 2021”.

It is possible that this expansion will be funded more from budget-holding “integrated care systems”, not from trusts, given that incentives sit at their level.

Scotland, Wales and Northern Ireland do not publish similar breakdowns showing NHS-funded private sector activity. However, all three countries have initiatives to recover elective lists that include an expansion of private-sector activity. We will remain interested in looking into data which may fill out this picture in future research.

Private care paid for by patients and their families

We also see a sharp post-pandemic increase in private hospital admissions funded privately across the UK. ONS data up to 2021 from the System of Health Accounts, the latest currently available, suggests that while private insurance rose by 4% that year, there was an even faster rise in out-of-pocket expenditure – of fully 10%.

We do not have access to private data on the number of admissions for Scotland, Wales and Northern Ireland that we can align with NHS data in the same way as we have done for England. However, the Private Healthcare Information Network (PHIN) has shared data that allows us to look at recent trends in privately funded admissions and day cases in these countries. These show that by 2022, privately funded activity had rebounded to well above its pre-pandemic level in all three countries. The growth was most pronounced in people paying out of pocket, shown in the darker colours at the bottom of the next chart, rather than those covered by insurance.

Admissions paid for out of pocket up to September 2023 more than tripled from the quarter ending September 2019 in Northern Ireland (up 218%), more than doubled in Wales (up 124%), and almost doubled in Scotland (up 80%). This illustrates quite a rapid shift. Having traditionally had less privately paid for health care than England, these other countries have quickly started to converge towards the higher English level. The number of admissions paid for out of pocket in England rose by only 20%, though it remains the highest relative to the size of the population.

Across the whole of the UK, this means a 32% increase in out-of-pocket admission and day cases from the quarter ending September 2019 to last September.

Possibly as people or employers learn to expect difficulty in accessing care to continue, we see privately insured admissions increase somewhat later going into 2023 across the UK countries. Scotland, England and Wales have all now seen increases to a level above 2019. Northern Ireland again has seen a very sharp rise of over 250%, though absolute numbers remain small at under 3,000 admissions each quarter. Across the UK as a whole, privately insured admissions are up 5% due to slower and somewhat later growth in England.

The ONS also tracks how much consumers all across the UK spend on different types of care, allowing us to see shifts across much wider services than those which are hospital based.

We see several waves of increased spending. From 2011 to 2015, there was a rapid growth in spending on private dentistry. This appears to be potentially connected to a growth in people being squeezed out of NHS provision, which we have warned happened due to a dysfunctional contract and a drift of dentists to spending more of their time on private care.

Private spending dipped sharply during the pandemic, and mostly recovered to around its previous level in 2022 and 2023. Private spending on medicine and therapeutic appliances has yet to fully recover at all.

However, hospital services were the exception, mirroring the data shown by PHIN. Spending on these rose by 13% from 2019 to 2023. Spending on “paramedical services”, which would cover outpatient care from nurses and midwives, also rose by 13%. Unlike, for example, over-the-counter pharmaceutical products, these are services where the NHS has traditionally been overwhelmingly the main provider.

The lack of growth in categories associated with general practice may not be a clear indication that they are not expanding. It may reflect that increased spending on general practice and other services may be increasingly happening through digital channels – such as short appointments or algorithms for primary care – which have relatively low costs per use.

What do these trends mean?

Care is care whoever provides it, and most people receiving it will be grateful. Given that the NHS has taken years even to return to the levels of care provided before the pandemic, the picture for waiting times without private sector involvement would be much worse than even the difficult reality today.

But there are two potentially troubling aspects in the trends we see towards more people paying out of pocket, and very recently towards parts of the NHS itself relying more on private care for delivering planned diagnostics and treatment.

The first is the extent to which these patterns may be being forced on the UK by a lack of NHS provision, and pressure from emergency demand, and serving as an alternative to the NHS being able to do more, rather than simply reflecting additional or better treatment being made available. The second is their implications for health inequalities, the financial protection of less affluent people suffering from ill health, and the availability of care based on need.

Previous periods of expanding the use of private sector within the NHS were based on a desire for competition. They were supposed to encourage the whole NHS to become more efficient and capable, and to deliver more care to more people overall. But today the growth in NHS work carried out by private firms appears to be driven mainly simply by a search for somebody to deliver care when there is far too little.

The rapid increases seen in the latest quarterly figures also raise the question of whether there is actually much more treatment to be unlocked simply by increasing willingness to use the private sector, as the opposition Labour party have raised. The data seem consistent with the NHS pulling this lever very hard already, showing willingness to expand the private sector to a large proportion of all care in some specialties. Given that NHS England’s budget is stretched to the absolute limit, it is probable that the key constraint is not having any more money to spend on the private sector, rather than an ideological unwillingness to do so.

In sharp contrast to the noughties when privately purchased private care actually fell alongside NHS waiting times, we are seeing a growth in private spending too as waiting lists have ballooned, especially on hospitals. The rapid increases in people paying from their own pockets in Scotland and particularly Wales and Northern Ireland suggest a very sudden shift in public behaviour. It may be no coincidence that Northern Ireland, where the change is greatest, has the longest NHS waiting times, followed by Wales. At a time when incomes have not risen, the likely cause for the public buying more care privately is that they see health service access as having worsened.

More private spending means more competition for the time of consultant doctors – most private doctors split their time with the NHS – and outsourced services like imaging, potentially making it harder to expand care paid for by the health service.

These trends also have long-term implications for the egalitarian NHS system.

Focusing marginal NHS spending in the private sector in itself could increase inequalities if not managed carefully. Private services which are not co-located with emergency and intensive care capability, and tend to be in wealthier areas, may be less able to provide extra care to sicker people in poorer areas.

If people are simply spending themselves as a reaction to the unavailability of NHS hospital care, this creates inequalities even more directly. While it does expand the amount of care, it means that a growing proportion of total health spending in the UK, and of the health workforce, is being allocated purely based on the ability to pay.

As we have warned for dentistry, which saw a similar earlier boom in private spending, a three-tier system will be the result: for those lucky enough to get NHS care, those rich enough to pay, and the rest of the population, left to wait in pain without help.

An unplanned expansion of the self-pay private sector also creates difficult policy issues we will hope to explore further in future. Are people who pay for private tests getting faster access to NHS treatment, and should they? Should we allow people to shuttle between private and NHS care, and if we do, how do we address the gaps between systems? If many parts of health care are increasingly funded privately except for emergency hospital care, which remains firmly in NHS hands, does this mean poorer people will be increasingly left out of preventive and supportive care until they receive costly and intensive urgent treatment?

If the NHS continues to find it hard to deliver as much care as people need, these questions are likely to confront an incoming government soon – but unlikely to be mentioned much by politicians fearful of what they imply.