You recover your health, they recover their costs

A new report suggests that pay beds could help to secure the future of the NHS. Paul Gosling reports

There will be more pay beds, and more NHS patients will pay for add-on facilities, such as evening appointments and better meals, predicts Healthcare 2000, the independent report on the future of the National Health Service published last week.

As the market reforms take an ever-tighter hold over the NHS, more patients and trusts accept the principle of a wider range of charges within the the service. Chris Ham, director of Birmingham University's health services management centre and a member of the Healthcare 2000 panel, says: "As we are moving towards more of a mixed economy in the NHS, it is inevitable that hospitals will want to offer pay beds, and I don't see any problem with that. It is a useful way of topping up budgets."

In 1993/94, the last year for which figures have been published, 158 NHS trust hospitals earned pounds 185m from pay beds, giving them a market share of 14.4 per cent of private health care. That represented a growth of almost 13 per cent over the previous year, a trend that looks set to continue.

Pay beds are offered through various arrangements: some hospitals directly manage them, others contract with external companies to run private wings. For example, Margate Hospital in Kent has 13 pay beds, which are managed by the private company Healthex. The company's profits are transferred to the hospital after keeping a proportion as a management fee.

A pounds 3m development is planned for Margate, to be run by Healthex, funded through the Private Finance Initiative. The new wing will offer an additional 18 to 20 beds and, unusually, provide a private out-patients and daycare facility. The Department of Health must give approval before the contracts can be finalised, but has informally welcomed the proposal.

Bill Nuttall is the private patients manager at Margate, employed by Healthex, having previously run pay beds at Leeds General Hospital. He argues: "We are helping to secure the future of the NHS." Mr Nuttall believes that as the number of pay beds grows, so private hospitals will close down, as is already happening in London. He predicts private healthcare suppliers will move away from running independent hospitals, instead developing partnerships to run private wings at NHS trusts.

Nuffield Hospitals, one of the country's leading private healthcare suppliers, says political uncertainty is holding it back from doing this, though it is leasing land from Hull trust hospital. Nuffield will run an entirely independent hospital, but expects to rent out some facilities while the NHS hospital is being refurbished.

Bupa has entered into two agreements, with Hastings and Bradford hospitals, to lease land from trust hospitals, with rental being a proportion of income. The hospitals will have their own operating theatres, and radiology and physiotherapy units. It is expected that the closeness of the private hospitals will assist the NHS trusts in retaining consultants who want to do some private work.

Ian Robertson, manager of St Mary's NHS trust, which has provided pay beds for 60 years, and last year generated a pounds 1.25m profit for the trust, argues that the retention of consultants is a key benefit from pay beds. "It keeps our medical staff, and enhances the reputation of St Mary's. We have got the consultants' loyalty," he says.

Mr Robertson believes that the market reforms are confusing traditional definitions. "The question of what is a private patient will be harder to define. GP fundholders' business is going to our private wing because of our package of prices. It may be that it will be in the NHS interest in some cases to close beds."

The independent sector argues that a hidden form of cross-subsidy is taking place, under which trusts protect private beds from the real commercial costs. Norwich Union has sponsored the National Economic Research Associates (Nera) to establish whether this is true, and a report will be published within the next month.

Nera's economics consultant, Keith Davies, says: "First, we have looked at the purely accounting side of things, to see whether [private beds] make a surplus, to see whether all the resources used are costed. Then we have looked at the wider issues of the cost of training, of consultants who don't look after NHS clients, and see whether they still make a surplus."

If the results support the complaints from the independent sector, the Government will be under enormous pressure to introduce stricter accounting regimes, which, independent providers say, would destroy the concept of pay beds.

If, though, the report shows that pay beds genuinely create additional income for the trusts, producing a subsidy for NHS patients, it could have important effects beyond the next election. Even an incoming Labour government might then accept the use of pay beds.