The Partnership of the NHS and the Private Companies - Essay Example

The purpose of the essay is to analyze a mixed economy structure by the study of a private-public partnership. The focus of the essay is an example of the Private Finance Initiative Scheme that works with the private sector. In this case, the example is that of the National Health Service that is one of the leading health service providers in the United Kingdom. The paper starts with a brief introduction of the Private Finance Initiative Scheme. Then it moves onto provide a short history and background of the National Health Service. The foremost element of the essay is about the management of the partnership with the private companies. Since the National Health Service collaborates with many private hospitals (and it is difficult to consider the strategies of each hospital separately), most of the essay discusses the strategies of the government and the National Health Service in maintaining and improving the partnership. The first part of the analysis focuses on the strategies of the NHS that have improved the customer care and the quality. The later part discusses the limitations of the NHS in the providing of better quality results. Private Finance Initiative Under the Private Finance Initiative (PFI) that was initiated in 1992 by the then Labour government, many private sector companies entered into an agreement with the public sector so that they could work in sensitive areas like health and education. According to CPA (2008), the private finance initiative has become so popular among the private companies that currently in the United Kingdom, there are 500 new projects operating worth an overall capital value of £57 billion. The Private Finance Initiative ensured that the public and the private sector could work together in the attainment of certain goals. The private sector could work in areas that it had not worked before and the public sector could achieve efficiency in its goals of welfare of the people. The PFI over the years has become increasingly important for private-public collaborations and there are many partnerships in the United Kingdom that work under the scheme. One example of a PFI scheme is the collaboration of the NHS with the private sector. NHS- a background The National Health Service was created after the Second World War as a welfare state reform policy by the Labour Government at that time. It was felt that England during the years of the war had proved that it could employ resources efficiently. If England could perform so well in the war endeavors, it could also help the people through the mobilization of the labor force as NHS (2010) relates. Initially a lot of doctors opposed the idea of the providing of free medicine and services to the customers. However, with time the opposition of the doctors was clearly slackening and so the National Health System became very popular in the UK. Over the last few years, the National Health Service (NHS) has become a part of the Private Finance Initiative (PFI) and has made agreements with many private hospitals in which the private companies are to carry out the medical and surgical procedures and operations and the government has to fund them. Since NHS is the major provider of health care in the United Kingdom, most of the private hospitals in the country work in collaboration with the service. The government also spends most of the healthcare expenditure on the funding of the NHS as BBC (2005) relates. The importance for the NHS can be judged from the interview of Patricia Hewitt, the health Secretary of UK in 2005, who said that the number of private companies that were working with the National Health Service would double in the next three to five years. According to her, (2005) three billion pounds were to be spent on the private sector treatment in the National Health Service. Her statement shows how important the partnership of the NHS and the private hospitals is to the government and the economy as a whole. According to a BBC report (2005), most of the money that is provided by the government through the NHS is spent on small non urgent operations and check-ups of the patients. The numbers of operations that are carried out by the funding of the NHS through the private sector are 15% of the total operations that are carried out. This may not be a very large percentage but through this system the government ensures that basic medicinal facilities are free for everybody. The use of the private sector has greatly improved the overall basic structure of the National Health Service. This is because the government is using the efficiency of the private sector to get its objectives of welfare for the general public. Studies have shown that the employment of the private sector in the National Health Service has overall improved the quality of the services. According to a business report (2005), it was expected in 2005 that by 2008 no patient would have to sit more than eighteen hours in order to get a medical checkup. Analysis of the NHS- private sector partnership Whenever there is an interaction of the private and the public sector there are always many issues raised in the management. This is because the private and the public sector are two systems that are very different from each other. There is less that is common between the public and the private sector. Where self interest is the basic motive in the private sector, the public sector focuses on the total allocation of the resources in manner that the wellbeing and interest of the masses as its first priority is maximized. The objective of the private sector is to increase the profits while that of the public sector is to improve the living conditions of the people. The private sector also is generally more efficient than the public sector where Red-Tapism and corruption are commonly found. When the two systems are so different in their ways, it is very difficult to maintain a relationship between the private and the public sector. A lot of time and money has to be spent on the management of the mixed economy that is created due to the result of a partnership between the public and the private. A lot of care has to be taken so that the partnership can keep both the private and the public sector happy. Over the years, the National Health Service has tried its best to maintain a proper partnership with the public sector companies. Since it is very hard for both the companies, hospitals and the NHS to manage the Private Finance Initiative Scheme in a proper manner themselves, they use different means to do so. The companies that are generally involved in the Private Finance Initiative (especially in the case of NHS) establish a separate company known as the Special Purpose Vehicle. (SPV) The SPV is used by the private companies to manage the current projects and also search for new work as CPA (2008) relates. The Special Purpose Vehicles act as intermediaries, passing on the requirements and the requests of the companies to the government sector. This way the demands of the hospitals may be able to reach the government and subsequently, steps would be taken to improve the overall efficiency. Consequently, there would be a better partnership between the public and the private sector and both will be satisfied. The use of the Special Purpose Vehicles in the NHS- private sector partnership ensures that the management can be done easily. The government does not have to be overburdened about the funding techniques and the private companies would not have to bother about the fulfillment of their demands. All of this is done by the companies called the Special Purpose Vehicles as CPA (2008) relates. However the employment of the SPVs in this case may be hazardous to the companies and the government too. Since the SPVs act as catalysts that speed up the management process, they demand a lot of fees. According to a report of the CPA (2008), the pay offs that the Special Purpose Vehicles demand ranges from 2 % to 25 % of the profits of the hospitals and the private companies. Critics argue that this may be a lot of money and the SPVs can actually exploit the private companies. However, it can be argued that the task carried out by these SPVs is a very cumbersome one and so they may deserve such high fees, as the report of CPA (2008) states. The SPVs provide both the private hospitals and the National Health Service to concentrate more on quality control and other more important issues like Performance management and Community engagement. Since the management and the governance of the partnership is not that the companies and NHS have to worry about, a lot can be done by both to improve the quality of the services that are provided. Further, the government tries to ensure that he private sector is well funded. As mentioned above, it is made sure that the private companies are given a lot of benefits. The funding of the private sector is considered one of the most important tasks by the government and the National Health Service. 1.7 billion pounds in just 2005 have been spent on the private sector in order to improve the quality of the services provided. Various other benefits and bonuses are also provided to the private divisions. For example, the sum of operations that the private hospitals carry out has been increased to 15%. This means that the government is funding and covering more and more of the expenses of the private hospitals. As a consequence, the quality as a BBC report (2005) states, is improving consistently. The extensive funding by the National Health Service also improves the quality. According to PHU (2005) , the patients do not have to suffer by waiting. In most of the private hospitals that have collaborated with the National Health Service, there is at least one doctor that is available all the time. In case of any emergency, the patients do not have to wait for the doctors. They can get free and good treatment as soon as they reach the hospital. Standing in queues is not what is seen in the private hospitals that work with the NHS. Since the National Health Service comprises of a lot of private hospitals there is a great number of doctors that are found in the hospitals. According to PHU (2005), there is a variety of doctors- both general and specialist. Different specialist ns therapists are present in each hospital. This ensures that the patients are provided with good services and they do not have to wait or go through unnecessary pain. Also, another important element that is found in the hospitals according to PHU (2005) is that the patients can avail the medical opportunities regardless of whether they have health insurance or not. This way the people who do not have health insurances can still avail the medical services. The revenue that is earned by the treatment of the patients is also allowed by the government to be a part of the hospital’s revenues. This way this capital is used by the hospitals to finance the better quality of the services provided. Hence, the quality of the services is further increased and the patients are ensued healthier lives. Although the management of the National Health Service is carried out in such a way that little time is wasted and better quality services are provided, yet there are also many problems that are faced by both the government and the private sector in the partnership of the private companies under the National Health Service. Since the public and the private sectors are very different from each other there are many problems that are faced. Some of them are given below. It is quite obvious that there have been a lot of complaints from the public sector especially from the former doctors of the National Health Service. For example, one of the professors at the University of Surrey, Vincent Marks said in a BBC report (2005) that the introduction of the private sector will cause the destruction of the National Health Service. According to critics like Marks (2005), most of the private owned companies just focused on the making of profits. This was the reason, according to him, why the NHS was experiencing decreasing number of patients. He argues that the profits that the private companies made were far greater than the amount of money received by the NHS through taxation. If this continued further there would not have been many reserves left with the NHS in a few years time. In fact it is estimated that by the end of the decade, NHS would likely be in a state of deficit. It is quit shocking that the NHS confesses to this fact on its own website! There has been little that has been done to find the solution of the problem. Although the private sector is likely to increase the efficiency of the NHS, yet it can also prove to be one of the reasons of the destruction of the NHS. It seems that the government is taking no action about this. It is quite disturbing to know that only 29% of the PFI projects that have a value greater than a hundred thousand pounds are subject to competition as a report of the CPA (2008) states. The same is true for the NHS. There are a very small percentage of the projects that motivate the private companies or hospitals to compete with each other. This means that most of the private sector companies do not have to compete to be a part of the NHS. If this is true, the whole concept of the introduction of the private sector is shaken. The main objective of the partnerships with the private sector was to increase the level of efficiency and so the quality of the services provided. The basic difference between a private and a public sector is competition. If the companies or the hostels do not compete on a large scale for the projects, they do not feel motivated to improve the quality of the services they provide. Since the basic motive of the private sector is to increase and maximize profits, they would not concentrate on the quality of their services. On the contrary, they would spend as less money on the can. This may compromise the quality of the services provided. As a result, the goal of the welfare of the people may not be achieved. There is also a limit to which the National Health Service can provide funding. The National Health Service gets all its money from taxation and since the taxes are not a lot, there is little that the NHS can get as a report of BBC (2005) states. Since it does not get a lot of revenue from the taxes, it cannot do extensive funding of the private companies. If the funding by the government is very low, the companies might not be motivated to work under the National Health Service. They would prefer working alone rather than being ‘bossed around’ by the NHS. Operating on their own can help the private companies to achieve very high profits. Further, they do not have to follow the set of rules that are dictated by the NHS. This way, if the funding by the government is very low, the private companies might not be motivated to work under the National Health Service. This way, the whole concept and objective of the welfare system of the people would not be achieved. Conclusion To conclude, the Private Finance Initiative has been successful in many regards as it has led the private sector to interact more with the public sector. As a result the private sector has worked in sectors that it could not work in before. Similarly, the public sector has increased its efficiency and also the welfare of the system. The example of the National Health Service in this regard is very important because it is one of the best examples of the interaction of the public and the private sectors. The Private Finance Initiative scheme under which the National Health Service operates has been successful in many regards. Through the use of SPVs the wastage of time is avoided, so the government and the private companies can concentrate on more pressing issues. Also, the quality is improved because of the increased funding by the government. Since the revenues earned from the treatment of the patients are used to finance the expenses and the quality control expenditures of the hospitals, the quality of the services that are provided have improved over the years. The patients do not have to wait to get treated and have to pay reasonable prices (because of increased competition). However, apart from these benefits there are many ways in which the NHS has not been successful. One of the reasons is the low percentage of the hospitals that are to compete for the Private Finance Initiative Scheme. The private sector gets de motivated this way and the quality is compromised. Another important thing is that the National Health Service does not have sufficient funding anymore. The revenues earned from taxation would have to be improved in order to get better results of the partnership of the NHS and the private companies. It is important that the government looks into the matter and increase the funding. Otherwise, the quality of the services can be greatly compromised as the customers are exploited increasingly. References BBC. (2008). NHS use of private sector to rise [Internet]. Available from < http://news.bbc.co.uk/2/hi/health/4542009.stm > [Accessed 21 April 2010] Committee of Public Accounts. (2008). HM Treasury: Makingchanges in operational PFI projects. UK. Stationery Office Hughes OE, (2003, 3rd edition), Public Management and Administration. An introduction, Basingstoke. Palgrave Macmillan. Flynn, N. (2007). Public Sector Management. London. Sage NHS.(2010).England’s National Health Service [Internet]. Available from < http://www.nhshelp.co.uk/history.html > [Accessed 21 April 2010] Private Health Care. (2005). Hospital Treatment - Why Go Private In The NHS?[Internet]. Available from < http://www.privatehealth.co.uk/private-hospitals/nhs/benefits/> [Accessed 21 April 2010] Richards. D & Smith, MJ. (2002). Governance and Public Policy in the UK. UK. Oxford Salisbury, C. (2008).The involvement of private companies in NHS general practice [Internet]. Available from < http://www.bmj.com/cgi/content/extract/336/7641/400> [Accessed 21 April 2010] Read More