One of the most serious affects of outsourcing in the NHS that has been observed is a decline in quality of care.

The case that has really highlighted the problem with quality when NHS services are outsourced is that of Hinchingbrooke hospital, the running of which was outsourced to private company Circle in 2012. The contract hit the headlines in January 2015, when after only two years of a ten year contract, Circle announced that it was pulling out. The announcement came just before the publication of a damning report on the hospital from the Care Quality Commission (CQC): the CQC raised serious concerns about care quality, management and culture at the hospital. The CQC found a catalogue of serious failings at the hospital that put patients in danger and delayed pain relief. The hospital was put in to special measures, the first time the CQC has had to do this. Circle cited financial considerations when announcing its withdrawal, but conceded that the report had also been a factor in its announcement.

CQC flags serious concerns about privately run Hinchingbrooke Hospital

Circle to withdraw from Hinchingbrooke contract

Circle was also the private provider involved in the privatisation of Nottingham’s dermatology service, which in June 2015, was described by an independent report as “an unmitigated disaster”. Once part of a national centre for excellence at Queen’s Medical Centre, it is now much reduced, with some patients sent to a centre in Leicester. When Circle won the contract several consultants refused to transfer from NHS contracts, leaving the dermatology service with few consultants and Circle had to employ locums.

Nottingham dermatology privatisation 'unmitigated disaster'

The outsourcing of GP contracts has also shown problems with quality when contracts are won by private companies. In April 2015 two surveys were published which indicated that private providers deliver poorer GP and out-of-hours GP services.  Researchers at Imperial College London found that private sector and other alternative providers of GP services to the NHS do not do as well as traditional GP practices. The research found that these providers perform worse than typical surgeries on 15 of 17 key indicators – such as patient satisfaction, diabetes control and keeping patients out of hospital. In the second study, researchers at the University of Exeter Medical School, found that private providers of out-of-hours GP services deliver poorer care than NHS alternatives. The findings were based on 900,000 responses to the 2012/13 GP Patient Survey: NHS providers scored highest on timeliness, patient confidence in doctors, and overall care experience.

In February 2014, the Care Quality Commission criticized Virgin Care over its use of non-medically trained receptionists to assess patients in its Croydon Urgent Care centre. CQC inspectors found the centre was in breach of four basic standards of care.

Private providers of out-of-hours GP services deliver poorer care than NHS, research finds

Private sector providers of GP services being outperformed by traditional practices

Opening general practice to private providers 'may have worsened patient care'

NHS watchdog says Virgin Care-run clinic put patients at risk

Quality has also been a concern in the area of cataract operations, a routine operation frequently outsourced to the private sector. In Somerset, dozens of people were left with impaired vision, pain and discomfort after undergoing operations provided by the private healthcare company Vanguard Healthcare under contract with MusgroveParkHospital, Taunton.  The hospital's contract with Vanguard Healthcare was terminated four days after 30 patients, most elderly and some frail, reported complications, including blurred vision, pain and swelling. In a very similar set up in Devon, 19 NHS patients had the outcome of their cataract surgery reviewed after at least two had problems with their eyes following operations at a private hospital. The problems emerged on the first day of operations conducted under a contract to perform cataract operations between the NHS's South Devon Healthcare Foundation trust, which runs Torbay hospital, and MountStuart hospital, owned by Ramsay Healthcare.

NHS faces legal bill as dozens suffer problems after private eye operations 

NHS patients have cataract operations reviewed after private treatment 

Another notable case of falling quality of care is that of Serco in Cornwall. The quality of care provided by Serco under a contract to provide out-of-hours care was reported to be falling “unacceptably short” of essential standards of quality and safety by the Government Public Accounts Committee. The problems came to light after whistleblowers contacted the media. A review by the Care Quality Commission in March 2013 found GPs were working double shifts of up to 13 hours due to staff shortages. The following month Serco admitted it had found evidence that their staff had altered performance records. Eventually in December 2013 Kernow Commissioning Group reached an agreement with Serco to cut short its contract, which finished early in May 2015.

Private health contractor's staff told to cut 999 calls to meet targets

Controversial Serco GP contract cut short

Serco out-of-hours fell 'unacceptably short'

Serco faces fresh allegations over Cornwall out-of-hours GP service


The quality of service provided by Serco was also investigated in Suffolk, where it was awarded a £140 million contract in October 2012 to run community services. The company was criticized for failing to meet key response times. In January 2014, a report from Serco to the council's health scrutiny committee showed that Serco was not hitting three of its key performance indicators in community health response times. For example, it failed to meet urgent four-hour response targets - for nurses and therapists to reach patients at home 95% of the time (only achieving 89.3% in November 2013). Before Serco took over, the target was achieved 97% of the time. In September 2015, Serco relinquished the contract and an NHS consortium including Ipswich and West Suffolk Hospital Trusts took over the running of community services.

Serco health provision in Suffolk criticised

Serco “underestimated” community health service complexity

In June 2013, the NHS temporarily stopped referrals to BMI Healthcare’s MountAlvernia hospital, in Surrey, following a Care Quality Commission report which found serious failings on patient consent, care, cleanliness, staffing levels and service quality monitoring. The report noted some staff had told inspectors breaches had been caused by initiatives designed to "save money" or for "logistical and financial reasons". Care failures cited by the CQC report included a surgeon who operated without gloves in blood-stained shirt sleeves, and a child who was not seen by a paediatrician for seven hours despite their condition deteriorating. The CQC was alerted to the situation by whistleblowers. BMI Healthcare, owned by private equity, is struggling financially.

NHS stops referring patients to private hospital after damning report


Cost-cutting has been a notable factor in contracts that have been outsourced: by October 2012, 46 nursing posts had been cut at HinchingbrookeHospital and cost-cutting was at the heart of the problems for Serco’s out-of-hours service in Cornwall and has been a factor in other contracts operated by Serco.

In Cornwall, Serco introduced a new IT system in summer 2012 in order to reduce costs, but the system meant that skilled clinicians were replaced by call-handlers without medical training who follow a computer-generated script to assess patients. In the long-run there was a decline in the quality and safety of the service (see above - Cuts in Quality).

Hinchingbrooke losses double Circle Health estimate

In August 2014 a report in The Independent noted that Serco had been overcharging NHS hospitals millions of pounds. Britain’s biggest pathology services provider, which was established by Serco in partnership with Guy’s and St Thomas’ hospitals, first called GSTS and now trading under the name Viapath, has also been dogged by allegations of cost-cutting and clinical failings.  Internal documents show increasing concern amongst senior consultants who claimed that staff cuts and a lack of investment since privatisation left some laboratories close to disaster. 

Overcharging by outsourcing giant Serco costs NHS millions

In Suffolk, Serco announced a month after being awarded the £140 million contract to provide care, including community care, that 137 jobs would be cut. Unison said of the 66 FTE (full-time equivalent) frontline jobs were going, community nursing posts would be cut from 210 to 179, specialist and district nursing posts from 65 to 56, physiotherapy posts from 50 to 42 and other health staff who deal with things such dressings would be reduced from 93 to 75. The job cuts were announced in late 2012 and by early 2014 the quality of care provided by Serco was being criticized.

Serco announces job cuts a month after taking over from NHS Suffolk

Suffolk Community Healthcare: 66 frontline posts to go

Cost-cutting was reported to be at the heart of the difficulties experienced by the out-of-hours company Harmoni (now owned by Care UK) in London. In 2010/2011 several GPs complained about an aggressive cost-cutting agenda in place at Harmoni that they felt put the patients at risk. According to The Guardian, Dr Fred Kavalier, the former clinical lead at Harmoni, resigned in January 2011 because he felt unable to be responsible for the service, which he believed had become unsafe after cost-saving cuts in clinicians' shifts and the length of time allowed for GPs to see patients, and a failure to recruit and pay GPs sufficiently. In late 2012, Harmoni was also accused of manipulating its performance data to cover up delays in seeing patients and missing numerous targets. Harmoni is reported to have frequently operated with shifts unfilled. In November 2012 a seven-week old baby with a suspected respiratory infection died after repeated calls to the service over several days, during which Harmoni is alleged to have failed to follow protocols in key areas.

Harmoni out-of-hours GP service putting patients at risk

Former Harmoni clinician warns of 'dangerous' pressure on appointments 

Private companies are closing GP practices in areas were it is difficult to make a profit. The Practice plc, which runs around 50 GP surgeries, closed a surgery in Camden Road, London, the Maybury surgery in Woking, the Brandon Street practice in Leicester and the Arboretum surgery in Nottingham. All these surgeries were in areas of high deprivation, where it is difficult to make money. The Practice plc defended terminating the contracts and closing services, saying loss-making activities were unsustainable.

When privatisation of GP practices goes wrong

Once services are provided by private companies monitoring and accountability could become a real problem. In March 2015, the independent think tank the Centre for Health and Public Interest (CHPI) published a report noting that the NHS was struggling to monitor and assess the safety and efficacy of services it has outsourced to private providers. A survey of Clinical Ccommissioning Groups (CCGs) using freedom of information requests found that 60% of CCGs surveyed did not record how many site inspections they undertook, or were unable to say how many they had done.  The report noted that of even greater concern was that 12% had not carried out any site inspections. The CHPI noted that the research found a reluctance among CCGs to enforce their contracts with the private sector – just 16 CCGs out of 181 surveyed had imposed any financial sanctions due to poor performance.

In September 2015, the transport company Arriva admitted that it had incorrectly reported its performance on non-emergency NHS transport in Greater Manchester and as a result gained £1.5 million extra in incentive fees for good performance. As a result the company may be referred to the Serious Fraud Office. Arriva has handed back the money to the area’s 12 clinical commissioning groups, but the situation highlights the lack of monitoring and accountability in such contracts. Arriva’s Transport Solutions division beat the North West ambulance service to the contract. 

Arriva owned up to the fraud itself, however when things wrong in privatized contracts it is often only the presence of whistleblowers that means problems are uncovered: problems at Harmoni’s and Serco’s out-of-hours services and at BMI’s Mount Alvernia Hospital were revealed by whistleblowers.

A shocking example of lack of accountability was uncovered when United Health sold its practices to The Practice plc, including the Camden Road surgery in London. The North London PCT found that due to a loophole in the tender contract, it could not object to the sale. An inquiry into what happened by Camden Council’s health scrutiny committee reported a lack of accountability and an inadequate contract. A councillor on the inquiry committee reported that the committee had to resort to freedom of information requests and appeals to get to see the contract. There were also concerns over a lack of accountability whilst the surgery was open, with problems showing only when patients were transferred to new GPs. Several of the patients’ new GPs reported that the patients had had appalling care often prescribed the wrong medicine. A study of two indicators of how well patients are being treated, the diagnosis of depression and atrial fibrillation, by Dr Paddy Glackin, secretary of the local medical committee for six years, made him concerned at the deterioration of quality of the service and lack of monitoring by the PCT. There was a significant decrease in the numbers of patients diagnosed for the two conditions in the Camden Road practice from 2008. He noted that this meant that GPs at the Camden Road surgery were either brilliant doctors preventing it or they stopped diagnosing it; the latter is the most likely scenario due to the high level of locums.

The contracting NHS – can the NHS handle the outsourcing of clinical services?

Arriva may face SFO fraud inquiry over NHS deal

Outsourcing has created many problems in the area of conflicts of interest. The health reforms of 2012 handed around two-thirds of the NHS’s budget to Clinical Commissioning Groups (CCGs), however many of the members of the CCGs' boards also have their own private interests in the sector. In November 2015, an investigation by the BMJ and The Times into England’s CCGs shows that many are commissioning from organisations in which their own board members have an involvement. The study found that CCGs in England have awarded hundreds of contracts worth at least £2.4 billion to organisations in which their board members have a financial interest. The findings follow a previous investigation by The BMJ in April 2013 which found that more than a third of GPs on the boards of CCGs had a conflict of interest resulting from directorships or shares held in private companies. 

General practice commissioning: in whose interests?

The finances of several of the private companies involved with the NHS are in a precarious position, including The Practice Plc, Spire, GHG/BMI and Circle. The financial instability of these companies should influence the decision as to whether they are suitable partners for the NHS, as patients need a long-term commitment for services.

The Practice Plc

The Practice Plc has yet to make a profit and its last accounts (to March 2014) obtained from Companies House show a loss of £0.8 million and debts of £3.3 million. The Practice Plc’s business has been backed by the private equity company MMC ventures since 2006, without this backing the company is not a going concern. Backing by private equity results in a disassociation between the management and the business providing the NHS service. In general private equity companies seek to exit their investment after three to five years, as soon as a company is a financial going concern – private equity does not provide a long-term commitment. 

NHS service providers' financial positions are weak – at best


The private hospital company Spire Healthcare does a considerable amount of business with the NHS; in the first half 2014 revenue from its business with the NHS rose 29.2% to £116.9 million (28% of total revenue). The company has been through difficult times financially, until finally becoming a public company listed on the London Stock Exchange in July 2014. For many years the company had a heavy debt-burden (around £1.3 billion), which pushed the company to sell off property, which it then leased back.  In April 2012 Spire began an auction looking to generate funds through the sale of a possible 10 hospitals, approximately one third of its property portfolio. This actually led to the sale of 10 freeholds hospitals and two leaseholds to a consortium of purchasers comprising Malaysia’s Employees Provident Fund (EPF), affiliated investment funds of Och-Ziff Capital Management Group and Moor Park Capital. This sale paid off over £700 million in debt, but still left the company with around £700 million in debt. In early 2014, Cinven, the private equity company behind Spire Healthcare, sought a buyer for Spire. However eventually, in July 2014 Spire Healthcare was floated on the London Stock Exchange. The flotation raised £255.2 million for the company and paid of more debt.

Debt-laden Spire Healthcare in £1bn property sell-off

Spire Healthcare to reduce debt load through partial sale and leaseback

Spire prospectus July 2014 

Spire 2014 Half year report


The private hospital company, GHG/BMI does a considerable amount of business with the NHS at over 35% of its caseload in the six month period to the end of March 2014. However, GHG/BMI has a very heavy debt burden created by the acquisition of the company by a consortium involving private equity companies and the South African company Netcare in 2006. Netcare became the majority shareholder and restructured GHG as a separate operating and property companies, with a considerable amount of debt secured against its hospital properties (GHG). In January 2012, media reports highlighted GHG’s escalating debt, with its property arm having debts of £1.65 billion and its operating arm debts of £230 million. Media commentators have noted that “vulture funds” have already bought much of GHG’s debt at discount rates in the hope of a default in 2012/2013. In September 2013, things worsened for BMI Healthcare as the Competition Commission accused the company of extracting excessive profits from insurance companies and patients and the pressure was on for BMI to sell at least 10 hospitals. Some debt restructuring took place with payment due January 2015 of approximately £1.5 billion, however Netcare notes in its 2014 Annual Report that a long-term solution to GHG/BMI’s debt problem is still under discussion. GHG/BMI continues to be in a precarious financial position. BMI has pulled out of several hospitals in the UK as part of a restructuring program to reduce debt and costs.

Advisers line up on £1.57bn GHG debt workout to avoid ‘zombie risk’

Britain’s healthcare companies look as sick as their patients

Ailing private health group BMI comes under pressure to sell hospitals 

Netcare Annual Report 2014


The private hospital company Circle’s unstable financial situation has been an ongoing aspect of media articles about the company throughout 2010/2011. Just prior to the flotation in June 2011 media articles highlighted the company’s operating loss and that as of December 31 2010 the company had debts of £82 million. The flotation in June 2011 raised finance and another round of equity funding in December 2013, raised £27.5 million. In July 2014 Circle sold its Bath hospital site to a US property company and now leases the site; the profit was used to pay off debt. The company has yet to make a profit, with a loss for the first six months of 2014 at just over £10.5 million up from almost £9.6 million loss in the first six months of 2013.

Circle Holdings 2012 Interim Report

Circle Holdings 2014 Interim Report 

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