Insourcing – how private companies work inside NHS hospitals

What is insourcing?

In the past the word ‘insourcing’ has been used to describe taking back in-house a service that has been outsourced, however NHS England, NHS Improvement, and the Department of Health and Social Care describe insourcing as:

“where an NHS organisation subcontracts medical services/procedures. It differs to locum supply in that the full end to end service is provided, not just staff. The supplier uses the NHS organisation’s premises and equipment to deliver these services, however remote consultations are also available.”

The idea is that these companies conduct medical procedures, such as surgery and diagnostics, in NHS premises in downtimes, primarily the weekend, when the NHS is not using the premises. The staff they employ are generally full-time NHS employees who work on their rest days.

A national framework agreement is in place with NHS Shared Business Services listing 40 companies. These companies have already gone through a competitive tendering procedure to be put on the list and can be used by trusts without additional contract tendering. An initial framework began back in 2018 and ran until September 2022. A new framework began in July 2023 and runs until July 2027. However, trusts are also using companies that are not listed on this framework.

The popularity of this approach has increased over the past few years and with any extra money for the NHS being funnelled into reducing the elective care waiting list, it is likely to keep on increasing.

The healthcare market analysts Mansfield Advisors have noted that the NHS insourcing market is one of the fastest growing markets in private healthcare, in the 2019 financial year it was worth £44m, by FY2021 it had reached £95m, and is predicted to rise to £139m in FY2022 and £295m in FY2024.

What companies and who is involved with insourcing?

Companies active in the area and listed on the NHS SBS framework include Totally Healthcare, Eden Clinical Services, Gutcare, The Endoscopy Group, Medinet, and Alliance Health. Services being carried out by these companies include dermatology, general surgery, endoscopy, radiology, and a range of diagnostics for neurology and cardiology.

In January 2023, The Guardian revealed that some of the country’s most senior NHS consultants are earning millions running private firms that offer to cut waiting lists at their own hospitals.

Top consultants in Manchester, Sheffield and London are among directors of “insourcing” agencies and some hold leadership roles at NHS trusts that have awarded contracts to their own companies, raising concerns about potential conflicts of interest.

Pioneer Healthcare, which was sold in 2022 to Totally, is led by three senior consultants: Prof Prasad Godbole, deputy medical director at Sheffield Children’s NHS foundation trust; Hesham Zaki, lead paediatric neurosurgeon at the trust, and John McMullan, consultant neurosurgeon at Sheffield Children’s and Sheffield Teaching Hospitals NHS foundation trust.

In addition to its other contracts, Pioneer has an initiative to cut waiting lists at Sheffield Children’s hospital, running 64 all-day theatre lists since 2021. It has also been paid more than £6.5m by Sheffield Teaching Hospitals from January 2019 to December 2022, including payments for a tendered £752,000 contract starting in May 2021 for “healthcare on trust premises”.

Another insourcing firm, Gastro Teams Seven 7 of Durham, has been paid more than £770,000 since January 2022 by County Durham and Darlington NHS Trust, where two of its directors work as consultants.

An Observer investigation has found:

• Three senior consultants in Sheffield ran a private firm, Pioneer Healthcare, offering insourcing services to help the NHS cut backlogs. The company won a series of contracts with local hospitals before being sold to a major private healthcare provider in a £13m deal;
• At Manchester University NHS Foundation Trust, three top surgeons including a clinical lead and a former clinical director are the owners of Fortify Clinic , a company offering “end to end” services to tackle waiting lists. The firm was paid £1.3m by the trust for work in 2022;
• Two senior consultants at the Northern Care Alliance NHS Foundation Trust trust set up Venture Health Group in December and began contracting with their own

Why is insourcing attractive for trusts?

The companies perform services for less than the NHS tariff, often at 20% less. The reason they can is that the private companies don’t have the fixed costs of their own hospital. This makes the process of insourcing highly attractive to the trusts, which are desperately trying to get more done within budget constraints.

The popularity of insourcing with trusts also relates to how insourcing falls outside existing mechanisms for regulating staff labour. There is a cap on how much trusts can spend on agency workers and rates can only be increased beyond the cap to fill a shift if there is a patient safety issue, and it may be difficult to show there is an issue for routine elective care procedures.

Trusts can employ bank staff as they are not subject to a price cap, but this could be expensive for the trusts as they may find themselves paying significantly more, particularly for nurses and allied health professionals.

It begs the question, if staffing is such an issue within the NHS, where do the insourcing companies find their staff. The companies recruit full time NHS employees who work for the insourcing companies on their rest days, often Saturday and Sunday. The companies recruit from a larger pool of staff across a number of trusts - a team working for an insourcing company at one trust is likely to consist of employees of several different trusts. 

Why is insourcing attractive to NHS staff?

The attraction for consultants of working for an insourcing company on rest days is that the pension tax threshold is not an issue. Consultants may not be willing to work extra bank shifts however much they may be paid as earning money from bank shifts increases the likelihood of both breaching the pension tax threshold and increasing the amount of tax payable by making automatic pension contributions. 

Unfortunately, until changes are made to the pension situation this will limit the number of consultants willing to work overtime within the NHS with the knock on effect of increasing the popularity of insourcing companies as the only way to get extra procedures carried out. 

Are things likely to change any time soon? Speaking at the Nuffield Trust’s virtual annual conference 2022 Amanda Pritchard, CEO of NHS England, said that NHSE leaders were actively “working with government” on making pension arrangements more attractive in a bid to support the NHS workforce. 

There have been calls for changes in the pension situation for some time. But in February 2021 the government announced it was going to ignore proposals in a 2019 consultation designed to make it easier for consultants to work extra shifts in the NHS, as it felt the changes it had made in the March 2020 Budget had resolved the issue of clinicians being discouraged to take extra shifts. 

But the pension issue has not been resolved and consultants do not want to do extra NHS hours. So for now, private companies will continue to find lucrative work within hospital trusts as they attempt to reduce their waiting lists.

Workforce availability affected

There are already signs that private companies are trying to fudge the system leading to issues with workforce availability. In January 2022, NHS England and NHS Improvement had to send out guidance after it became aware that several staffing agencies were approaching NHS trusts offering insourcing solutions that were just providing staff at an escalated rate of pay.

These insourcing solutions have included “the provision of individuals or teams of clinical and medical staff who are paid at an escalated rate above the NHS England and NHS Improvement price caps” and who are engaged through a staffing agency not on the insourcing framework.

The use of escalated pay rates attracts workers from elsewhere in the NHS, which in turn reduces the supply of agency workers available to fill shifts in the trust and wider health system. It also has “a ripple effect on general agency rates, as it raises the pay expectations of agency workers, and forces other departments and trusts to increase their rates to attract their workers back.” 

It would be good to think that if the NHS pension issue is sorted out, then there would be no need for insourcing. If the companies can find NHS staff to run an operating theatre or carry out diagnostics on a weekend, then the NHS should be able to do this as well. If the companies can recruit staff from across trusts to get a team together, then the NHS should be able to do this as well. This would remove yet another opportunity for private companies to profit from the NHS.

Conflict of interest issues

The Centre for Health and the Public Interest (CHPI), an independent thinktank, has called for a ban on such arrangements between insourcing companies led by consultants and the trust they are employed by. The General Medical Council said current conflict of interest policies did not always deliver “the transparency and assurance that patients rightly expect”.

The trusts say all rules were followed and interests were publicly disclosed and managed appropriately.

Alan Clamp, chief executive of the Professional Standards Authority, which oversees regulation of health professionals in the UK, called for a cross-sector review of managing conflicts in healthcare and urged regulators and employers to “tackle business practices” that “risk undermining public confidence”.

David Rowland, director of the CHPI, said the current rules were “woefully weak” and called for a ban on arrangements of the sort identified by the Observer.