Report of Meeting 10 March 2004 at the Royal College of Obstetricians and Gynaecologists…

“Contracting or Employment of Consultants”

A meeting was held on 10 March 2004 at the Royal College of Obstetricians and Gynaecologists London, by FIPO entitled “Consultants – Professionals or Employees”. The thrust of the meeting was to discuss the future status of Consultants in the Independent and NHS Sector in terms of employment and contracting in the light of changes of acute healthcare delivery and the introduction of ISTC’s (Independent Sector Treatment Centres).

Several of the presentations are available to review online, follow the links associated with each presenter's name.

Tom Mann's PresentationMr John Randle
Hospital Management Consultant

In his initial overview Mr. John Randle, Hospital Management Consultant analysed healthcare trends and expenditure in the acute healthcare sector. These figures were based on published data from Laing and Buisson as well as his own interpretations. Mr. Randle demonstrated an increase in hospital revenue and consultant fees with a total combined growth since 1994 rising from approximately £2 billion to £3.8 billion per annum. Indexing hospital revenue including NHS pay-beds and consultant fees showed similar growth rates since 1997. A feature of this growth was the steady expansion of NHS patients as well as self-pay. However, in the last year from 2002-2003 there had been a slight fall-off in the total number of inpatients. Day cases rose to a plateau and peaked in 2001-2002 and have also fallen off slightly. The bulk of the payments received in the Independent Hospitals was from the insured group with self-pay also levelling off in 2001 and falling slightly since then. This was inversely related to a rise in NHS contracted work. This trend was is more clearly demonstrated when analysing all payments by payer indexed to 100 as of 1997.

In a separate review of Consultants earnings, Mr. Randle took a hypothetical figure for gross annual earnings of £ 150,000 for a consultant with a combined NHS and private practice. Basing this on the average consultant salary of £ 80,000 for 4 days work a week and £ 70,000 for one days work a week in the private sector, Mr. Randle showed the influence of current private practice rates in boosting Consultant incomes in this country. If changes in acute healthcare were to reduce everything to a common fee then this would involve the consultant needing to earn £ 30,000 each 5 days to achieve the same end result. This would appear a most unlikely scenario.

Tom Mann's PresentationMr Michael Bonehill
Solicitor at H Montlake & Co

Mr. Michael Bonehill, solicitor with H. Montlake & Co, then spoke about legal restraints and the Competition Act. He reiterated again that a “Chambers” is not a legal entity and is not recognised as such. However, the behaviour of sole traders working together under a single roof (which may be classified as a Chambers), could lead to difficulties under the Competition Act if these individuals were to collude in any way over fee settings. He laid out the alternative entities for Consultants who may wish to work in the Independent Sector. These were partnerships, limited liability partnerships and a limited liability company. There are inherent advantages and disadvantages in these various forms of group workings.

Mr. Bonehill went on to define the prohibitions under Chapter 1 of the Competition Act which prohibits any agreements between parties which may effect trade within the UK and which have as their objective the prevention, restriction or distortion of competition with the United Kingdom. Chapter 2 of the Act prohibits any conduct which amounts to abuse of a dominant position in the market and which could effect trade in the United Kingdom. Mr. Bonehill was at pains to point out that a group of consultants working in a restricted geographical area would only be considered in breach of Chapter 2 prohibition of the Competition Act if they were abusing their numerically dominant position and making unreasonable charges or behaving in any other inappropriate manner.

access Mr Bonehill’s legal presentation please visit the dedicated website at

Tom Mann's PresentationMr Martin Murray
Accountant at Sandison Easson & Co. Chartered Accountants

Mr. Martin Murray of Sandison Easson and Co. specialist accountants then spoke about the differences in self-employed and employed status and the implications for tax schedules pensions and other benefits. Mr. Murray also laid out the financial equation between salaried and self-employed individuals and a company.

He also suggested a decision flow analysis for consultants who are considering the possibility of moving into a partnership or limited company or an expense sharing Chambers. This depended on the commitment of time, energy and finance that each consultant was prepared to expend. Mr Murray also mentioned the changes in taxation, which are likely and which will affect all these legal entities. He again stressed the need for all Consultants to have good financial and legal advice before embarking in this type of venture. (Click here for slides)

Tom Mann's PresentationDr Thomas Mann
Director of the National Implementation Team for ISTCs

Dr. Thomas Mann, Director of the Implementation Team for the ISTC project at the Department of Health, gave a detailed review of the role of ISTCs and the potential impact on the market. He announced plans to extend ISTCs to cover cardiovascular, diagnostic and gynaecological procedures. It was noted that a group of ISTCs in the “spine” of England had been awarded for the first time to an independent hospital operator, namely Capio UK. Dr. Mann then discussed “Additionality”, the concept that NHS consultants will not be allowed to work in ISTCs even if they were so inclined. It was made clear that, based on political imperatives and instruction, it was not possible for any employed NHS Consultant or any consultant who had been working in the NHS within the last six months, to contract and work in an ISTC.

However, subsequently FIPO has learned that there may be some loophole by which a Consultant with an NHS contract could undertake such work in an ISTC from within his/her NHS Trust. This would be acceptable if the Trust and the ISTC were to agree on his working in the ISTC on secondment from the Trust. This would maintain the NHS control over the consultants overall service delivery.

Tom Mann's PresentationMr Mark Smith
Managing Director of Mercury Health

Mr. Mark Smith the Development Director of Mercury Health Group then spoke about his own group and the fact that they were to operate five ISTCs in the southern part of England. Describing Mercury Health as part of the Tribal Group he outlined the policy context behind ISTCs. He enlarged upon the structured secondment of consultants through arrangements with their employer but defined and also reiterated the Additionality clause discussed by Dr. Mann. He then spoke about the credentialing and the types of speciality work that will be carried out as well as giving an outline of the type of professional contract envisaged. The ISTC contract will mean a move from a ‘fee for item of service for consultants’ to a salary for 5 years or fixed term. It was expected that surgeons would work to guidelines and protocols based on evidence based practice and be innovative and flexible in their response. He suggested that this would be an attractive package for consultants with dedicated support teams, no emergency work and at a “fair public sector reimbursement rate”.

When questioned over the precise reimbursement rate Mr Smith was unable to give accurate salaries although the understanding was from the audience that recruitment agencies are offering approximately £ 100,000 to £ 110,000 per annum for surgeons in some ISTCs, with terms and conditions uncertain. This equated poorly with the NHS contract and meant that sessional rates for consultants would be about £ 210 per session. As 4 operative procedures were anticipated on average per session (more in some specialities) this meant an operative fee rate of about £ 50 per procedure before tax. There was no information about study leave, annual leave, pension arrangements or duration of contract.

Tom Mann's PresentationMr Tim Baker
Director of Business Development at Norwich Union Healthcare

Mr. Tim Baker, Director of Business Development of Norwich Union Healthcare, then spoke about whether or not insurers were getting value for money from consultants. He stated that private healthcare is a non-competitive business with no innovation, lacking transparency and dominant market players with vested interests. He said that overall the independent market was small because there is a price barrier for most consumers and that this was the result of an inefficient, ineffective market. He stated that private hospitals were too small to gain economies of scale with a low proportion of Day Case output. He was also concerned about lack of quality data.

The insurance companies were clearly against the present consultants’ fee for service model and Mr Baker suggested that there was little competition and that consultants effectively worked a closed shop with poor quality outcome data. There would be future changes and he noted that waiting lists and times were coming down and that the ISTC programme will create new capacity, which will cause considerable turbulence in the system. These would result in higher throughput, competing providers and greater transparency.

Mr. Baker did not discuss in detail the NERA report which was a commissioned by the Norwich Union and the Financial Times suggesting that UK Consultants were overpaid by comparison with certain selected overseas Consultants for a range of operative procedures. This was challenged on various points from the audience and is discussed elsewhere in the FIPO website. (click here…..this should lead to the news section on the FIPO site where NERA report is discussed) There seemed little doubt that, despite the obvious and admitted flaws in the NERA report, the insurers were preparing to use this and any opportunity to send their clients for treatment in the ISTCs as a means to lower patient reimbursement rates for consultant services.

Tom Mann's PresentationMr Jon Ford
Head of the BMA’s Health Policy & Economic Research Unit

Mr. Jon Ford, Head of the Health Policy and Economic Research Unit at the BMA, then presented an erudite breakdown of the UK healthcare market which he described as “monopsonistic, segmented and asymmetric”. The NHS is a monopoly employer of Consultants whilst the private sector is dominated by a small number of private medical insurance carriers and hospital groups. It is segmented because the NHS offers universal though not comprehensive healthcare whilst the acute private sector provides an alternative and complimentary healthcare to about 12% of the population. NHS treatment is mainly consultant-lead, where private treatment is entirely consultant-based.

In terms of private practice he thought this was marginal activity as 30% of consultants do no private practice and 20% of consultants gross less than £ 10,000 per annum from private practice. This had implication for fixed costs. He pointed out that the public sector discount causes distortion of the market and he made comparisons with legal aid, the Bar and the role of principles versus junior barristers. Mr Ford’s conclusion was that there are considerable differences between the two sectors but that NHS consultant incomes are 60% lower than they were in 1980, relative to other earners and that real private fees are lower than one decade ago as actually noted in the NERA report.

His final comment was that the greater the degree of monopsony, the lower the rewards; the more segmented the market the more disparate the rewards; the more asymmetrical the market the greater the rewards. He also looked then at the NERA Report produced by the Norwich Union and challenged this on a variety of grounds.

Tom Mann's PresentationProfessor Nick Bosanquet
Professor of Health Policy at Imperial College London

Professor Nick Bosanquet, Professor of Health Policy at Imperial College, then talked about PCTs and the possibility of contracting directly with consultant groups. He reiterated his concern over Clinical Governance and the top down standards and protocols. He was unsure about value for money and whether or not money would in fact follow patients, but pointed out that in London and the South East there were certainly financial problems for PCTs in providing all the necessary services. The key concerns for PCTs were access, waiting times and also the six month maximum wait limit.

PCTs were in a difficult position with a number of un-costed forward commitments including the new GP contract, the contract with practices, the consultant Contract and relationship with GPs. He then questioned the direct relationship with Consultants and said that there was a need for a new culture and a development of a dialogue with Consultants with “quality” high on the agenda. He saw the possibility of new kinds of partnerships with Consultants working in some form of groupings as a way for greater flexibility in providing services.

Over 100 people attended the meeting from all sides of the PMI industry, NHS and the profession. Three CME points were awarded for the meeting for all professionals attending these sessions. Return questionnaires showed a high satisfaction rate and value derived from this meeting.

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