Written Evidence submitted by the Association of Independent Healthcare Organisations (BRE0019)

• The Association of Independent Healthcare Organisations (AIHO) is the trade association for independent healthcare providers across the United Kingdom. AIHO represents over 250 hospitals that provide services to insured, self-paying and NHS-funded patients. AIHO members vary from large hospital groups to smaller, specialist providers of specific surgeries and treatments.

AIHO recognises the enormity of the context and challenge that Brexit poses for the government and welcomes your initiative to consult in this way. The following response reflects the views of a range of AIHO members.

1. Risks that AIHO see following the referendum outcome. AIHO’s views on what action Government could take to mitigate those risks. 

1.1 Uncertainty and instability causing staff recruitment and retention difficulties

1. The independent healthcare sector and NHS both rely significantly on migrant workers (from both the EU and internationally) in order to fill a number of key clinical roles, particularly in nursing which is identified on the Government’s official Shortage Occupation List. However, reliance on migrant workers in the health sector is not just about nurses and doctors, it is also about other critical team members such as cleaners, porters and administrative staff.

2. The uncertainty around how the UK will treat EU nationals following Brexit - not least as a result of the Prime Minister explicitly not guaranteeing the status of EU nationals already in the UK - is likely to lead to instability and uncertainty within the sector’s EU nationals’ workforce.  Additionally, the UK may become less attractive for potential new employees in the years leading up to Brexit.

3. In order to mitigate the risks, the Government needs to reassure EU staff in particular about the importance of their current and future contribution to the UK healthcare system and confirm that they will be able to remain once the UK leaves the EU.

4. Furthermore, there have been discussions on a potential immigration ‘emergency brake’ for the UK in an effort to meet concerns on free movement in the short-term.  It is anticipated that the political discourse on immigration will force the Government to take measures on a form of immigration it can control in the short-term, i.e. non-EU immigration. This is of real concern as a significant number of nurses come to the UK from outside the EU.

5. On both these issues, it will be important for the healthcare sector that this does not limit hospitals’ ability to recruit or increase administrative procedures (visa applications and registrations) for recruiting EU and international clinical and non-clinical staff.

1.2 Economy uncertainty leading to reduced business confidence and consumer spending

1. AIHO sees economic uncertainty as the single biggest factor that could impact our members’ key customer groups, potentially giving rise to reduced business and consumer confidence and spending. If the sector and its investors cannot be assured that they will have staff for new or expanded facilities and services, it would be very difficult to justify the investment. Investment plans are likely to be reviewed, given the market uncertainty, heightened risk and lack of access to capital. 

2. Furthermore, reduced business confidence and any deterioration to the financial performance of UK companies would have an adverse impact on tax revenues to the UK government and introduce uncertainty to NHS funding.

3. More specifically, most of the sector’s medical equipment is manufactured in Europe and with the decline in sterling this will lead to cost increases – exacerbated by the reduction in interest rates.

2. AIHO’s views on what Government should be doing within the UK now to sustain and build business confidence to continue trading and to secure its confidence to invest in innovation and growth. 

1. AHIO strongly believes that the government should be doing everything possible to ensure the country does not slip into recession. The risks of recession for the independent sector include:

• less businesses covering their staff through private medical insurance thus less private activity on hospitals and more strain on the NHS;
• lower consumer confidence, less self-pay spending on health and again more strain on the NHS;
• less tax revenues potentially affecting NHS budgets.

2. Inward investment has become more likely as investment in the sterling zone has become more attractive. Central London hospitals may benefit as international patients take advantage from the sterling’s decline. Given the importance of international patients’ to the UK independent healthcare industry (nearly £2 billion to the London economy annually), it is also important that any new controls do not impact on patients’ and their families’ ability to obtain visas to come to the UK for treatment.

3. AIHO’s principle concerns and priorities as the UK begins the process of exiting the EU.  Outcomes that AIHO would want to see in relation to our trading relationship with the EU.

3.1 Free movement of people

1. A complete end to the free movement of people could result in a significant proportion of current and future hospital staff being presented with new legal barriers to work.  It is crucial for the healthcare industry that it can continue to recruit clinical staff from abroad, particularly where there are identified skills shortages amongst the UK workforce. The independent sector employs around 60k clinical staff alone and the sector seeks clarity on arrangements going forward.
2. Clarity in terms of employment law, for example agency workers’ rights, holiday entitlement, working time and TUPE is also a priority for the sector. The sector would be keen to ensure the retention of the EHIC (European Health Insurance Card) reciprocal arrangements with the rest of Europe.

3.2 Free movement of goods: pharmaceuticals and medical devices

1. The free movement of goods is one of the overriding principles of the EU Treaties, and pharmaceuticals and medical devices circulate more or less freely. Their special status, owing to the need to guarantee their efficacy and safety, entails a raft of EU legislation. Healthcare providers in the UK rely on this EU legislative framework for the vast majority of drugs and devices they prescribe.

2. Leaving the EU legislative framework for pharmaceuticals and medical devices would entail establishing a parallel system, with its own institutions, scientific expertise and monitoring systems.   This would be an unnecessary administrative burden and therefore AIHO would advocate the maintenance of the existing legislative framework.

3. Additionally, the sector would not want to see the price of hospital imported goods rising due to tariffs or the like. Anything that increases costs across the board again impacts on hospitals’ ability to invest in continuing to provide high quality patient care, innovative services, and research and development. Most of the sector’s medical equipment is manufactured in Europe and with the decline in sterling this will lead to cost increases – exacerbated by the reduction in interest rates. Trade that is ‘as free as possible’ is a priority for AIHO members.

3.3 Research and Development

1. The UK is a world-leader in science and research, developing new technologies, discovering life-saving medicines and pioneering innovations.  The industry benefits from various funding schemes and programmes, such as Horizon 2020, the Innovative Medicines Initiatives (IMI), the European Investment Fund (EIF) and the European Research Council (ERC). However, Britain exiting the EU threatens the ability of UK based organisations to access these schemes and could lead to a ‘brain drain’ of researchers and scientists from the UK.

2. Whilst AIHO welcomes the Government’s commitment to underwrite the Horizon 2020 grants in the short-term, it will be crucial for the UK’s world-leading position in science and research, and the knock on benefits that the UK healthcare sector derives from this, that in the longer-term that the UK continues to have access to these or equivalent grants.

3.4 Clinical research regulation

1. Clinical research in the UK for the purpose of developing new pharmaceuticals is governed by the EU Clinical Trials Regulation. The Regulation provides a single framework for trials covering multiple countries, and places the UK within a unified research network. Leaving this research network could cast the UK outside of the scope of future clinical research, and make it less likely that hospitals in the UK are part of multi-site trials.

2. If the UK were to leave the scope of the Regulation, companies wishing to conduct multi-site clinical trials across the EU could exclude the UK, owing to the distinct process required for registering a clinical trial in a separate jurisdiction. Separate centralised and national clinical trial authorisation procedures would need to be followed. However, mutual recognition arrangements could be arranged to minimise inefficiencies.

3. Similarly, in order for clinical trials conducted in the UK to be used to support applications for the authorisation of medicinal products in the EU, the regulations governing the trial would have to show equivalence with the existing EU legislation. Therefore, the continued applicability of, or equivalence with, the Clinical Trials Regulation, will be important for UK research institutions and hospitals.

3.5 Financial Services Sector

1. The City of London is not only the engine of the UK economy; it is a provider of high income jobs that facilitate access to independent healthcare for their employees. London, outside of the EU, may become less attractive to large financial institutions and hence reduce the customer base for independent healthcare in the UK. It will be crucial for the City of London’s financial services industry (and therefore the independent healthcare market) for passporting rights to continue to be extended to the UK, once the UK exits the EU.

4. AIHO’s views on priorities for framing relationships with the rest of the world and our wider trading environment. 

1. Following on from the point made above, the financial services sector is a significant contributor to the UK economy and a key customer group for independent healthcare services. AIHO would welcome prioritising this business sector in negotiations and seeking favourable clarification of passporting rights for our members’ customers. AIHO is pleased to note that Philip Hammond has recently alluded to such a step.

2. From a geographical perspective, the majority of our members’ suppliers are UK-based, but source goods from outside as well as inside the UK. Therefore, negotiating trading agreements with the EU as well as other significant markets such as the US and China is a priority.

5. Future opportunities for independent healthcare 

1. Independent hospitals can support the NHS through the provision of NHS procedures through spare capacity at no additional cost to the taxpayer. Only 1 per cent of independent hospital capacity was utilised to increase NHS operational resilience in 2013/14[1]. Referral to treatment times show that patients are treated earlier by independent sector providers compared with those treated by NHS organisations. Waiting times are an important indicator of organisational efficiency.

2. Policymakers and local decision makers should develop a strategic vision which effectively utilises the capacity and capability of independent hospitals within the NHS. New research commissioned by AIHO shows that the independent sector carried out approximately 21 per cent of NHS funded hip replacements and 23 per cent of NHS funded knee replacements at a cost set by the NHS in 2014/2015, helping to alleviate NHS capacity demands and providing greater choice to NHS funded patients. Rather than an ad hoc approach at times of intense demand, the capacity available in independent hospitals should be part of a longer term plan to meet the growing needs of the ageing population.

3. Better use of self-pay and personal or corporate insurance is also vital to ensuring the financial sustainability of the NHS. As the population’s healthcare needs increase and become more complex, we must consider how to moderate demand for NHS care in order for the service to continue to deliver care to a high standard. Demand for frontline services can be reduced by harnessing healthcare provided outside of the NHS. To improve NHS sustainability, we should use capacity in the independent sector through self-pay and insurance. The sector is actively exploring ways to make private medical insurance (PMI) more accessible and attractive to corporates and individuals.

4. The government should also encourage the public to use PMI more effectively. A reformed and incentivised PMI market could support demand moderation for the NHS and boost innovation, efficiency and productivity in the UK economy. In 2012, 10.9 percent of the UK population had private voluntary health insurance. The bulk of it was provided through employers (3.97 million policies) versus individual policies (0.97 million)[2].

5. Policymakers should develop mechanisms that encourage people with PMI to use it, such as a more formalised GP referral system. In addition, the government should better inform patients, GPs and support staff on PMI. This would help consumers to understand about the scope of their cover alongside the NHS and how the claims process works. This in turn will help increase the likelihood of patients being asked whether they have it, and consequently, the likelihood of them using it. Spire Healthcare surveyed GPs in 2013 and found that less than two thirds of GPs asked their patients whether they have PMI[3]. Research from HCA International also found that of those patients who go down a private treatment route, only 22% had the option raised by their GP. 78% of the time it is the patient that brings it up.

                                                                                                                                                                        October 2016