How private finance is moving primary care into corporate ownership

British Medical Journal, April 21, 2001 by Allyson M Pollock, Stewart Player, Sylvia Godden

Summary points

Healthcare companies and property developers are rapidly expanding into the ownership and provision of primary care premises

Under the private finance initiative, there are no restrictions on the amounts that can be borrowed or invested

"Bundling" of diverse NHS and non-NHS facilities into one project allows the commercial sector to target new sources of revenue

No data are collected centrally on the different types of public-private partnerships in primary care or on the various methods of financing and their implications for future NHS expenditure

Questions about the extent to which planning, population needs, and accountability are incorporated into the procurement process remain unanswered

A central aim in establishing the NHS was to integrate primary care and health and social services in health centres. But this aim was compromised by the absence of public capital and the reluctance of the Treasury to buy out practice premises owned by general practitioners. Although there was some grant funding for health and local authority owned health centres, by 1974 only 15% of general practitioners operated out of these.[1] General practitioner owned practice premises remained the dominant model from 1966 until 1989, financed by government loans and funded from NHS revenue under the rental reimbursement schemes. The privatisation of the government loan body in 1989 saw a switch to private finance and the entry of commercial companies and for-profit corporations. The amount of capital that can be raised by the private sector for new investment in the NHS is unrestricted. However, these debts have to be repaid through NHS funds or user charges.

The renewed impetus for integrated services in the 1997 white paper, The New NHS,[2] means that more sophisticated buildings are required to accommodate advanced clinical technology and information systems. The complex financing and funding arrangements, combined with demographic factors, makes it likely that as general practitioners opt for a salaried service, the trend to for-profit corporations owning and buying out practice premises will accelerate.

Currently, primary care services are provided by 29 987 general practitioners in 9000 main surgeries and 2500 branch surgeries.[3] The most recent survey of ownership carried out by the NHS Executive's valuation office in 1995-6 showed that 63% of practice premises were owned by general practitioners, 16% were owned by the NHS, and 21% were rented from the private sector.[4] In its first capital investment strategy for the NHS, the Department of Health proposed a "national target of improving 1000 GP premises over the next 3 years [by] replicating the success of big hospitals in non-acute settings and to explore the scope for PFI [Private Finance Initiative] type solutions in primary care."[5] Recent estimates suggest that about 10bn [pounds sterling] needs to be invested in primary care over the next decade.[6] Investment has started and is accelerating under the government's public-private partnerships initiative.

Although loans for practice premises are now increasingly from the commercial sector (see background paper on the BMJ's website), few data are collected centrally on the different types of public-private partnerships in primary care, their financing, and the implications for NHS expenditure. This article describes the new forms of ownership that are emerging in NHS primary care services.

Methods

We did a comprehensive review of business market surveys, the commercial press, and companies' annual reports, supplemented by telephone interviews and written correspondence with managers of companies and primary care leaders in health authorities and regions. We have divided market entrants into two main categories: healthcare companies and property developers, with several subclassifications.

Healthcare companies

We have defined healthcare companies as those that have a primary interest in providing or supplying primary care services but that have diversified into premises and property ownership to gain access to NHS revenues. The spectrum of healthcare companies ranges from general practitioners in traditional group practice premises to major corporations (fig 1).

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Traditional "cottage" group practices

General practitioners may form limited companies to procure group practice premises. The Shadwell Medical Centre development in Leeds resulted from four general practitioners moving to larger premises to cope with an expanded list size. The doctors formed a separate property owning partnership and took out a 300 000 [pounds sterling] commercial loan. The expanded list size allowed the practice to take on another partner. The shortfall in income from NHS general medical services was made up by leasing space to a pharmacist and optician and office space to Leeds Community Mental Health Trust.[4]

Coloniser chains

Some general practitioners have moved from group to chain ownership of practice premises. The Cheltenham Family Healthcare Centre, which opened in April 1999, houses five practices and 26 general practitioners together with practice nurses, reception staff, and midwives. It serves 46 000 patients. The project cost 5.8m [pounds sterling], including value added tax, land purchase, and rolled-up interest. Capital was provided by the General Practice Finance Corporation in the form of a 25 year repayment loan, and the health authority gave an 843 000 [pounds sterling] grant to fund space for non-general medical services. The doctors formed a limited company to buy the premises from the developers and to rent space. Three quarters of the rent comes from the NHS notional rent scheme for providing general medical services; the rest is paid from commercial sources, including a commercial lease negotiated with the local hospital for children's dental services.[7]