The facility fee
Payments for private medical procedures are typically divided into a fee for the clinician/s and a fee for the facility where the work is performed. This 'facility fee' includes the cost of: employment of the various staff involved; use of an operating theatre or equivalent; laboratory fees, e.g. histopathology; disposable instruments; and implants. Historically there has been complete separation between the two components of the fee, however, recently the edges have become blurred:
• For common procedures, some PMIs have attempted to introduce agreements with certain care providers, with a total package fee to include clinicians' reimbursements. It is then up to the care provider (e.g. a private hospital chain) to distribute the work, and crucially decide what fees it should pay to its clinicians.
• Some clinicians have organised themselves into groups or 'chambers' of clinicians, often as a limited liability partnership (LLP) or corporation, an entity which is typically registered with the Care Quality Commission in England. Such a group can then negotiate what fees to pay to chosen facilities for certain procedures.
You may find that the fees charged by some facilities are surprisingly low, which may of course reflect a lower quality of care. Conversely, it may represent the true costs of a procedure, higher costs elsewhere simply representing profit. In such a situation, you have the potential to adjust your fee accordingly, as well as negotiating with the facility for an adjustment in their fees.
• In many cases, the fact that many private hospitals carry out NHS waiting list or Extended Choice Network procedures (at NHS tariff) has helped clinicians understand the true costs involved. This has fuelled local discussions regarding redistribution of private hospital fee splits for self-pay patients' procedures.
Strategies
This is a complex area, however, there is little doubt that accessing the facility component of the fee can potentially lead to an increase in the profitability of private medicine for clinicians; given the attempts of certain PMIs to reduce clinicians' fees in recent times, this represents a major opportunity for clinicians. Consider the strategies below for an effective approach, potentially working within an LLP or similar:
(i) Negotiations with private hospitals concerning self-pay patients' fee splits
At most private hospitals, a patient typically pays an agreed fee in advance for a procedure, which includes the associated facility fee and clinicians' fees. The clinician's fee may or may not include associated follow-up, as per local agreement. This fee is then typically paid to the clinician(s) in arrears, typically as part of a fortnightly or monthly 'payroll'.
There is a wide variation in the fee splits paid to clinicians for similar procedures, reflecting the economics of supply and demand, local competition between both hospitals and clinicians, perceived expertise in certain areas, and local negotiation. The ease with which one may negotiate changes in the fee split will naturally vary between hospitals and individuals.
Factors to consider include:
• local price variation
E.g. if your hospital is charging £300 less for a procedure than its rival, you could argue for a rise in total patient fees to more appropriately reward you for your work.
• local variations in the fee split
E.g. are you paid more for the same procedure at a rival hospital?
• the responsibility that you are undertaking
E.g. if you do not use an anaesthetist where others do, but the fees are similar, you could request an enhancement to reflect the added responsibility you have taken on.
• how busy you are
Consider whether your procedure is perhaps priced at too low or too high a level.
• local threats
E.g. competition in town; in some situations you may wish to reduce the total cost to the patient to compete more effectively.
• your wishes.
As a professional, it is your right to set your own fees at a level with which you are happy.
The most important of these factors is the last. If the business is yours, in other words, if you, as an individual or group, are being referred the work - not the hospital - then you should certainly have the power to set your own fees. If there is competition between private facilities in town (and this can mean NHS facilities, especially for day case work), then you can divert business to an alternative facility in order to achieve your goals. This is a particularly powerful argument if there are other (e.g. quality) aspects of your private hospital's care with which you are unhappy. In many cases, merely the threat of moving business will be sufficient to allow for a successful negotiation, often leading to improvements in patient care as a result. If, however, the hospital receives many generic referrals and distributes them to its consultant staff, the hospital is in a very strong position to determine what to apportion to you.
(ii) Working within other facilities, e.g. the NHS
NHS Trusts are usually keen for consultants to carry out private work within their facilities, however, the degree to which each individual Trust embraces private work varies widely. Organisations are normally able to provide a price list for procedures that can be carried out, the fee usually covering all aspects of the procedure, except the clinicians' fees. In many cases, the fee in English NHS hospitals is the same as the PBR tariff for the procedure in question, the profit therefore being the lack of a payment to the clinician(s), who charges separately, plus any 'standard' profit from the procedure at normal NHS PBR rates.
For certain procedures, if you are able to promise a certain volume of work, you may be able to negotiate a lower facility fee per procedure from the organisation. This becomes extremely important in the setting of clinicians' chambers (LLPs) and negotiating with the various facilities that you may have access to; if two organisations are able to provide the same quality of care, favouring the less costly allows a lower total fee to the patient, potentially greater profit, or both.
Patients' perceptions, as ever, are key to the success of diverting care to other organisations. Many patients will have chosen private healthcare due to personal anxieties regarding public hospitals, however, they are usually reassured if you can provide solid reasons for recommending treatment there instead. These may include:
• one-to-one nursing, if you can arrange this
• better equipment
• a more relaxed environment for the surgeon to work in
• better emergency facilities, in case of a complication
• better nurses, for example, theatre nurses who only do orthopaedic procedures, rather than private hospital theatre nurses, who typically have to multitask
• lower total costs
Generally speaking, it is easier to engage your private practice with NHS facilities if your specialty is day case / outpatient based. In the absence of dedicated private wards, prolonged inpatient stays for private patients on NHS wards often lead to considerable disquiet for all concerned. In addition, the ever-present threat of cancelled procedures due to capacity issues can make planning treatments difficult.
(iii) Forming an LLP or company and delivering the care 'package'
It is not only private hospitals that can deliver private healthcare 'packages' - the provision of comprehensive complementary services for a patient. Any organisation, either a company or limited liability partnership,
provided it is appropriately registered (with the Care Quality Commission within England) can provide such a package. Examples include the companies that run some of the UK's independent treatment centres, high street refractive surgery centres, dental practices offering cosmetic treatments etc. Each such organisation charges a single fee to the patient for each treatment, making key decisions regarding how to remunerate its staff, purchase its consumables and the location of where such treatments are delivered.
In many cases, the treatments are delivered within the organisation's own facility, e.g. the dental practice, however, in other cases operating theatres are hired from either private or NHS hospitals for the provision of care. The fees payable for such facilities are a matter for negotiation by the organisation and may be charged on a case-by-case basis, or by the 'hour'; such arrangements may or may not include the provision of staff by the host facility, as required.
A group of clinicians can form a limited liability partnership (LLP) - or a company - in such a way and provide care packages as above. The goal of such a partnership may be carrying out NHS waiting list work at attractive rates, NHS contracts for regular work, private practice, or all of the above. There are naturally pros and cons of working in this way, including cooperation for the benefits of all, but also interpersonal differences and difficulties. Within such an organisation, it is commonplace to have published, mutually agreed fee schedules, something that is expressly forbidden by competition law outside such an arrangement.
If your LLP or company attains value, for example, through long term contracts or a good brand, then you may be able to charge new clinicians to join your organisation, or sell your share when you wish to divest your interests. Furthermore, if you personally have significant market share and too little capacity, your organisation can engage new clinicians on different terms. While such actions seem logical from a business perspective, particularly within medicine they may lead to disharmonious relationships between colleagues, as well as fostering the development of rival organisations locally, which may ultimately drive down profits. Conversely, of course, this may be of ultimate benefit to patients from a competition perspective.
If your organisation wishes, you can apply to the PMIs for recognition as a provider of care, however, recognition is not guaranteed and you should not assume that your organisation will achieve the same fees for carrying out procedures as other facilities; many PMIs are understandably trying to reduce their costs and will doubtless drive a hard bargain. It is worth remembering that the contracts associated with PMI recognition are likely to be time-limited and will need renegotiating at a later date.
(iv) Your own facility
Following the publication of the Competition & Markets Authority
private healthcare market investigation order in 2014, it is increasingly difficult for clinicians with equity shares in private hospitals and / or facilities. Typically, consultants are not allowed to own more than 5% - directly or indirectly – of the financial interest in any facility, unless in entirety. Further guidance in this complex area is currently beyond the scope of this website.