The government has struck a groundbreaking deal with two of Britain's independent hospital chains to carry out 25,000 orthopaedic operations on patients from the NHS waiting list in England at a cost to taxpayers which slashes the normal private sector rate.
John Reid, the health secretary, will today announce block contracts with Nuffield Hospitals and another UK company to provide hip and knee replacements at 40 of their operating centres across England. There will be no charge to patients.
The contracts will provide extra capacity to help reduce maximum waiting times to six months - one of the government's key political targets in the run-up to the next general election. Although details will not become clear until the stock exchange has been informed this morning, the price to the taxpayer is understood to be the same as the standard NHS tariff, a drastic reduction on the normal independent sector rate.
Other private healthcare firms are thought to be furious that Nuffield, a not-for-profit charitable group, is prepared to use its spare capacity to undercut them so comprehensively.
Mr Reid is expected to claim it as a triumph for a hard-nosed approach to the private sector. He squeezed out British firms from the first round of fast-track surgery contracts in September, when most of the business went to South African, Canadian and US consortiums.
Two of those contracts have since turned sour. Anglo-Canadian was "deselected" as preferred bidder for a London chain of treatment centres last week and Mercury Health withdrew in February from plans to build 10 surgery centres across England.
But the shock of being beaten by overseas firms for NHS business may have had a lasting effect on the British companies.
Mr Reid told the Commons health select committee in October that NHS trusts buying operations in the private sector paid about 40% more than the standard NHS rate. By negotiating the new contracts at a bulk rate, he is claiming to have eliminated that excess.
Nuffield will start carrying out the operations next month and all 25,000 should be done by April next year. Further contracts may then be signed.
The deal begins to honour a promise by Tony Blair in July last year when he said the government would get the independent sector to perform 125,000 operations over the next five years.
The government was criticised by Frank Dobson, the former Labour health secretary, for paying overseas firms a premium rate for building fast-track surgery "factories" instead of investing in expansion of the NHS.
Mr Reid will say the new contracts will provide extra capacity that the NHS could not have found even if it was showered with extra money. The companies have promised not to poach NHS staff, although they will be allowed to offer more overtime to NHS surgeons who are already on their books. The deal will use spare capacity in their operating theatres.
The health secretary told colleagues this month that he was preparing to scrap the concordat with the private sector that was signed three years ago by his predecessor Alan Milburn. It emerged yesterday, however, that his real intention was to move to bulk buying instead of spot purchasing at inflated rates. Individual trusts will be allowed local deals at higher rates if they have particular short-term difficulties.
For many years, patients needing orthopaedic surgery have endured some of the longest waits in the NHS. The maximum wait in England has been cut to nine months and the target is to cut this to six months by the end of next year.
Nuffield Hospitals, established in 1957, grew into Britain's largest not-for-profit chain. Its website says it wants a partnership with the NHS. "In the short term, where we have the capacity and suitable resources, we are helping to reduce waiting lists.
"In the long term we look forward to collaborating locally on shared challenges or providing healthcare in the community."
