Who pays when it goes wrong? The uncertainty of private providers in the NHS

The sad story of the 30 people who have apparently been left with damage to their eyes after undergoing routine cataract operations at Musgrove Park Hospital begs the question: who pays when it goes wrong?

Cataract surgery, carried out on a total of 62 people in May, had been outsourced to private provider Vanguard Healthcare, which did the operations at the hospital.

‘Who is responsible and who will pick up the tab for compensation claims?’

The contract with Vanguard was to help the hospital clear a backlog of patients.

But the hospital apparently terminated its contract with Vanguard after just four days.

Trust chief executive Jo Cubbon said: “Technical issues in the facility had arisen and it became necessary to cease the service arrangements in place.”

Who to turn to?

So who is responsible for what happened at Musgrove Park, and who would pick up the tab for the compensation claims?

Unsurprisingly, the trust has been reluctant to talk in detail about what took place and what went wrong, pending the outcome of its own investigation.

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Similarly, it has refused to discuss where the eventual compensation bill would end up, although Colin Close, the trust’s medical director, was quoted by the Somerset County Gazette saying: “Any financial responsibility would rest with us. If any patients wish to pursue compensation, we would work with them.”  

The hospital subsequently claimed that Dr Close had been misquoted.

Vexed indemnity

The question of the safeguards to be put in place to ensure that private and other providers have the necessary indemnity cover in place so they are able to meet claims for clinical negligence have been somewhat vexed.

In response to a parliamentary question, the Department of Health said last summer that the NHS standard contract required all contractors of NHS care “to hold and maintain adequate and appropriate indemnity insurance”.

Private providers can sign up to the NHS Litigation Authority’s Clinical Negligence Scheme for Trusts, but it is not compulsory. Instead, they are free to secure appropriate clinical negligence indemnity insurance from the wider insurance market.

‘There’s a risk private providers may seek to ensure liabilities for issues remain with the commissioner’

However, commentators have questioned how effectively commercial insurers would be able to assess the risks involved in carrying out surgery and offering general clinical services, with the associated inherent risks of both historic claims and their potential to come to light many years in the future.

Ian Gillespie, the chief executive of Vanguard, had said that it “has appropriate cover in place”. But the Litigation Authority said the question of financial liability would depend on the contract with Vanguard: a matter for the trust, rather than the authority.

The risk is of course that private providers may seek to contractually ensure that liabilities for issues like clinical negligence claims remain instead with the commissioner, be it a clinical commissioning group or an individual GP, and therefore fall ultimately with the authority, and thus funded by the taxpayer.

‘Getting away with it’

Politically, this would seem to be a dangerous course of action for the general public, which is already weary of stories about enforced cost cutting across the NHS.

If private providers appear to be “getting away with it” in terms of meeting the cost when things go wrong, questions will inevitably be asked about why they should be able to take the benefit and the profit they generate from providing NHS services. 

Similarly, any private provider found to have insufficient insurance cover in place to be able to indemnify a trust would be very bad news for the government.

‘What is to stop a private provider refusing to indemnify if it doesn’t agree with the trust’s view that it was at fault?’

Aside from purely contractual arrangements, one call also envisages a scenario whereby a trust agrees to deal with a claim and seeks to recoup its outlay from the private provider that the trust considers to be at fault.

What is to stop the private provider from simply refusing to indemnify on the basis that it does not agree with the trust’s view that it was at fault?

Here the public purse would have to bear the cost unless the trust was prepared to sue the private provider, with all the associated risks and costs attached to such a course of action.

No doubt the DH is more than alive to these and other potential ramifications.

Richard Jolly is a partner in the healthcare team at national law firm Weightmans LLP