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Some of the country’s most senior NHS clinicians are earning a lucrative sideline running private firms that offer to cut waiting lists at their own hospitals, the Observer can reveal.

Top consultants in Manchester, Sheffield and London are among directors of “insourcing” agencies that charge the health service to treat patients at weekends and evenings and have won millions of pounds of work.

Some hold leadership roles at NHS trusts that have awarded contracts to their own companies, raising concerns about potential conflicts of interest.

One deputy medical director jointly ran a firm that provided “insourcing” solutions to his own NHS trust before it was sold in a £13m deal last year. Other consultants have set up firms that they and their colleagues work shifts through themselves, often at rates above NHS price caps.

Colin Melville from the GMC said conflicts of interest could damage trust in the service. Photograph: thephysician.uk

The Centre for Health and the Public Interest, an independent thinktank, this weekend called for a ban on such arrangements. The General Medical Council said current conflict of interest policies did not always deliver “the transparency and assurance that patients rightly expect”.

An Observer investigation has found:

  • Three senior consultants in Sheffield ran a private firm, Pioneer Healthcare, offering insourcing services to help the NHS cut backlogs. The company won a series of contracts with local hospitals before being sold to a major private healthcare provider in a £13m deal;

  • At Manchester University NHS Foundation Trust, three top surgeons including a clinical lead and a former clinical director are the owners of Fortify Clinic , a company offering “end to end” services to tackle waiting lists. The firm was paid £1.3m by the trust for work in 2022;

  • Two senior consultants at the Northern Care Alliance NHS Foundation Trust trust set up Venture Health Group in December and began contracting with their own trust that month to help it meet “challenging backlog targets”.

The deals are revealed as trusts ramp up reliance on the private sector to tackle record waiting lists, with the “insourcing” market alone projected to be worth £295m next year, up from £44m in 2019, according to analysts Mansfield Advisors.

“Insourcing” involves teams of doctors and nurses being drafted in to treat patients on NHS premises. Private companies offering insourcing solutions typically work outside normal hours and use spare theatre capacity. They may use their own anaesthetists and theatre staff but often rely on support staff and infrastructure from the host NHS trust.

Trusts say the services help clear backlogs and can be cheaper than outsourcing to private hospitals because the firms do not have the same fixed costs or overheads. But the growth of the sector has raised questions about value for money and potential conflicts of interest.

Pioneer Healthcare, which was sold last year to healthcare service firm Totally, is led by three senior consultants: Prof Prasad Godbole, deputy medical director at Sheffield Children’s NHS foundation trust; Hesham Zaki, lead paediatric neurosurgeon at the trust, and John McMullan, consultant neurosurgeon at Sheffield Children’s and Sheffield Teaching Hospitals NHS foundation trust.

In addition to its other contracts, Pioneer has an initiative to cut waiting lists at Sheffield Children’s hospital, running 64 all-day theatre lists since 2021. It has also been paid more than £6.5m by Sheffield Teaching Hospitals from January 2019 to December 2022, including payments for a tendered £752,000 contract starting in May 2021 for “healthcare on trust premises”.

Another insourcing firm, Gastro Teams Seven 7 of Durham, has been paid more than £770,000 since January 2022 by County Durham and Darlington NHS Trust, where two of its directors work as consultants.

The trusts say all rules were followed and interests were publicly disclosed and managed appropriately, but the findings have led to calls for a review of conflict of interest rules for healthcare professionals

Alan Clamp, chief executive of the Professional Standards Authority, which oversees regulation of health professionals in the UK, called for a cross-sector review of managing conflicts in healthcare and urged regulators and employers to “tackle business practices” that “risk undermining public confidence”.

David Rowland, director of the Centre for Health and the Public Interest, said the current rules were “woefully weak” and called for a ban on arrangements of the sort identified by the Observer. He questioned whether potential conflicts could ever be effectively managed “if you’ve got money going from an NHS trust to a company owned by senior employees”.

“Even the perception of a potential conflict is damaging,” Rowland said.

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A whistleblower at one trust where consultants run an insourcing firm said there had been “a lot of complaints” about the arrangements internally and called for greater scrutiny. “This is backdoor privatisation,” he said.

The growth of insourcing has also led to concerns about value for money for the NHS. Several firms have reported substantial profits and offer consultants £2,000 per 10-hour shift, higher than the £137.58 an hour maximum they could receive if paid in line with the NHS’s approved rates.

Prof Colin Melville, medical director at the General Medical Council, said patient trust could be damaged “if a doctor’s interests affect, or are seen to affect, their professional judgment”. “We know that current arrangements for managing conflicts of interest don’t always deliver the transparency and assurance that patients rightly expect,” he said.

Totally, which acquired Pioneer Healthcare in 2022, said the firm used otherwise spare hospital capacity to treat patients at costs “equal to or below” NHS tariffs and had helped cut NHS waiting lists by 40,000 a year. All contracts were awarded through “formal and anonymous procurement processes” to eliminate conflicts of interest and “directors of Pioneer who hold decision-making roles within trusts” were not involved.

Sheffield Children’s NHS Foundation Trust said all potential conflicts were “thoroughly considered and managed”. Sheffield Teaching Hospitals NHS Foundation Trust said consultants who also worked for Pioneer were not involved in decision-making and there was no conflict of interest.

Fortify Clinic said it was on an NHS framework for insourcing and had complied with NHS rules. Manchester University NHS Foundation Trust said: “We undertake all non-pay procurement in accordance with public procurement contracts regulations, our governance framework and the Chartered Institute of Procurement & Supply guidance.”

County Durham and Darlington NHS Foundation Trust said work undertaken by Gastro Teams Seven 7 had been “key to its pandemic recovery” and there was “no conflict of interest.”

Venture Health Group said it had followed processes around conflicts of interest. The Northern Care Alliance NHS Foundation Trust said the contract had been awarded directly to the firm during a “very challenging period” and that “a full procurement exercise to seek a longer term partner” would be undertaken in April.

The Department of Health and Social Care is considering a UK-wide system for doctors to declare their interests.

NHS England said: “While it’s in part thanks to the use of the independent sector that the NHS in England has already virtually eliminated two-year waits for elective treatment, guidance is clear that insourcing should not be used where temporary workers are paid escalated rates and suppliers must be registered with the [regulator] CQC.”

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