How does the outsourcing of health and social care affect service quality?

Commercial organisations are increasingly being contracted to deliver health and social care in England. The privatisation of these public services is politically sensitive, with many fearing that the profit motive might put patients and service users at risk.

‘Outsourcing’ health and social care refers to transferring services – such as operations, in-patient care or community services – to for-profit firms rather than having the NHS or local authorities provide them directly.

The evidence from assessments of the quality of outsourced health and care services very rarely suggests that further outsourcing is a good idea. Despite this, more and more services are outsourced to the private sector. In 2021, £13.8 billion was spent by the NHS to pay for healthcare services provided by the private sector (British Medical Association, 2022).

In the NHS, public and private hospitals have comparable outcomes, but they treat very different types of NHS patients. What’s more, outsourcing may be having wider detrimental effects across the services, leading to worse health outcomes on average.

In social care, for-profit providers are doing worse in direct comparison with council-run services. They are also driving undesirable outcomes across the entirety of the services.

Is outsourcing increasing?

Levels of NHS privatisation in England are hotly contested. Government sources frequently claim that there has been no increase in outsourcing (Hancock, 2023). They cite the accounts for NHS England, which show a comparable spend on private provision over the last ten years.

But this hides some important patterns (Nuffield Trust). For example, while total spending is stable, there has been a substantial increase in the use of private providers to deliver hospital care.

Recent studies show that the number of NHS patients receiving consultant-led treatments in private hospitals has almost trebled since 2010 – rising to over 10% of treatments by 2022 (Goodair, 2023).

Similarly, expenditure by regional commissioners – those in charge of purchasing hospital care and community care – on for-profit providers has more than doubled since 2013, increasing to 6.5% of the total spending by all commissioners for which data were available in 2019 (Goodair and Reeves, 2022).

By comparison, some social care services in England have become totally dominated by for-profit provision. Around 75% of adult care homes and over 80% of children’s homes are now run for profit (Barron and West, 2017; Bach-Mortensen et al, 2022).

The quality of historical data makes it difficult to know precisely when these sectors became so heavily outsourced. What is clear is that before the 2010s, both the adult and children’s social care sectors were dominated by the for-profit sector – and the direction of travel has continued further in the years since.

What is striking is that residential care markets have become dominated by for-profit companies despite there being no explicit government policy to create services run almost entirely by the private sector.

Both health and social care services have seen meaningful increases in the outsourcing of services to for-profit providers – but the NHS remains a largely publicly owned service. This has not been the case in social care for decades.

What does outsourcing mean for patients and service users?

In healthcare settings, average outcomes for patients treated in private and public hospitals are roughly equivalent.

A few studies test for average outcomes in NHS hospitals compared with private hospitals: they find that patient satisfaction and health outcomes do not differ between the two settings on average (Moscelli et al, 2018, Pérotin et al, 2013). The same studies also find that the patients treated in the two settings are not comparable as private providers tend to treat healthier patients on average – and the studies must rely on statistical tools to try and correct for these imbalances.

More concerning is evidence that increases in regional spending on for-profit healthcare providers have, on average, corresponded to more patients dying of medically curable conditions such as specific respiratory diseases and cancers defined as ‘treatable’ (Goodair and Reeves, 2022).

These are trends that have also been observed in international contexts where healthcare services have been privatised (Quercioli et al, 2013). The conclusion of these studies is that areas that privatise their services are delivering worse quality healthcare on average – resulting in the avoidable deaths of patients.

The evidence for social care is even more worrying. Here, direct comparisons between for-profit and publicly run services have a consistent pattern of worse care in the private sector. This is measured through the assessments of quality reported by independent regulators (Patwardhan et al, 2022; Barron and West, 2017; Bach-Mortensen et al, 2022).

The dominant performance of publicly owned residential care makes it even more puzzling as to why the private sector delivers so many of these services.

There are also concerning trends in the social care sectors that appear to be worsened by outsourcing. For example, when children are taken into care, many are moved long distances across the country, away from their social support networks. This practice – worsened by outsourcing – is sometimes not in the children’s best interests and is simply a result of placement availability (Bach-Mortensen et al, 2023).

Similarly, staffing ratios in social care are a big concern. Again, evidence points to this being worse in for-profit provision (Burns et al, 2016; Department for Education, 2015).

One major concern is that cuts to staffing and resources are directly associated with the profit-seeking behaviour of the private equity firms that are increasingly involved in the sector. These firms are commonly using debt financing and selling off company assets to raise short-term cash (Corlet Walker et al, 2022).

How reliable is the evidence?

Outsourcing is hard to evaluate. The services provided by the private and public sectors are rarely comparable, and their users often have different needs and different socio-economic backgrounds.

The practice of outsourcing also happens in piecemeal and incremental ways, making it hard to compare outcomes ‘before and after’ the event. In the social sciences, we often look for comparison groups that are created randomly or ‘as-if-random’, and such settings are unlikely to arise in these cases.

Consequently, with privatisation of health and social care services, we are relying on observational patterns to provide evidence on whether theorised trends are likely to be happening in reality.

What else do we need to know?

Outside England there is a very different picture: the devolved governments of the UK have taken a different policy direction in terms of how health and social care markets are used. They also have different attitudes towards for-profit provision of these services.

The different data systems in each nation make comparisons tricky, but lessons are certainly available from how each differs (for example, Dayan and Edwards, 2017).

More broadly, the evidence for the NHS results in an obvious puzzle: if outcomes are roughly the same in private and public hospitals, how can outsourcing result in more deaths regionally?

One answer might be that there are knock-on effects, and that outsourcing makes it harder for the public hospitals to maintain their same quality of care. This might be particularly true if the public hospitals are left to deal with a higher proportion of patients with intense care needs and if they are not financially compensated for them. This is something that should be examined.

Across health and social care sectors, a key question that is yet to be answered is ‘who is suffering from the effects of outsourcing?’

It is likely to be the case that some groups of people are affected more than others by privatisation –but a robust analysis of the equity impacts of privatisation is yet to be conducted. For example, the reported rise in self-funded healthcare since the outbreak of Covid-19 is an obvious way in which shifts towards the private sector might result directly in increased health inequalities (Private Healthcare Information Network, PHIN, 2023).

Research in the social care sector regularly evaluates residential care services. As a result, we know less about the effects of privatisation on the quality of care in community care, early intervention, and other social work practices – many of which are also outsourced to the private sector.