How privatising ADHD diagnosis robs the NHS of resources

This blog was first featured on the LSE blog here. 

Since the pandemic, private healthcare companies have seen soaring revenues and big returns. But few have seen the types of growth experienced by the mainly private equity backed companies which deliver ADHD assessments and cataract surgery to NHS patients. 

As our latest report shows, private companies have done incredibly well out of the demand for ADHD diagnosis amongst mainly younger people who are struggling with an ongoing mental health crisis.  

We estimate that spend by the NHS on private companies delivering these assessments has soared from £36 million to £128 million more than tripling over a 3 year period, with expenditure in the current financial year accelerating at an almost exponential rate. 

And because these companies often deliver ADHD assessments online at low cost, some have been able to make a very large 33% margin from NHS services.

This means that in some instances one pound in every three spent by the taxpayer on these forms of care goes nowhere near a patient but instead leaks out in the form of profit. 

Private eye care profit margins are a scandal  

These returns match the returns generated by the owners of 5 private eye care clinics, who have generated an average 32% profit from delivering NHS funded cataract surgery, with some companies making a 50% margin.

Over the course of the last year, 5 companies generated an astonishing £169 million in profits from NHS cataract care. 

Which again is taxpayer money set aside for the NHS which goes nowhere near patient care. 

To put this in context, this level of extraction is more than the average of 10% annual profits made out of all 100 NHS PFI contracts, which are widely deemed to have been the worst value for money contracts in the history of the NHS.  

This income has been generated as a result of an estimated 400% increase in the amount of cataract operations being provided by private companies since the pandemic, with 5 companies receiving £536 million in 2024.    

Given the extreme financial pressures the NHS is under, the ability of these companies to generate so much income and profit from providing services to  NHS patients should come as a surprise.  

But the market rules underpinning the current NHS system are so heavily weighted in favour of private companies, it is surprising that they haven’t done better.  

The damage to the NHS of “Right to Choose” 

As part of an initiative to expand the role of private sector companies in the NHS, the last government created the right of patients to choose any care provider, whether it be an NHS hospital or a private company – an initiative known as “Right to Choose” which the current government has stuck with.  

The rules underpinning Right to Choose are highly technical, but what they mean in practice is that when a GP refers an NHS patient to a private company for an ADHD assessment or a high street optician refers an NHS patient to a private clinic for cataract surgery the company simply sends a bill to the local NHS.

The local NHS body then has to pay the bill irrespective of whether they have the funds available and even if they don’t think the patient is a priority for receiving care.  

Remarkably, under the rules there is no need for the private company to hold a contract with the local NHS body before it submits its invoices.  

And the rules have prevented the local NHS body setting a limit on the number of NHS patients the company is able to treat or the amount of income it can receive. 

Given this arrangement, private companies have been given a good reason to set up large numbers of clinics throughout the country and encourage demand for their services.  

In the case of ADHD assessments online advertising and social media have been widely used by private providers to inform patients how to use the Right to Choose framework to a get a GP referral for a free ADHD assessment. 

For some private providers of NHS cataract surgery this has involved providing ‘financial incentives’ to high street opticians to refer patients to their companies rather than the NHS.

The result is that expenditure on these areas of care has soared and the NHS has had to pay for hundreds of thousands of episodes of care which it never budgeted for.

For the companies, this has been an entirely rational business response to the opportunities presented to them.  

For those patients who have received fast treatment under these rules it has, without doubt, been a God send.

For many other NHS patients, who are in dire need of other forms of care it has been a disaster.  

Our research has shown that the amount of income sucked out of local NHS eye care departments by the Right to Choose rules to private companies has left many NHS hospitals unable to provide effective emergency care, treat children, deliver services to those facing irreversible sight loss and train the next generation of eye surgeons. 

And the impact of the Right to Choose rules on the financial viability of the NHS is becoming apparent up and down the country.

In Oxfordshire, the local authority health scrutiny committee has written to Wes Streeting about the impact of the Right to Choose arrangements on the financial sustainability of local NHS services. 

In Merseyside and Cheshire, the uncapped growth in Right to Choose cataract referrals to private companies for cataract care is said to have threatened the financial viability of the heavily indebted local NHS, to the point where the local Integrated Care Board has considered stopping all referrals to private cataract companies. 

This is something which Greater Manchester has already resorted to in order to stop Right to Choose ADHD referrals from plunging it further into financial difficulty and to allow it to focus on those neurodiverse patients who are most in need. The NHS in the Black Country has followed suit for the same reasons.

Nationally, we estimate the Right to Choose rules have blown the budgets allocated for ADHD assessments by over 110% with £164 million potentially being taken away from other stretched services to pay invoices to private companies for treating NHS patients.

Government attempts to revise the market regulations to stem the massive rise in spend on Right to Choose providers have faced a backlash from the private sector lobby.  

And those local NHS bodies which have tried to suspend referrals to private companies due to the fact that they are running out of money are said to be facing legal threats from the private sector to reverse their plans.

Such action by the private sector is understandable – the annual reports of some of the largest suppliers of ADHD services to the NHS state that a change to the Right to Choose rules is a principal risk to their business.

The current rules which allow private companies to generate uncapped amounts of money and profit out of the health service at a time of crisis imperils its future and places their interests above the needs of patients.

If the NHS is to stand any chance of surviving the remainder of the Starmer administration and beyond it urgently needs to stop scarce taxpayer money leaking out of the NHS.

The private sector should only be used when local NHS bodies identify a clear need for additional provision, rather than allowing the market to dictate demand. Private companies delivering NHS care should be subject to more demanding contractual terms, including a reasonable cap on their profits and a requirement that they are tax registered in the UK.