What was the real purpose of Virgin's mysterious report into NHS customer service?

In 2000, Labour asked Virgin to report on customer services in the NHS. What they delivered went well beyond this remit, proposing policies and agendas eerily similar to what would become New Labour's NHS marketisation strategy. Who were the mystery authors, and what was Labour's role?

Andrew Robertson
30 January 2013

Richard Branson - Image: D@LY3D

A hitherto restricted report commissioned by Labour back in 2000 has revealed how Virgin overstepped their remit – advice on improving customer service in the NHS - by promoting an increase in the use of private companies. Further inclusions written into the report by mystery authors also reveal a fledgling policy idea that would later become part of Virgin’s expansion into the healthcare market. The document also sheds light on New Labour’s wider programme of marketising the NHS – the job the Coalition has now seen to conclusion.

The document, which was meant to focus on customer service, extended into areas of regional pay, consultant contracts and staff salaries, elements that would later be included as part of Labour’s ‘NHS Plan’. Under Tony Blair, Labour welcomed private companies into the NHS like never before, and in doing so helped spawn a new organisation that would go on to be key to maintaining competition in the recent Health and Social Care Act.

Now, with the Coalition’s Health & Social Care Act 2012 hammered through parliament, the NHS is being fragmented at an ever-increasing rate and some of those involved in handing out the new contracts include the very same architects behind this previously unseen report.

Asking for Virgin’s help
In 2000, the Labour party asked Richard Branson’s Virgin to advise on how to make hospitals a more user-friendly environment. Virgin, in the eyes of the Labour party, were a standard-bearer for customer service which could teach the NHS a thing or two about how to improve service quality.

Alan Milburn, the then Secretary of State for Health who commissioned the report, explained his decision to the BBC: "When people get into hospital they want to know that the basics are right - that the wards are clean, the food is good, the care is there. That is why I have now asked Sir Richard Branson's award-winning Virgin Group to advise us on how hospitals can be made consumer-friendly."

Completed in June 2000 and titled, ‘Customer Service in the NHS’, the report had a narrow remit to make recommendations on various areas of customer service: ‘Staff training to improve customer focus; systems for spreading best practice in customer service, guidance to improve the environment in NHS building and staff roles and responsibilities.’

Yet despite the report focusing on the seemingly uncontentious area of customer service, the Labour government chose to classify the report as ‘restricted.’ Now, following a FOI request made by Keep Our NHS Public activist, Mr N Csergo, the document has been made public for the very first time.

In order to carry out the task, a project team was formed, made up of the questionable healthcare expertise of ‘a General Manager of Cabin Services, Virgin Group Brand Quality Director’ and an ‘external consultant who has worked extensively with Virgin Atlantic.’

We do not know the exact identity of this team because their names have been redacted from the document. However, it seems certain is that whoever the authors were, they had nothing to do with large parts of the report, which regularly strayed from the customer service parameters into government policy with remarkable accuracy.

Promoting private interest
On page eleven of the report, under ‘A National Hospital Building Plan’, it says: ‘New buildings provide a great rallying point for beleaguered staff and dissatisfied customers.’

There should, it states, be ‘a number of specialist hospitals concentrating solely on elective surgery, requiring 1 to 5 days stay. Private hospitals could be utilised for part of this work.’

Providing advice on how to keep a patient happy is one thing; suggesting the most effective way to carry out surgery for the UK population appears to be quite another. In two parts of the report, the authors did make it clear when it was beyond their remit. These areas included the issue of consultants’ pay, which at that time was considered too low to encourage long-term retention of quality staff. ‘A new contract for consultants is required. Not in our brief, but on the face of it…Perhaps consultants should be given the choice of doing private work only.’

Who wrote Appendix 4?
A further recommendation made by the ‘Virgin customer service team’ and which also overstepped their remit, was considered important enough to be given its own appendix.  

Under ‘Poly-Clinics (Combined GP Clinics and Day Surgery Hospitals)’ Appendix 4 provided a detailed list on what these new health centres should look like. The categories were listed as ‘Key characteristics’, what it ‘provides’, what it ‘must have’ and ‘costs and benefits’. In the latter category, the mystery author informs us that a benefit of a Poly-Clinic is that it ‘offers choice for patients. Including choosing to pay.’

Appendix 4 appears to be the beginning of a new policy idea, and seven years later it was to become one. But why was this included in the report? Virgin PR director Nick Fox, suggested ‘Appendices were included for ease of reference.’ Maybe so, but on the question of who wrote them and what have they to do with customer service, Mr Fox was unable to explain further. ‘We have no more information and there was no follow up from our side,’ he said when contacted for this article.

Whether it was Virgin or the Department of Health that introduced this appendix is important because in 2007, Ara Darzi, Labour’s then Secretary of State for Health, introduced Poly-Clinics as policy. The government ordered all 152 Primary Care Trusts in England to have a GP-led centre, a third of which were run by private companies.

In 2008, Sir Richard Branson planned a network of Poly-Clinics in which GPs would be given a percentage of the profits on top of their NHS salary. In the 2000 report under the heading ‘Staffing’ it says the idea of Poly-Clinics would be ‘Attractive to entrepreneurial GPs’.

Then in early 2010, Virgin Care purchased a 75% stake in the healthcare arm of Assura and took over their Poly-Clinics. The Poly-Clinic system collapsed, however, following the Coalition government’s move towards “GP-led” commissioning.

Virgin denied they had used the report to promote policy for a potential future revenue stream, saying, ‘Virgin Atlantic and Virgin Group were asked by the Labour Government thirteen years ago to provide practical suggestions to address a range of issues flagged up by the Department of Health from the point of view of a company with a reputation for providing excellent customer experience in the travel industry.’

NHS Plan
A clue about who the report’s architects might be comes from the authors of ‘The Plot Against the NHS’ written by Colin Leys, and Stewart Player. In an article for Red Pepper they inform us how a Dr Penny Dash ‘was appointed head of strategy and planning in the Department of Health, and co-authored the NHS Plan of 2000, which initiated the marketisation process.’ Later, Penny Dash joined McKinsey & Co as a partner, the global consultants responsible for coming up with the £20 billion worth of savings the NHS is now having to endure, and which was partly used to justify the need for the Health & Social Care Act 2012. McKinsey, were also responsible for the financial modeling of Poly-Clinics, and Penny Dash was involved in two Darzi reports when Sir Ara Darzi was Secretary of State for Health. One of these reports promoted polyclinics in every part of the country. Was it Dr Dash and the team who pushed for Appendix 4 to be included in the Virgin report?

With the content of the report under Labour’s control, the media only wrote about the findings they were allowed to see. The Guardian carried a piece that focused on the cleanliness of the hospitals with the headline ‘Virgin team highlights NHS shambles’. The Telegraph reported that ‘NHS hospitals are ‘dirty and poorly run’. In an extensive interview with Peter Sissons on the BBC Breakfast show, Alan Milburn had ample opportunity to mention the Poly-Clinics, but did not. Nor did he mention other contentious points that were in the report, such as ‘flexibility in all clinical staff salaries to reflect regional differences’.

The dirty hospital stories made for uncomfortable reading, but not anything that the media-savvy government couldn’t handle. Equally, it provided an opportunity for the Labour party to bring in sweeping changes, part of which was to introduce the regular use of private hospitals in order to reduce waiting times.

One month following the June 2000 Virgin report, Labour launched the ‘NHS plan’. Several of the key points announced by the Department of Health were taken straight from the Virgin report. There was a need to ‘Create new roles and responsibilities and better training for NHS nurses’, ‘new consultant contracts’ and perhaps most controversially of all, to ‘Foster an agreement between the NHS and the private sector for using private facilities’.

The move from using private hospitals in peak times such as for winter flu epidemics, to a new permanent partnership had begun. In October 2000, Alan Milburn signed an agreement with the private healthcare representative organisation, the Independent Healthcare Association. The concordant established a new deal, with a host of measures that included setting up specialist diagnostic and treatment centres.

Independent Sector Treatment Centres
The use of these specialist elective care units became Independent Sector Treatment Centres (ISTCs). The ISTCs were key to providing an established foothold for private companies in the NHS, some of whom went on to form a private healthcare group called the NHS Partners Network (NHSPN).

The argument put forward by Andy Burnham’s team is that Labour’s use of ISTCs was simply to bring down waiting times. In a debate on the use of the private sector in the Commons on January 16th, 2012, Andy Burnham said, ‘We introduced the Independent Sector Treatment Centre initiative to help reduce waiting times for treatment at busy NHS hospitals while increasing patient choice.’ However in an interview to the Guardian in 2005, Paul Corrigan, a member of the 2000 strategy team alongside Penny Dash during the introduction of the NHS Plan, suggested the use of private hospitals was part of a wider plan. ‘…the idea behind these independent sector treatment centres (ISTCs) was always something much bigger. We were always looking beyond the capacity hump. We never saw it as one big push and then waving goodbye to the private sector.’

The ISTCs, which are often located in NHS hospitals but run by private companies, led to accusations by the British Medical Association of ‘fragmenting the NHS, cherry-picking of cheaper surgeries, and failing to improve a quality of care.’ In 2007, a leaked document from the Health Care Commission (HCC) raised serious questions over the quality standards within the ISTCs, stating that the national data on the clinical quality of ISTCs was “incomplete and of extremely poor quality”. The NHSPN, which was formed in 2005, had by this time been voted into the NHS confederation, the main membership body of the NHS, offering them an increasing legitimacy. 

They used this platform to ensure that a report on the ISTCs was less critical than it otherwise would have been. In the NHSPN annual 2007/08 report, they boasted: ‘Earlier in the year a leak of the HCC document had resulted in some ill-informed criticism, but (the) NHSPN was able to exert influence to make sure that the final version was a fairer representation. This included submitting comments on the final draft, preparing a response and devising a media handling strategy in advance of publication.’

The influence of the NHSPN and the private companies that make up their members didn’t stop there, and in fact grew increasingly influential. In the same 2007/08 annual report they informed their members of how, in October 2007, they had a ‘Meeting with Andrew Lansley on the Conservative Party’s draft bill.’  This ‘bill’ went on to become the infamous White paper, ‘Equity and excellence: Liberating the NHS’, and in turn the Health and Social Care Act 2012. The NHSPN used their influence to play a key role in maintaining competition in the bill, by lobbying the Head of the Choice and Competition team of the NHS Future Forum, Sir Stephen Bubb.

Such was the farce of the listening exercise that Sir Stephen Bubb, who was installed in his position by David Cameron, admitted on his blog towards the end of the period:  ‘just as I was signing off our Panel's report on " Delivering real choice" I get sent a copy of the PM speech announcing he is accepting many of our key recommendations although we haven't actually given him the report yet!’.

Revolving door
The expansion of elective care, as recommended in the Virgin report, also led to increased opportunities for private companies, including NHSPN member, Care UK. In their 2011 Annual report for bondholders, a section under ‘capital expenditure’ reveals just how beneficial the elective surgery programmes have been. ‘Care UK currently intends to finance all of its projected capital expenditure through a combination of operating cash flows and the ISTC Wave I buyback proceeds, totalling £54.0 million.’ In an article this year, the Guardian revealed how the company intends to  ‘increase the £190m a year it earns for delivering healthcare services to NHS patients through 35 new contracts it has won under AQP (Any Qualified Provider) to provide diagnostic services, elective surgery and diagnosis treatment…’

It is worth noting that the chairman of Care UK, John Nash, gave £21,000 to run Andrew Lansley’s office when he was shadow secretary for health. Furthermore, Alan Milburn, the commissioner of the Virgin report, is the Chairman of the European advisory board for private equity company, Bridgepoint. In 2010, they purchased Care UK for £414m. Alan Milburn has a history, having worked as an advisor to Bridgepoint Capital between March and September 2004, when he was an advisor. Six months after his appointment, a subsidiary of the company won a £16 million NHS contract.

Despite repeated requests to obtain a response regarding Alan Milburn’s role in the report, cooperation from his Bridgepoint office has not been forthcoming.

A report, written by both Virgin and the Department of Health included policies that had nothing to do with the customer service remit. Labour turned many of the recommendations by the ‘cabin crew customer service team’ into policy and a decade later Virgin bought out a company delivering that very same policy. Now, two years later, Assura have been rebranded as Virgin Care, who recently won a lucrative contract of £500 million to run community services in two areas of Surrey.

In a recent speech made at the healthcare think tank the King’s Fund, Labour’s shadow health secretary Andy Burnham stated clearly that Labour would “repeal the Health and Social Care Act 2012 and the rules of the market.” Mr Burnham described a skeleton idea for a more integrated NHS, and offered an open invitation to “build a genuine alternative.” He said “I don’t want to do the usual politician thing of pulling a policy out of the hat at the time of the next manifesto that takes people by surprise.”

Certainly, they would do themselves no harm by accepting responsibility for the part they played in marketising the NHS and admit that their policies cleared the path for the Health and Social Care Act 2012. A move away from the market will be welcome news to the many Labour voters who feel effectively disenfranchised by their closeness with corporate interests in the Blair/Brown years.

Furthermore, Labour will need to show that underhand policy-making, written by unaccountable corporations on restricted documents, no longer takes place. And while they are at it, they could turn their attention to the 1 in 6 Labour Peers who have recent or current financial links to companies involved in private healthcare.  

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