The Government is overpaying private hospital operators by more than £200 million to carry out surgery for NHS patients.

In an effort to cut waiting lists, the Government launched a programme in 2005 to outsource some routine surgery to the private sector. It says that it is committed to buying £1.4 billion of services from independent surgical treatment centres (ISTC), including hip replacements, cataract surgery and diagnostics, during the initial phase of this programme.

However, according to the Department of Health, the scheme is running at 16 per cent below capacity in value terms, meaning that only £1.18 billion of services are provided by private hospitals for NHS patients. The remaining £222 million of public money is being paid regardless because most of the hospitals’ operators have negotiated “take or pay” clauses in their contracts with the NHS. It means that they are paid the same sum regardless of whether the NHS sends enough patients.

A spokesman for the department said: “Whole programme utilisation of the wave-one ISTC programme is currently 84 per cent. Utilisation is the value of procedures used as a percentage of the procured value.”

The department declined to comment on capacity at individual centres, saying only that “specific details about individual schemes and their contracts are commercially sensitive”.

However, The Times has learnt of several individual ISTCs that have been operating well below capacity.

Mercury Health’s St Mary’s NHS Treatment Centre in Portsmouth is running at just 80 per cent of capacity, according to its owner, Care UK. It was contracted originally to perform 435,000 individual procedures for the NHS over five years. On current trends, it is expected to perform tens of thousands fewer than this.

Another ISTC, Capio Healthcare’s centre in Reading, was also undershooting significantly, although it has increased patient numbers recently and in July was operating at 90 per cent of capacity.

The Department of Health spokesman said that, overall, the situation was improving. “We are working to further maximise value and it is increasing all the time,” he said.

Graham Kendall, spokesman for the NHS Partners Network, the organisation representing independent healthcare providers, said that take-or-pay clauses were common and were crucial at the programme’s outset to justify the initial investment of building and equipping the centres.

Some insiders concede that they have damaged the industry’s reputation and in the new contracts under discussion for the second phase of the programme, due to begin in 2010, the clauses will be dropped, Mr Kendall said.

Privately, independent hospital operators blame poor estimates of numbers of patients when contracts were signed, as well as vested interests in the NHS that have made some trusts reluctant to refer patients to private hospitals. Institutional opposition from unions and other elements within the NHS hierarchy have proved another stumbling block, they say.

Mr Kendall said: “Every provider is working to maximise take-up. It’s in the interests of all of the providers to treat as many people as possible.”

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• BA chief waives bonus after T5 fiasco
• Prospects of cheaper loans hit as Libor soars
• Rice price dives as US and Japan set to unlock grain pact