The costly, controversial outsourcing of NHS mental health services

In the worst of her mania, Isobel Hallett planned to put her magical powers to use by jumping off the local viaduct and flying over the town of Knaresborough in Yorkshire.

“People telling me ‘you can’t fly’ just made me cross,” Hallett says of her first fully manic episode in May 2022. She was subsequently diagnosed with bipolar disorder after 14 years of struggling with severe bouts of depression.

Hallett, who is 30, was admitted to the hospital a mile away from her home, where she waited for six days in a loud, crowded ward as doctors tried to find her a psychiatric bed.

She was eventually transported 200 miles away to a private hospital in Harrow, near London, run by the company Cygnet Health Care. Her fiancé at the time could not afford to make regular trips to visit her. When her manic episode subsided, and depression set in, the loneliness became intolerable.

After a month, she discharged herself. “If I’d been closer to home where I could see my fiancé, see the dog, see some friends it would have made a big difference,” she says. 

The NHS outsources mental health support to the private sector just as it does other procedures such as eye, hip and knee operations — part of a wider trend of the taxpayer-funded service supplementing meagre resources and staffing.

But unlike other segments of the public health sector, the 50 mental health trusts that provide services to patients across England tend to rely on private providers for specialised care that is often complex and expensive.

This outsourcing can be costly for the NHS trusts already facing severe financial strain. It can also have damaging effects on patients sent far away from their home and loved ones for treatment. 

Spending on private “out of area” beds by NHS mental health trusts in England has reached record levels in the UK, and is 43 per cent higher than it was five years ago, according to Financial Times calculations. 

Of 20 mental health trusts that responded to Freedom of Information requests with the data requested, 17 say they have increased spending on private beds considerably over the past five years as bed occupancy within the trusts reached some of the highest levels on record.

The responses also reveal that several trusts are increasingly discharging patients to bed and breakfasts and hotels amid cuts to community psychiatric services and pervasive local authority housing shortages.

Part of what is driving the trend is a rapid increase in demand for mental health services, which poses a problem not just for the health system but the wider economy.

In July, the Office for Budget Responsibility estimated that a rise in health-related economic inactivity was costing the government £16bn more per year since the pandemic, largely due to rising mental health problems.

Chancellor Jeremy Hunt vowed to tackle the problem in his Autumn Statement in November with a five-year carrot-and-stick plan to provide extra support and coaching to help nudge people into work, while tightening sanctions on benefit claimants who do not take up work placements.

But many in the sector feel this does not get to the heart of the problem — that more and more people are getting to crisis point because of underlying drivers of instability, such as financial insecurity, and are not being supported sufficiently in the early stages of mental ill health.

“The reason more people are getting really sick, and going off work as a result, is because they’re not getting the care they need early. It’s as simple as that,” says Dr Lade Smith, chair of the Royal College of Psychiatrists (RCPsych). “They’re sick. They’re not pretend sick.”

Meanwhile, a landmark mental health bill — which had been five years in the making and is expected to alleviate pressure on trusts by reducing the number of people detained with psychiatric conditions — did not make the cut for the King’s Speech last year.

There is now only a vanishing chance the legislation will be passed before the election later this year, exacerbating fears that trusts will further buckle under the pressure of demand.

Turning to the private sector

Close by the former coal-mining village of Rainworth in Nottinghamshire, builders are putting the finishing touches on a new multistorey psychiatric ward owned by Cygnet Health Care. From January, the site will start treating dozens of men with acute mental health conditions from across England.

A few miles away, Nottinghamshire Healthcare NHS Trust has been battling with bed capacity at over 95 per cent on its mental health wards for the last 12 months. The Royal College of Psychiatrists recommends bed occupancy does not breach 85 per cent.

Ifti Majid, the trust’s chief executive, says the “danger” of new private hospitals opening is that “we’re not treating the condition, we’re treating the symptom, which is that we need more beds”. Nottinghamshire increased spending on private beds from £26,000 in 2014-15 to £14mn in 2022-23.

Majid believes the recent “tsunami” in demand for services is partly caused by increasing financial strain on individuals and growing insecurities about work and housing, which he says are key pillars of mental stability. There were an estimated 4.8mn new referrals to mental health services in the UK in 2022-23, 50 per cent higher than in 2017-18.

Majid calls the financial position of his trust “critical”. This is caused in part by the increasing outlay on private beds, which in the past year have become more expensive per day, he adds.

For several years, experts have called for an end to what the NHS calls “inappropriate” out of area placements, where a patient is sent far from their community to receive care. A review of mental health services in 2016 found that these placements tend to be more costly and harmful to patients than using local NHS services. A commitment was made to eradicate them in acute inpatient care by 2021.

But spending on such placements in England rose rapidly last year and is inching back towards record levels set in late 2019, according to FT analysis. By September last year, 95 per cent of all “inappropriate placement” days were at private providers rather than NHS trusts, up from 73 per cent in 2017. 

In 2019, the government announced it would invest £2.3bn extra in mental health services per year by 2023-24 — with total spending on services estimated to reach around £17bn — and it is on track to reach that goal this year. Smith describes the uptick in spending as “fantastic” but says inflation and soaring demand for services had simply “wiped it out”. Mental health trusts are currently facing some of the worst staffing shortages across the NHS. Thirty per cent of mental health nurses will approach retirement age in the next five years.

In the 1980s, a several decades-long drive to reduce the number of mental health beds in England began. Initially it was coupled with an ambition to improve provision of care in the community.

But while per person spending at NHS mental health trusts has risen in recent years, care provided by local authorities for community services — things like patient wellbeing checks, medication updates and referrals for talking therapies — has taken a financial hit. From 2018-19 to 2022-23, the local authority public health grant had a 6 per cent real-terms funding reduction, according to a recent report by MPs.

“The transition to community care has not happened in the way that it needed to happen,” Smith says. “We used to manage people so that it didn’t get so bad that by the time they came in again they were in crisis.”

Meanwhile, the need for inpatient care is soaring. In the second quarter of 2023-24, more than three-quarters of mental health trusts had bed occupancy above the Royal College of Psychiatrists’ recommended limit, up from 63 per cent six years ago. Northamptonshire reported average bed occupancy on mental health wards of 133 per cent between July and September last year, and has been over full capacity since 2021.

This has led to a situation where many trusts are in desperate need of additional beds, often with precious little notice.

At Northamptonshire, for example, spending on private beds increased from £1.8mn in 2019 to £3.6mn in the first eight moths of last year, according to data provided via FOI. Average private bed prices fluctuated from £763 per day in 2020 to £2,000 in 2023.

At Central and North West London trust, spending on private beds increased by 46-fold between 2014 and 2022 from £147,000 to £6.8mn.

Central and North West London says it is reducing its use of private beds with the aim of ending their use entirely in 2024, and is investing in community services to act as a step-down from inpatient care. Northamptonshire did not respond to a request for comment.

A ‘king’s ransom’

Private providers are for the most part responding nimbly to deficits in the health service.

Andy Bell, chief executive of the Centre for Mental Health, a research and campaigning organisation, says that while private providers across most of the NHS tend to do the “quick stuff” — including routine operations and assessments — in mental health they usually provide more specialised longer-duration services because this is where the public sector most severely lacks capacity.

“We spend a king’s ransom on complex and long-stay services, like forensic and locked rehab,” Bell says. He claims this isn’t always justified clinically. Private providers, he says, “do have an inevitable business interest to keep people in those beds”.

A study of mental health rehabilitation by the Care Quality Commission, a health regulator, in 2020 found that stays in private beds tend to last almost double the duration of stays in the NHS. 

Smith of RCPsych notes that the per day rate of private beds can be similar to NHS costs if they are bought in block contracts, but the urgent need for beds during periods of overcapacity means they are often bought ad hoc at an elevated price.

She adds that, like a low-cost airline, there are often extra unforeseen costs tagged on, for things like nurse observation and additional one-on-one support.

Smith believes the NHS needs to invest in regional specialist services, for issues such as eating and personality disorders, which several trusts could use.

Three of the biggest for-profit mental health providers — Priory Group, Elysium Healthcare and Cygnet Health — account for around 30 per cent of the mental health market in the UK, while the NHS accounts for around 53 per cent, according to the consultancy LaingBuisson. 

But these private providers overwhelmingly get their revenues from public bodies. Cygnet, which was purchased by US health giant Universal Health Services in 2014, gets “substantially all” of its revenues from public entities in the UK, according to its latest annual report.

Revenues at the group increased by 50 per cent since 2018 to £551mn, while earnings before interest, tax, depreciation and amortisation increased by a fifth to £48mn.

Priory, which was purchased by Dutch company Waterland Private Equity in 2021, says it gets a “substantial portion” of its revenue from public bodies, but has seen a decline in revenues and profits since 2017.

Elysium, which was purchased by Australian multinational Ramsay Health Care in 2022, has seen ebitda rise 50 per cent to £67mn, according to filings. It has built or acquired 12 new sites in the UK since 2018, taking the total to 73, with five more under construction.

Cygnet, Elysium and the Priory each say they are proud partners to the NHS and are committed to providing the best outcomes to their patients. Cygnet says: “Our services provide intensive support to some of society’s most vulnerable people and those presenting with higher acuity, complex care needs.” The company says its investment “helps to fill the gaps in [NHS] provision”.

It adds that in many cases, the average length of stay at Cygnet services is less than in other settings, and it never refuses or delays the transfer of people to an equivalent NHS bed once one is available.

Priory says it does not delay discharge or retain patients in its service unnecessarily or seek to profit from extending the duration of admissions. The company says that average length of stay varies depending on specialism and because Priory offers a range of specialisms this could mean longer lengths of stay than in the NHS.

Elysium says all of its services are “delivered according to need and our preference is always to work in partnership”.

Investment in community

When patients are admitted to hospital for several weeks or months, they often lose their council accommodation. Due to a local housing crisis across swaths of England, trusts are often unable to find suitable replacements quickly. Around 10 per cent of people in mental health beds are ready for discharge but cannot be moved, according to the RCPsych.

In order to vacate beds for new admissions, some trusts are increasingly discharging patients to hotels and bed and breakfasts rather than to council or supported accommodation.

South London and Maudsley (SLAM), the second-largest mental health trust in the UK, spent nearly £4mn discharging patients to hotels and B&Bs in 2022-23, up from £1.3mn the year before, according to data provided via FOI, and spent nearly £1.5mn between April and September of last year.

Essex Partnership University, a smaller mental health trust, did not discharge patients to bed and breakfasts or hotels in 2019-20 or 2020-21 but spent around £60,000 on it across the last two years.

SLAM says it is seeing “extremely high levels of demand for mental health services across south London”, caused in part by the long-term impact of Covid-19, the cost of living crisis and a lack of local authority housing.

It notes that it is currently streamlining its admission and discharge processes and increasing the number of senior decision makers in liaison teams so that patients spend less time in emergency departments.

Essex says that because of limited beds it has to “offer alternative care to ensure patients receive timely and appropriate support”.

After checking herself out of the Harrow facility, Hallett was prescribed lithium in December 2022 and has not had any serious mental health episodes since. She says that after receiving community care she has had the support of a “wonderful therapist” whose assistance and kindness “saved my life”.

But Hallett says it took too long and was “too hard” to get the support of the mental health team. She was admitted to hospital multiple times in 2021 after trying to kill herself and was simply discharged home without support.

In light of cases like these, some medical professionals and politicians are clamouring for greater investment in community teams and services for young people. They are also eager to see the long-awaited mental health bill passed into law.

The legislation aims to reduce the strain on services by taking away the power to detain people with autism and learning disabilities, and by tightening the criteria for being sectioned.

The government says it is investing £1bn to March 2024, part of its £2.3bn mental health investment, in improving community services to reduce reliance on inpatient beds as well as establishing 24/7 urgent helplines across the country.

It notes that the independent sector plays a key role in bringing down waiting lists and delivering NHS-funded care, but says it remains committed to eliminating all inappropriate acute out of area placements for adults and bringing forward the mental health bill when parliamentary time allows.

Abena Oppong-Asare, Labour’s shadow minister for mental health, says her party is committed to passing the bill in its first term of government should it win the election next year. It has also committed to investing £760mn recruiting 8,500 more mental health professionals and rolling out mental health hubs in every school.

Many argue it is crucial that services are available to people at the very onset of their difficulties. According to estimates from the RCPsych, 75 per cent of mental health problems arise before the age of 24 and 50 per cent before the age of 14. 

“If you treat young people, they become adults who don’t have mental health problems,” says Smith. “If you don’t treat them, they become adults who have chronic, relapsing mental health problems.”

If you have information to share related to this topic, please contact anna.gross@ft.com

This article has been corrected since publication to reflect the accurate amount spent by South London and Maudsley trust on hotels and B&Bs, which was originally stated in billions of pounds but should have been millions