Staffs Cancer Procurement Collapses & More Disputes in Health Contracting

Within hours of publishing our article about the Manchester health tender last week, another major “prime contractor” type contract in the health sector collapsed.

Staffordshire has been trying to put a contract in place for cancer care for a couple of years now. It was paused early last year because of concerns from NHS England, who commissioned a report, and asked the commissioners to respond  to some of the concerns raised. The process was allowed to restart a few months ago.

But last week an announcement was slipped out saying that the bidder (notice the singular there, only one bidder is rarely a good sign in a procurement of course) had not been able to achieve the financial parameters required by the commissioners.  The bidder was a consortium of private and public sector bodies, led by Interserve with a couple of the local hospital trusts also involved.

Last week we also heard that Virgin Care are in dispute with East Staffordshire commissioners and Burton Hospital Trust over a “prime contractor” type agreement for elderly care that Virgin runs.

This does not bode well for the proposed Manchester contract and just demonstrates the major issues here. The commissioners want to pass real operational and financial risk onto the providers, understandably. They want to pay for services based on outcomes, as far as possible - improved survival rates, lower admissions to hospital, that sort of thing.

But the providers (again understandably) are not keen on taking on such risks when so much is outside their control. That’s even before we get onto the issue of who takes responsibility for “demand risk”. As the UK population increases and ages, and certain health problems seem to escalate (diabetes, dementia), the demand for healthcare grows. The commissioners want to pass this risk onto that  providers as far as possible. Providers don’t want to accept that – and we are generally on their side in that argument. Passing on risk which is outside the provider’s control is rarely appropriate (or cost effective) in contracts.

Another issue is that some of the bidders for this sort of contract are public bodies themselves and may not be allowed to take on the risk because of their own governance structures. The UnitingCare contract collapsed in Cambridge in late 2015 and the two public sector bodies who formed the consortium delivering the work just walked away; they had set up a structure to enable them to do that. However, their governance would not have allowed them to take on the contract otherwise, we suspect. And the private sector has similar issues; Circle lost a fortune and eventually walked away from their  Hinchingbrooke Hospital contract.

So one of our informed readers commented that the Manchester contract really has to be won by the (public sector) hospital Trust in the City to be viable. He also suggests that if this is a stitch up, then why run a procurement and waste millions on advisers? A good point!  But can that Trust take on the risk? Can they manage a network of sub-contractors, public and private? Who pays if income does not keep up with cost? Who takes the risks?

We still think this will almost certainly end in tears.

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