CHPI Report on Health Contracting – Poor Contract Management the Norm?

hospital sign sepia 200The Centre for Health and the Public Interest (CHPI) is an independent think tank committed to health and social care policies based on accountability and the public interest. Recently, it released an important report titledThe contracting NHS – can the NHS handle the outsourcing of clinical services?

Unfortunately, it falls into that category of “important but depressing” reports, looking as it does at outsourcing of medical services that previously were performed within the NHS – principally community health services and secondary care. This is a growing trend. As the report says, “Over the last four years there has been a 50% increase in the amount spent in the private sector on these services by local commissioning bodies and NHS trusts, from £6.6 billion  in 2009 to £10 billion in 2014.”

The cost of managing this is very high, too. “We estimate that there are now some 53,000 contracts between the NHS and the private sector, including contracts for primary care services. These contracts, as well as the contracts with NHS providers, are arranged and administered by 25,000 staff working in CCGs (clinical commissioning groups), CSUs  (commissioning support units) and NHS England’s local area teams, at an annual cost of £1.5 billion.”

Now bear in mind that those teams do a lot more than just manager these external contracts, but that is still a lot of resource going into commissioning and managing health services. Yet according to CHPI, it is not done very well. There have been high-profile failures, such as the Winterbourne View case and Serco’s out of hours contract in Cornwall, but this report identifies more systemic problems. Based on official data and a survey completed by 181 CCGs, the contract management processes appear to be poor in too many cases.

“Out of those which responded to our survey 109 (60%) did not record how many site inspections they undertook, or were unable to say how many they had done. Of even greater concern, 22 (12%) did not carry out any site inspections.”

In many cases, CCGs have outsourced the contract monitoring function to CSUs, which is one reason why this data was not available. But CSUs themselves are going through some turmoil, and the current government wants them all to be private sector firms themselves by April 2016. At that point, the public sector commissioners will be outscoring contract management to a private sector firm who will be managing other private sector firms who provide critical health services to the population.

But we’re into the procurement outsourcing paradox then – if CCGs are incapable of managing their providers, so have to outsource that task to CSUs, how will they manage the CSUs properly? We had some interesting arguments on this site last month around procurement outsourcing, but really what we are talking about here is the CCGs outsourcing responsibility for the management of highly “strategic” contracts, which I don’t think many of us would see as sensible.

There are other signs of contract management weakness too. CCGs are afraid to enforce contract terms “for fear of exacerbating the financial situation of providers ... We found that only seven out of the 15,000 contracts had been terminated because of poor performance and only 134 contract query notices had been issued. Only 16 CCGs had imposed any form of financial sanction on private providers.”

Of course, the National Audit Office Framework for Contract Management (which I was heavily involved with) was published way back in 2008 and laid out the key elements of a good contract monitoring and management regime. It looks like CCGs need to take a look at that, if they haven’t already.

But back to this CHPI report - it is very good and well worth reading. The recommendations include the need for a proper audit of CCGs’ capacity to do this work, and the suggestion that the privatisation of CSUs should be reconsidered. Greater transparency would also help, with more information published by CCGs covering these issues. Now all of this may be irrelevant if Labour win the election and turn the whole process upside down again, but even then, managing the performance of health “providers” (whether public or private sector actually) is going to remain a big issue in the years to come.

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  1. Stephen Heard:

    Of course the other dimension is the sheer cost and the vast cottage industry of contracting in the NHS where scarce public money is passed around the system.

    The annual bun fight starts in October each year with commissioning intentions published by the commissioners (Clinical Commissioning Groups or NHS England area teams for specialised services like transplants) and then concludes in March with providers (acute trusts, ambulance services, mental health trusts, community services etc) securing annual contracts.

    Historically this contracting round has been adversarial with each side taking positions that often lead to arbitration and stand off which requires intervention from Chief Executives to conclude by the March deadline. It is all very tense and counter productive as legal proceedings (Crown v Crown springs to mind!) rarely occur despite lots of posturing and legal fees being incurred.

    As the report indicates all of this costs at least £1.5bn each year which I suspect is an under estimate and is probably closer to £2bn when unintended consequences like extended contracts and compromises are taken into consideration.

    The future of the NHS is being portrayed as much more collaborative with new clinical models proposed in the Five Year Forward View which as Peter has pointed out is not a strategy but a vision which has not been endorsed by all of the major political parties. However it states that the NHS requires a minimum of £8bn additional funding to see this vision materialise.

    So stop this madness of contracting and save £10bn over the next spending review and work collegiately with simple SLA’s or MoU’s and divert the clinicians involved in this madness to the front line to help deliver the vision. If we continue with the blame culture associated with NHS contracting than the vision will not be delivered and it will fail.

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