The NHS Commissioning Revolution – And Why It Might Fail (Part 1)

Back in November at the HCSA (Healthcare Supplies Association) conference, I covered many major issues relevant to NHS procurement. Probably the most important in many ways – indeed, one of THE most important issues facing the NHS – is the way that health services are being commissioned on behalf of patients. So, this is how hospitals, mental health trusts, and GPs are engaged to carry out the services that they provide to the citizen.

In 2012, the Health and Social Care Act was introduced by then health minister Andrew Lansley. It introduced “clinical commissioning groups”, over 200 of them, who would buy services on behalf of their local population from hospitals, other public sector health trusts and the private sector where appropriate.

The idea was that this would introduce positive competition into the system, as the CCGs would run formal procurement processes (governed by UK and EU procurement regulations). That would be supported by legally binding contracts, with performance incentives, payment by results where appropriate and so on – in other words, all the supposed best practice private sector commercial and procurement mechanisms.

It’s fair to say that many think the 2012 Act has been a disaster. It certainly has not achieved its original objectives. There are many reasons, but amongst them:

  • CCGs were too small, leading to high costs, skills shortages, and conflicts of interest (doctors on their Boards awarding contracts to themselves).
  • The private sector to some extent “cherry picked”, taking more lucrative work and in some cases leaving the public authorities with the more difficult work – or activities (like Accident & Emergency) that really can’t be “privatised” or moved from the major hospitals.
  • Competition in many cases was limited; few Trusts showed much appetite for moving far from their geographic and professional base.

Funding issues since 2012, as well as high immigration, and an ageing and less healthy population have meant that pressure has grown on the NHS and performance levels have declined despite the “commercial” mechanisms that were supposed to protect against that. This January, we are seeing the NHS hitting crisis point in terms of full hospitals, postponed operations and long waits in A&E.

So, in a classic swing of the pendulum, the government has decided that, given the market and competitive approach seems to have failed, it might be better to go back to much more of a “planned economy” approach. This might mean giving a fixed sum of money to “someone” in a region (we’ll come back to that), based on a per head fee and the population being served, and that someone then allocating and managing the spend to get the best possible health outcomes and services.

This is pretty much how things worked under the old Regional Health Authorities back in the 1970s to 1990s. Compared to the “commissioning” model, this approach in theory has less direct incentive through competitive pressures for providers to improve and become more efficient, and requires a different sort of management.

That “someone” we mentioned earlier has to allocate the available money across a range of delivery organisations, potentially private and public sector, manage performance, and be ready and able to change priorities and funding as required. You might draw the analogy of a large corporation that decides to outsource and contractualise the vast majority of its activities, against one that keeps everything in house. Neither approach is necessarily wrong, but they are very different.

If you think about the outsourcing analogy, if you do everything in-house, you need a strong Board, a CEO who can manage different departments and functions within the company, decide who gets what resources and so on. The CEO needs to be able to say “right, I’m slashing marketing spend to invest in some new equipment”, or “I’m firing the CIO and the CPO tomorrow for non-performance”. That is quite different from running a system built on outsourced service providers and contracts, we’d argue, and in part 2 tomorrow we’ll discuss why that is causing problems for the NHS as it looks to move to the new approach.

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