The NHS Commissioning Revolution – And Why It Might Fail (Part 2)

In part 1, we talked about how the NHS is looking to move from an approach to service delivery based on competition and contracts to a more top-down allocation of resources model. In this case, we talked about “someone” who would receive money for a region and then deicide how to allocate that money in a managerial rather than a competitive manner. That “someone” is being defined as an accountable care organisation (ACO).

The ACO approach is seen by the government as the best option to manage a situation where funding is tight and demand keeps growing, and we don’t necessarily argue with that. After all, the commissioning approach hasn’t worked well, and indeed we saw problems with it right from the beginning.  But the problem now is that the ACO route is being followed without changing the underpinning rules, processes, structures and even laws that were all set up to fit with the commissioning model. Yet to succeed, the ACO needs clarity that it can make major decisions on allocating funds, on prioritisation, on resource management, without fear that it is doing something illegal.

The problem is that the 2012 Health and Social Care Act is still in place, because the government doesn’t want to face the inevitable discussion in parliament about the NHS that would arise if they wanted to put in place new legislation. So, they are trying to move to the ACO model within the previous framework. So, CCGs are still running “competitions, but now looking to appoint a single provider (the ACO). It’s not clear whether the ACOs will then have it run their own procurement exercises to appoint sub-contractors. (If the ACO is a public body then surely it must?)

Those sub-contractors, whether health trusts (public bodies) or firms like Virgin Care, will presumably have to run the work on a contractual basis. They are all “independent” with their own boards and governance, so I cannot see that they could accept anything else.  But if they run under contracts, what happens when the ACO wants to move money or work around? Or when the cash runs out? Or the ACO wants to try a different provider or approach?

In our analogy with a firm that runs its activities internally, our CEO can just “sack the CIO”. But you can’t do that so easily in a contractual situation.

And if the ACO is an existing public-sector health Trust, how do they feel about taking on the overall “contract” from a risk point of view? I’d be very nervous as a non-executive director, for instance, about committing to service levels for a fixed sum of money when I’m going to have multiple sub-contacts and contracts, many of whom will be other public organisations. I can see problems with how the ACO chooses its sub-contractors, the nature of those contracts, and how that all fits with the per capita single fee basis for ACO payment. And this is all because the government can’t or won’t do the sensible thing and repeal the 2012 Act.

So, at the HCSA event, I suggested that this is going to end in tears. We’ve already got problems in Manchester, the flagship pilot of this approach, where a procurement process for the ACO started last year, following a procurement approach that pretty much goes against every aspect of public procurement good practice.  This is what I said at the HCSA event.

“This contract covers the provision of virtually all health and social care services with the exception of in-hospital services across a major UK metropolitan area. The tendered contract was for a duration of 10 years and an estimated value of £5.9 billion, and was designed as a single block, thus excluding the possibility of awarding it by lots.

The contract was advertised on March 14th 2017, with expressions of interest required by April 28th.  There was no attempt at market making – indeed, the tender notice also explicitly indicated that the "contract will be awarded without further advertisement of this opportunity and there will be no further opportunity to express interest".  So that time pressure and lack of openness was designed it would seem to discourage bidders.

Clearly, the number of respondents who could credibly bid for this is very limited. Only one bidder replied to the advertisement – a consortium of multiple local health organisations. Negotiations are now proceeding with that entity.

However, because of VAT issues the latest idea is that the local acute trust would “nominally” hold the £6bn contract while governance decisions would be made by an LCO (local care organisation) board made up of providers in the consortium.

No, I don’t fully understand that last point either. The whole ACO approach is now also facing challenge with a judicial review likely to go ahead shortly. (By the way, we don’t believe there is a hidden privatisation agenda behind the ACO idea, although there may well be unforeseen consequences if it does go ahead.)

In part 3 we will look at what NHS England told us when we suggested that this specific Manchester procurement is flawed.

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