Commissioning and Providing for GP and Consultant Consortia - A few years on

Johnny Marshall Chairman NAPC (National Association of Primary Care) and John Stapleton from Thomas Eggar LLP look at the reasons why Commissioning remains an unattractive commercial activity.

Introduction

Following the release of powerful commercial forces, enabling the supply side of the NHS to move towards privatisation through Commissioning and Providing agreements, we find that  the hopes and aspirations of many who have geared up for this revolution (namely improved quality of care and patient experience, in addition to achieving value for money through local clinicians redesigning services and patient choice) remain unfulfilled and Commissioning remains an unattractive commercial activity.

Commissioning

The model of an Limited Liability Partnership (LLP) as a "not for profit organisation" has been taken up by many collaboratives. It provides a foundation for local ownership of the Commissioning agenda within primary care with membership usually limited to GPs. Practice managers often feature as an integral part of these organisations but the value of nurses in particular, and other members of the Primary Healthcare Team, has not been fully realised.  These LLPs have encountered difficulties in providing comparable pension arrangements within the NHS superannuation scheme to facilitate the transfer of NHS staff. In addition, by their very nature, the LLPs remain dependent on PCT funding. Where PCTs are reducing funding levels or even withdrawing funding altogether for this collaborative approach to Practice Based Commissioning (PBC), LLPs are left with financial liabilities and risk with respect to employed staff and commercial agreements which they may not have fully understood.

 

Resources have been freed up but, as the economic pressures increase, PCTs are increasingly reluctant to make those savings available for PBC to use. There are examples of some increased local provision, but the market is not working freely with local deals between PCTs and Acute Trusts around volumes of activity and pricing creating financial barriers for deCommissioning of acute services and investment in community services.

Providing

Similarly many collaboratives have adopted the private limited company model through which to develop new community services Providers. This represents a new level of financial risk within primary care, where significant capital investment is required to develop an organisational infrastructure with the capability to produce bids for new services. It has also thrown up new and unexpected problems as a result of a lack of market management skills within PCTs. 

Third party commercial organisations continue to see the benefit of working with local clinicians in joint venture entities, but they too will find it difficult to accept the heavy weighting of risk on the Provider. Clinicians who contract with commercial organisations have to give up significant influence and reward in exchange for this lower risk option and are beginning to question whether the advantages of such an approach outweigh the disadvantages.

Contracts are being submitted to consortia by PCTs and legal costs incurred only for the contracts to be withdrawn and fresh contracts issued. The revised draft contracts for Community Health Services are lengthy (124 pages long) and throw all commercial risks on the Provider. This is a complex contract and the Provider must either analyse and manage all the risk passed on by the Commissioner in the draft contract, or negotiate a fairer distribution of that risk between Commissioner and Provider.

Commercial bodies, such as those that are being set up  by participating GPs, need to exercise caution in accepting the risks that are being asked of them.  Commercial naivety and complex management structures, combined with the need to “get going” could result in undue risk being accepted. The Commissioner, as a commercial contracting party, must be prepared to absorb some risks if they are to succeed in opening up the market and overcoming the current shortcomings. These shortcomings include poor service specifications, poor contracting skills and a risk averse nature in assessing the procurement mechanism used. This results in increased costs for these new Providers, which inevitably threatens their financial viability through no fault of their own. GP consortia are ill-equipped to negotiate the apportionment of risk in these complex agreements, and considerable legal fees will be incurred if such practices are to avoid taking on unconscionable risks, which will act as a further deterrent. Providers also face challenges in the transfer of NHS superannuation rights. Without the free movement of a workforce how can we expect a market based solution to succeed?

This environment hardly supports the development of a new supply side within the NHS, as it equally applies to other Providers. Lack of market management skills within PCTs will inevitably drive local clinicians to seek lower risk options with less local ownership and control, at the same time that social enterprise is being promoted to keep services more locally owned.

Solutions

The obstacles that need to be overcome if the supply side revolution is to become a reality are:-

1. Commissioning vehicles - be they partnerships, LLP’s or Limited Liability Companies - should embrace wider membership than just GPs.

2. Providing vehicles should involve greater collaboration between GPs and consultants and other health professionals.

3. The transfer of existing pension rights needs to be more clearly addressed through secondment agreements  from the NHS.  This is only a very small part of the solution as all too often the NHS staff do not have the right skills.

4.  There needs to be a greater recognition of the integral nature of Commissioning and Providing by frontline clinicians.  This will lead to a move towards integrated care organisations (ICOs) who will be Provider organisations.  PCTs or SHAs will contract with them on the basis of agreed health outcomes. The ICOs will then provide what they can subcontract and what they cannot provide.

5. In order to be able to assess financial risk to ICOs there will need to be more accurate activity and financial data regarding the local health economy in question than currently exists.

6. Consideration should be given to an "open book" approach to profitability to ensure that any windfall profits, once offset against any previous years losses, are re-invested in patient services to give confidence that this approach represents value for money for the tax payer.

7. Service level agreements between PCTs or SHAs and ICOs will need to address issues related to patient choice and minimum clinical standards.

Conclusion

The supply side revolution is not going to work if the providing side is simply left to market forces – as either too many Providers will eventually succumb financially to the unconscionable risks that they are being asked to take on, or they will simply not take on these commercial risks and the supply side revolution will fail. If the revolution is to succeed, the Commissioners need to heed advice from the supply side and groom their relationship so that they achieve an equitable apportionment of risk.  If they simply rely on their market dominant negotiating position, that attitude will result in the revolution failing before it has begun.

Johnny Marshall Chairman NAPC

 (National Association of Primary Care)

and John Stapleton solicitor with Thomas Eggar LLP