Blog Type, IPT Blog, Industry Sector, Health | November 2016

Leadership of Strategic Commissioning in the Healthcare System of the Future

Commissioning services from non NHS providers has the potential to add value to publicly funded healthcare in the UK but requires leaders with a bold vision and a stable and supportive environment to create partnerships than can both transform care models and have the resilience and agility to respond to the unexpected.

The Challenge

In England, around £9 billion is already being spent with non NHS providers (excluding dentists, GPs and pharmacy service) and there is increasing opportunity to maximise the use of outsourcing where it adds value.

The task of leadership is therefore to create the conditions that allow effective and efficient outsourced services. The King’s Fund (2011) note that although the NHS has more in common with the private sector than is often recognised, the environment is different in four key ways:

  • The NHS has a duty to break-even but cannot choose or refuse its customers
  • Large number of professions with own codes and regulations
  • High media interest
  • High political scrutiny and intervention in day to day operations

These differences in part explain the challenges for a mixed healthcare economy system. Monitor (2013) also suggested that there are three distortions that leadership must address; participation distortions, cost distortions and flexibility distortions.

NHS commissioners can have low risk thresholds and favour incumbents for both continuation of contracts and for providing new services. Procurement processes can become overly complex and require providers to provide levels of reserves and working capital that are disproportionate to the value of the contract. Some contracts with non NHS providers cover patients with less complex needs but pay the same tariff that is paid to NHS providers who are left with a higher acuity (and therefore cost) case mix. Other cost distortions arise from different rebates for Value Added Tax,  variation in cost of capital faced by different types of provider and different liability for corporate taxes including corporation tax, capital gains tax and stamp duty.

Flexibility can be constrained by focus on process inputs which both stifle the creativity of non NHS providers and also prevent commissioners from requiring real time responses to changes in conditions and/or demand. This requires a shift in thinking towards commissioning by outcomes rather than process (as seen in High Reliability Organisations).

Creating the conditions for efficient and effective outsourced services

Leadership action is required in three areas.

Firstly political leadership is needed to create a stable environment for mature processes and relationships to be developed. Monitor (2014) observed that commissioning structures in England have been restructured 5 times in 16 years and that Clinical Commissioning Groups administrative spending relative to spending was reduced by 45% between 2010 and 2014. The current move to Sustainability and Transformation Plans might be construed as a sixth change.

Secondly, NHS Commissioners need to ensure they write detailed specifications and assess bids effectively. In July 2016, the National Audit Office reported on the £750 million project in Cambridgeshire which collapsed in eight months into a five year deal. The NAO reported that ‘the procurement advisors made limited assessment of the bid and the evaluation did not mention the need to secure performance guarantees’. As well as the need to improve procurement, attention needs to be paid to contract monitoring. The Centre for Health and Public Interest (2015) found only 7 of the 15,000 contracts held by Clinical Commissioning Groups were terminated for poor performance and only 16 of the 211 CCGs had imposed any sort of financial sanction on private providers.  Whilst many contracts are performing extremely well, this is not true for all. Following the BBC exposure of failures at Winterbourne View (a care home for people with learning difficulties in Bristol), the Care Quality Commission found that contract monitoring had been virtually non-existent.  Similarly, the Public Accounts Committee found that accountability for the outsourced contract to manage Hinchingbrooke Health Care NHS Trust was ‘fragmented and dispersed across the health system’.

Thirdly, non NHS providers need to understand the climate of healthcare provision and be realistic about risks and uncertainties.  In September 2015, Serco claimed that the £140 million, three year contract they had signed to provide community service in Suffolk was ‘not sufficient to carry out the level of transformation needed’. Failure to undertake due diligence and embrace risk sharing then hand the contract back only service to decrease the risk threshold of NHS commissioners further and reduce the volume of outsourced services, completing a vicious circle.

Words by Dr Elaine Maxwell, Associate Professor, School of Health and Social Care, London South Bank University