NHS and the Private Sector: Boom Time over?

Did you see it? On 28 February the Guardian carried an article reporting that the DH was launching a consultation on the current procurement legislation in the NHS; set by the 2012 Act. The document states it "....can lead to protracted procurement processes and wasteful legal and administration costs in.....where there is a strong rationale for services to be provided by NHS organisations, for instance to secure integration...". It also points out the risk of discouraging the co-operation needed for integration of care.

I can't see the NHS as a sector arguing to keep the act as it is. Recent wins by Care UK; Virgin and others have seen large chunks of community services give to independent providers. Alongside this development we have seen commercially minded NHS organisations with organised bid and tender teams win contracts "out of area". As a point of fact I have myself helped this happen multiple times and partnered private providers with numerous NHS Trusts in attempts to win contracts outside their borders. These highly capable bidding trusts are, however, in a minority. To most NHS Trusts the chance to retain their services will be seized quickly. Or at least, some services....

Community and acute services will be those most likely to see a large reduction in tender activity. They are most central to integration and there have been several well known failures to procure for example Cambridge and Peterborough. Other services operated by private providers have been lost at contract end. I suspect the reason for this is that commissioners and DH often underestimated to what extent the system was already tightly linked. In the ISTC Wave 1 for example acute trusts found losing day case work made theatre scheduling harder. As a major limiting factor there are also only so many key resources to go round; especially consultant surgeons and doctors. The high profile of these kinds of services and sheer pressure on they are under also makes them risky to bid for and run. (In fact NHS Ops staff are pretty much,in my view, world leaders at high volume acute activity on a shoestring. They need to be.

The private sector has added hugely to community and acute care in productivity and efficiency but the issues listed above will be augmented by political pressures exacerbated by the fall of Carillion and now Interserve. There is also a tendency to overcorrection in organisations which may lead to a rapid slow down of activity.

So where will tendering continue? I see the future in higher risk areas. Police custody; prison health; long term care and secure mental health are not sectors I see NHS Directors desperate to get back into. They are not easily integrated into the community system and require specialist expertise to run. They are also footnotes on board papers; often only coming to the notice of the board when financial risk emerges. Primary Care is another area where bids will continue. Competition and commercial outlooks are more commonly found and there are many sharp business people in practices confident they can deliver good quality services at lower prices than hospitals. In Dermatology; MSK and other outpatient or "risk and capital light" specialities I think brisk competition will continue.

The report says "There should be a continued place for the use of competitive procurement, to bring in new capacity or innovative service models.... commissioners should have discretion, subject to a best value test, when to seek interest from other potential healthcare providers." This will encourage CCGs to look at alternatives to acute provision on cost grounds at SME level if they can see the data and have capacity and information. However now I cannot see them using tenders on a large scale as much more than a threat to encourage improvement.

What to do with the skills in NHS Trust Tender teams if the market slows up? Here is a radical idea. Competition drives improvement but it doesn't have to be with the threat of an axe to Trust income. Perhaps the Kings Fund or DH should set up benchmarking systems based on quality and cost. The tender teams who have been modelling services and driving down costs could continue to do so; and compete openly and transparently on key metrics simply to be the best. Number of patients seen per session? Clinical outcomes from MSK pathways? No one likes being off the pace so if a CEO sees a Trust somewhere else treating twice as many patients per consultant with better outcomes they can task their team to investigate and replicate.

Contract law, need and scarcity will continue to drive procurement in the NHS in many parts and we should be busy. However is the boom time for the big community bidders coming to an end? I think it probably is for now.