What we know so far… New providers - BMA

Health Policy & Economic Research Unit
What we know so far…
New providers
April 2012

Health Policy & Economic Research Unit
Contents
1. What we know so far…
2. Introduction
3. New provider models before the White Paper
3.1 Independent Sector Treatment Centres (ISTCs)
3.1.1 Introduction of ISTCs
3.1.2 Financial implications
3.1.3 BMA concerns
3.2 Social Enterprise
3.2.1 Introduction of social enterprises
3.2.2 Transforming Community Services
3.2.3 Right to request
3.2.4 Transfer of staff
3.2.5 BMA concerns
3.3 Not-for-profit providers
4. Changes in the NHS
4.1 Any Qualified Provider
4.2 Failure regime
4.3 ISTCs
4.4 Social Enterprise
4.5 Not-for-profit sector
5. What we don't know
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1. What we know so far…
This paper forms part of a series of BMA briefing papers, which set out what we know so far on a
range of key topics following the Government’s health reforms.
The Health and Social Care Act 2012, which concluded its 15-month passage through Parliament on
20 March and received Royal Assent on 27 March, now defines much of the Government’s proposals
in primary legislation. The Act legislates for the NHS reforms first set out in the White Paper, Equity and
excellence: Liberating the NHS 1
, which was published in July 2010.
This briefing note describes what the changes will mean for new providers, identifying uncertainties
that remain around implementation and where proposals will be further developed through secondary
legislation and guidance.
Where of significance, the papers highlight changes that have been made to the Government’s original
proposals for reform through the parliamentary process, but otherwise reflect the information/detail of
where we are now.
The briefing papers focus on bringing together the available facts and drawing attention to gaps in
knowledge rather than giving an account of BMA policy. Documents stating the BMA’s policies and
positions are referenced in the papers where appropriate, to allow readers to examine these in more
detail if they wish to do so.
They are living documents and will be updated as and when new information emerges. We would be
interested to hear your views, and any information you may have, on the various topics covered in the
briefing papers. Please use the contact details below to get in touch.
Contact us
Health Policy and Economic Research Unit
info.hperu@bma.org.uk
BMA House, Tavistock Square, London WC1H 9JP
1 Department of Health. Equity and excellence: Liberating the NHS. 2010.
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2. Introduction
New forms of provider models have entered the NHS in the last decade following the introduction of
the internal market and the purchaser-provider split in the NHS in 1990. These new models include:
foundation trusts 2
, and independent sector treatment centres (ISTCs) in the secondary and tertiary care
sectors, and social enterprises and not-for-profit providers in the primary and community care sectors.
To facilitate the entry of new providers to the internal market the Labour Government introduced a
series of initiatives including: practice based commissioning, a national tariff for certain services known
as ‘Payment by Results’, the extended choice network (ECN) and free choice network (FCN), NHS
Choices 3
, Choose and Book, Transforming Community Services and the NHS Constitution. These
policies all contributed to a movement towards greater choice and competition in the NHS 4
.
The publication of the White Paper ‘Equity and excellence: Liberating the NHS’ in July 2010
introduced the new Coalition Government’s plans to reform the health service which sought to
encourage proliferation of the new forms of providers and complete the purchaser-provider split.
2 See the briefing note What we know so far … foundation trusts for more information.
3 NHS Choices briefing note. BMA, October 2010
http://bma.org.uk/working-for-change/shaping-healthcare/competition-and-choice
4 See the briefing note What we know so far … Choice and any qualified provider for more information.
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3. New provider models before the
White Paper
3.1 Independent Sector Treatment Centres (ISTCs)
ISTCs are non-NHS organisations that provide secondary care services to NHS patients, usually performing
common elective and diagnostic procedures.
3.1.1 Introduction of ISTCs
ISTCs were introduced by the Labour Government in 2003 with the intention of increasing capacity in the
health service in order to reduce waiting times. This followed concerns that hospitals were often cancelling
planned procedures due to the competing demand of providing emergency care. Moving elective
operations to separate organisations was intended to remove this motive and drive down waiting times.
There have been two ‘waves’ of ISTCs, both procured centrally with five year block contracts from
the Department of Health. To facilitate use of ISTCs, choice for patients at referral to hospital was
introduced on 1 January 2006 and most patients requiring an elective referral were to be offered a choice
of at least four hospitals.
ISTCs – key facts
• The first wave of ISTCs introduced 25 fixed-site centres, which were awarded contracts in 2003 to
deliver 170,000 consultant episodes for £1.6 billion.
• The second phase of ISTCs was introduced in 2005 resulting in nine schemes over multiple sites
contracted to deliver 250,000 consultant episodes and two million diagnostic procedures for
£4 billion over five years.
• 48 NHS-owned treatment centres have also been developed since 2000 5
.
3.1.2 Financial implications
Generally, ISTCs have been underused, with both wave one and wave two ISTCs performing around
85 per cent of contracted activity and overall contributing only around 2 per cent of all NHS activity,
therefore providing little extra capacity 6
. As a result, the cost to the NHS has grown considerably,
paying on average across the first 20 ISTCs 12 per cent more than the cost for the NHS to perform the
work internally 7
.
3.1.3 BMA concerns
The BMA has voiced a number of concerns with regard to the introduction of ISTCs including:
• ISTCs ‘cherry picking’ straightforward cases resulting in a greater proportion of more complex cases
treated within the NHS, which would raise the per capita cost of treatment for NHS providers.
5 The King’s Fund. Independent Sector Treatment Centres. October 2009.
6 King’s Fund, op. cit., p.3.
7 http://www.publications.parliament.uk/pa/cm200708/cmselect/cmhealth/1190/1190w118.htm.
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• Fragmentation of patient care due to lack of communication between organisations. Further detail
is available in an HPERU study of the impact of treatment centres on the local health economy.
• Education and training of the NHS workforce may also be affected by the transfer of activity from
the NHS to the private sector both through the distortion of NHS casemix and the removal of
training opportunities where providers lack the facilities, or are not contractually obliged to
provide training.
3.2 Social Enterprise
3.2.1 Introduction of social enterprises
During its recent years in power the Labour Government started a policy shift towards social
enterprises in the health sector with a number of initiatives. In January 2006, the Labour Government
published the White Paper ‘Our Health, Our Care, Our Say: A New Direction for Community Services’.
Amongst other policies, it emphasised that care could be delivered by a range of healthcare providers
including social enterprises. The Social Enterprise Unit (SEU) was established to promote the social
enterprise sector within the NHS, and the £100m Social Enterprise Investment Fund was also made
accessible to health and social care social enterprises. Further detail on policy developments can be
found in the HPERU briefing on social enterprises 8
.
3.2.2 Transforming Community Services
In January 2009, the Labour Government decided to separate all commissioning and provision
functions of PCTs. The Department of Health published ‘Transforming Community Services: Enabling
New Patterns of Provision’ instructing PCTs to divest their provision arms to separate organisations
using a national contract for community services. The intention was to break off PCT provider arms
into social enterprises.
3.2.3 Right to request
The ‘Next Stage Review’ 9
introduced the ‘Right to request’ in 2008. This established a right for NHS
staff to set up social enterprises to deliver services. Support was provided to new organisations
including a contract for up to five years as well as business development support. The Social Enterprise
Investment Fund provided £8.3 million to ‘Right to Request’ applicants. The Scheme closed in
September 2010 following the requirement that all PCTs separate commissioning and provision of
community services by April 2011 10
.
8 BMA, Social enterprises in the health service. April 2011
http://bma.org.uk/working-for-change/shaping-healthcare/competition-and-choice
9 Department of Health. High quality care for all: Next stage review. June 2008.
10 The King’s Fund. Social enterprise in health care: promoting organisational autonomy and staff engagement. August 2011.
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3.2.4 Transfer of staff
In order to ease the concerns of staff facing transferral from the NHS, the ‘Code of Practice on
Workforce Matters in Public Sector Service Contracts’ was introduced by the Labour Government in
2005. The Code set out an approach for transfer of staff from a public sector organisation to a new
service provider. It was designed to prevent the emergence of a two-tier workforce and ensured that
new starters would be on organisation-specific terms and conditions, which should be overall no less
favourable than the terms and conditions of transferred employees.
Social enterprises – key facts
There are around 62,000 social enterprises in the UK, which contribute more than £24 billion to
the economy, employing approximately 800,000 people. It is estimated that about 9 per cent of
them (approximately 6000) operate in the health and social care sectors 11
. There are 22 staff-run
social enterprises, which were set up under the ‘Transforming Community Services’ programme.
3.2.5 BMA concerns
The social enterprise model for healthcare is still relatively new in England and there is a lack of
evidence assessing the effectiveness of early examples 12
. The Department of Health’s assessment of the
Social Enterprise Pathfinder Programme found a need for clarity around the model and a need to
address staff concerns 13
. There is little evidence to suggest significant numbers of NHS staff wish to
work in social enterprises. In 2010, 73 per cent of staff in West Essex PCT (one of the ‘first wave’ social
enterprise projects) voted against the setting up of, and transfer to, a social enterprise 14
.
3.3 Not-for-profit providers
The not-for-profit sector, including voluntary and charitable organisations 15
, grew in terms of both
income and employment over the lifetime of the Labour Government, which saw planned expansion
of provision of public services by the sector. Increasingly funded by the state, the not-for-profit sector
has seen a shift in income from grants to contracts to supply services. The sector has been identified by
all major parties as a way of offloading public services, described as ‘the weapon of choice’ in the
battle for public sector reform 16
.
11 The King’s Fund. Social enterprise in health care: promoting organisational autonomy and staff engagement. August 2011.
12 Lewis, R., Hunt, P., Carson, D. (2006) Social Enterprise and Community-based Care. The King’s Fund. p.10.
13 Department of Health. Leading the way through social enterprise: the social enterprise pathfinder programme evaluation.
March 2010. http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_113535.
14 Social Enterprise Live, Staff vote halts plans for first ‘right to request’ social enterprise
http://www.socialenterpriselive.com/section/news/public-services/20100127/staff-vote-halts-plans-first-right-request-socialenterprise.
(accessed 18 November 2010).
15 Some definitions of the not-for-profit sector include social enterprises. However, in this case the definition refers to charitable
and voluntary organisations.
16 Unison. Third Sector provision of local government and health services. April 2007.
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Not-for-profit providers – Key facts
In 2010 the Association of Chief Executives of Voluntary Organisations (ACEVO) predicted
voluntary sector income from providing public services could increase by £2 billion by 2015 and
despite cuts in public funding, the sector’s share of grants and contracts with local and central
government could continue to grow. Figures from the National Council for Voluntary
Organisations (NCVO) showed the sector received about £12.8 billion a year in public grants and
contracts in 2007/08 17
.
17 http://www.thirdsector.co.uk/news/1039628/Delivery-public-services-will-grow-despite-cuts.
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4. Changes in the NHS
The Health and Social Care Act 2012 introduces reforms to encourage more use of new providers
with the aim of giving patients access to a greater variety of providers and choose those that meet
their needs.
4.1 Any Qualified Provider
One of the aims of the Government’s reforms is to extend choice of provider beyond elective surgery
to other areas of care including community services, mental health and diagnostics.
The new ‘Any Qualified Provider’ (AQP) policy is intended to aid the process of altering the NHS
landscape to that of a broad range of providers from the private, voluntary and independent sectors.
AQP will extend choice of provider for patients to new services expanding on the ‘Any Willing Provider’
policy introduced in April 2008, which gave patients choice of provider for routine elective procedures.
In July 2011 the Government announced the implementation of a phased role out of extended patient
choice of AQP in response to the consultation Liberating the NHS: greater choice and control 18
. This
would mean that from April 2012 commissioners will be required to apply the extended choice of AQP
to a minimum of three new services. A recommended list of eight community and mental health
services was indicated as likely candidates to begin AQP.
Providers will be qualified to provide the particular services under AQP arrangements if they:
• Register with the CQC, and from 2013 with both CQC and Monitor;
• Agree to the tariff set by commissioners;
• Receive no guarantees of volume or payment;
• Can demonstrate a track record of delivery of the service;
• Agree to the terms and conditions of the standard NHS contract, and incorporate any local
commissioner quality requirements or service specifications; and
• Sign up to managing potential conflicts of interest explicitly and transparently ensuring patients are
aware of their right to choose and the options available.
For more information please see the briefing note, What we know so far…Choice and any qualified
provider.
18 Liberating the NHS: greater choice and control. Government response – extending choice of provider
http://www.dh.gov.uk/en/Consultations/Responsestoconsultations/DH_125442.
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4.2 Failure regime
The Health and Social Care Act 2012 legislates for a new failure regime. If an independent provider,
including private providers and social enterprises, becomes unsustainable, a health special
administration procedure will come into place. This will be based on existing corporate insolvency law,
details of which will be set out in secondary legislation. For more information, a separate briefing note
on the failure regime will be available soon.
4.3 ISTCs
Before the entry of the current government, centrally negotiated ISTC contracts were due to expire,
with most wave one contracts concluding by 2009/10 and wave two contracts up to 2017. Following
this, ISTCs would operate as other independent sector providers able to treat private patients, no
longer subject to restrictions on employing NHS staff and free to compete for PCT contracts being
automatically registered as ‘Any Qualified provider’ for the services they were originally contracted to
provide 19
.
As the first wave contracts have came to an end the shift from national to PCT-based contracting was
delayed. For ISTCs this has meant moving from one Extended Choice Network/Free Choice Network
(ECN/FCN) arrangement to several (up to 50) contracts with individual PCTs. Due to difficulties with the
transition, the Government extended ECN contracts. However, the majority of ISTCs now have PCTbased
contracts in place 20
. These contracting arrangements are now subject to further change with the
abolition of PCTs and SHAs under the Health and Social Care Act. Interim arrangements have been
introduced with SHA and PCT clusters, and Clinical Commissioning Groups will be able to refer
patients to ISTCs through the Any Qualified Provider policy.
4.4 Social Enterprise
The Government has overtly announced its support for the Social Enterprises and PCT providers
continue to convert to this model. In March 2011, the Government announced the ‘Right to Provide’
programme following similar arrangements to the previous ‘Right to Request’ programme, to
encourage health and social care staff to create their own staff-led social enterprises. This means NHS
staff can request to manage the services or care pathways they currently deliver by setting up their
own organisation 21
. Little detail is available regarding the extent to which this is being taken up. The
initiative has been set up in the context of the Any Qualified Provider programme.
The ‘Code of Practice on Workforce Matters in Public Sector Service Contracts’ was withdrawn in
December 2010 and has been replaced by a set of ‘Principles of Good Employment Practice’ 22
. The
Principles are not mandatory and their adoption will not be part of the decision making process to
approve providers. The Government has said that it will monitor the application of the Principles
19 The King’s Fund. Op. cit. p.325 Cooperation and Competition Panel Review of the operation of ‘any willing provider’ for the
provision of routine elective care: interim assessment. February 2011.
20 Cooperation and Competition Panel Review of the operation of ‘any willing provider’ for the provision of routine elective care:
interim assessment. February 2011.
21 http://healthandcare.dh.gov.uk/rtp/.
22 Cabinet Office. Principles of good employment practice. 2010
http://www.cabinetoffice.gov.uk/resource-library/principles-good-employment-practice.
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through the Public Services Forum which will give trade unions and public service employers the
opportunity to feedback on the impact of the withdrawal of the ‘Code of Practice’ and the Principles.
4.5 Not-for-profit sector
Like its predecessor, the coalition Government has expressed an interest in enabling the not-for-profit
sector to provide public services as outlined in the ‘Big Society’ vision, which largely focuses on
decentralisation of responsibility to communities and citizens. A greater role for the not-for-profit
sector was also backed by the NHS Future Forum report on Choice and Competition. The report cited
current examples of third sector provision and identified that 70 per cent of the health service budget
goes on long term conditions, which are seen to be amenable to third sector providers as the majority
of this work is carried out in the community. Examples were cited of third sector organisations that
represent particular patient groups and have been influential in shaping services for certain conditions.
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5. What we don’t know
There is still uncertainty about how effective the reforms will be in promoting more competition in the
NHS. There could potentially be significant changes ahead for new providers. However, it could be
some time before the long-term effects become clear.
It is yet to be seen how commissioners will interpret the Any Qualified Provider policy. There are many
questions as to how the AQP policy will affect the different types of providers and how commissioners
will address reconciling patient choice of provider and tendering contracts with providers for complex
services. Although the details remain unclear it is likely that AQP will potentially further open up the
market to new providers.
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What we know so far… new providers