Independent Commissioning for National Health
Notes from ippr seminar, 28th June 2007
Presentations
Ian Dodge Director Policy Support Unit, Policy & Strategy Directorate, Department of Health
Health Reform
Commissioning is still weak in many PCTs. Partly because we have had a lack of clarity about
what we mean by commissioning, the commissioning framework should help. An overlooked
paragraph (23) in Commissioning a Patient Led NHS document (28 July 2005) referred to the
role of external consortia’s possible involvement in commissioning.
There needs to be much better assessment of needs and about the quality of current services
and value added. There are innovative models developed in the independent sector which
quantify population health and changes over time. These haven’t been developed in PCTs and
they don’t have the necessary models for analysis. There is the potential to introduce effective
changes in commissioning but it requires the development of different modelling techniques
and stronger analytical functions. There is an opportunity for the independent sector to
contribute.
PCTs should be free to seek support rather than think they should grow their own expertise.
They need to look at other agents such as patient groups and particularly the 3rd sector and
private sector to provide expertise. There need to be limits to private sector involvement,
because PCTs are public bodies and require legitimacy and accountability. This is partly why
you won’t see end to end commissioning undertaken by external consortia.
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Dr Natalie-Jane Macdonald, Bupa Commissioning services.
The Role of the Independent Sector in NHS Commissioning
IPPR Seminar
The Role of the Independent Sector in NHS Commissioning
Dr Natalie-Jane Macdonald
28 June, 2007
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Double click on the image above to view the full presentation
Dr MacDonald outlined the importance of effective commissioning, particularly in the context of
slowed rate of growth of spending and increasing demands for services. However, she
suggested it is a significant challenge to commission well and no one should underestimate the
scale of the task. Even with more effective commissioning it is difficult to achieve significant
savings because most PCTs work in monopolistic or oligpolistic provider markets. There are
organisations which have expertise in various elements of commissioning and they should play
a role, particularly in developing organisations and leaving them stronger when they leave.
She suggested that the independent sector, and in particular Bupa share similar values with the
NHS.
Dr Sandy Bradbrook - Chief Executive Heart of Birmingham Teaching PCT
Private Sector as Commissioners – Why no Gain?
PRIVATE SECTOR AS
COMMISSIONERS – WHY NO
GAIN?
Dr J Sandy Bradbrook
Chief Executive
Heart of Birmingham tPCT
Double click on the image above to view the full presentation
Dr Bradbrook suggested that bringing in external consortia to undertake end to end
commissioning would be a disaster for the NHS. Dr Bradbrook outlined some of the difficulties
associated with using independent organisations in commissioning. The private sector always
say they are more efficient, quicker, more skilled and have other special characteristics. But
the bottom line is they need to make a profit. It will be very difficult for commissioners to
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undertake difficult reconfigurations if the private sector are involved, because there is great
public hostility to private sector involvement in NHS decision making. Dr Bradbrook suggested
that the public would oppose public bodies involving the private sector in commissioning and
suggested that you can’t graft private sector values on to the public sector. The public sector
has a responsibility that cannot be transferred; PCTs are liable for their decisions. Dr
Bardbrook asked what is the liability if the private sector make decisions for the PCTs?
The track record of private sector involvement in NHS is varied and is certainly not an
automatic route to success. There is a need to be clear about what added value the
independent sector can bring. There is a need to analyse the risks to the NHS from involving
the private sector, for instance how to avoid market capture by the private sector and a loss of
core skills in the NHS.
He did observe that certain market niches could be developed for private sector involvement
where some gain could be obtained. However, the success of this would depend greatly upon
the senior NHS commissioning staff being clear about what they wanted and establishing good
specifications for such contributions.
Discussion (Chatham House)
A participant asked why there is so little spent nationally on developing commissioning when
the cost of commissioning failure is huge. The public are concerned that a lot of money is
spent on management. Commissioning is under resourced because there is a lack of political
will to move money into a management function.
The question was posed about whether commissioners are bearing too much of the burden for
health system reform and efficiency. The point was made that the ultimate goal was a choice
led system and that most innovation will come from acute providers.
NHS Values
There was some discussion about the values of the NHS and whether NHS values differ from
independent sector values and if so, does this mean the NHS shouldn’t use the independent
sector?
A participant asked what are NHS values and asked if they were presumed to be based on the
idea that the NHS is not for profit? This is, it was suggested, is fallacious because there is
profit throughout the NHS with hospitals and GPs for instance. Concern about protecting NHS
values has burdened the NHS. Being overly concerned about values has seen us going down
the international ratings for health care. However, the public don’t trust the private sector and
the private sector have a big job to do to convince the public to trust them.
End to end commissioning
Some participants were clear that they didn’t want to outsource the strategic end of
commissioning, as it was important for PCTs to retain a strategic overview. External agencies
should just undertake data analysis and modelling not end to end commissioning.
It was pointed out that outsourcing to the independent sector brings risks, a poor example of
outsourcing is ISTCs because there was no control over quality. The process of contracting
ISTCs is very mechanistic and provides no evidence about whether ISTCs are better or worse
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than NHS providers. ISTCs therefore provide some empirical evidence that end to end
outsourcing has real dangers. End to end commissioning is not supported in DH currently.
Another participant argued that it is a good idea to have external agencies undertake end to
end so long as they are not providing as well as commissioning. Another participant argued
that end to end is sensible if you risk share with PCTs. Some of the independent sector are
willing to undertake end to end commissioning because there are big opportunities to make
savings (and hence cost sharing is attractive), but there are also significant risks to the
independent sector. The DH should test out which organisations are willing and able to
undertake end to end commissioning.
Skills
One participant suggested that the first thing that PCTs need to learn if they consider using
external agencies is how to draw up specifications. It is very difficult to design a specification
that delivers what the people who wrote it think it should. NHS is very poor at this and needs to
learn how to ask for what it needs. But there are significant barriers to effective contracting,
the reason we need to contract out is because the NHS doesn’t have the skills internally.
It was pointed out that contracting the independent sector required skills which the PCT might
not possess and that using the independent sector would further erode existing skills.
Risk sharing
An alternative model to the assumed model of the independent sector being contracted to
support commissioning for a period of time, was proposed, based on risk sharing. External
agencies shouldn’t expect all the money that more effective commissioning saves, but risk
sharing would be effective in conjunction with right indicators for performance management. It
was pointed out that undertaking parts of commissioning is small business to the independent
sector but taking some of the inefficiency savings is potentially bigger business.
However, other participants pointed out that it is difficult to price risk in a commissioning
contract. Also an important rule of outsourcing is the need to strip out value before you risk
share otherwise the PCTs lose the existing benefits. PCTs should save money from more
effective commissioning because there are big gains to be had, but that money should be
retained by PCTs.
It was suggested that PCTs should only invite the independent sector to risk share when things
get really tough not when the PCTs are making savings.
Another participant pointed out that under practice based commissioning PCT money is
allocated by GPs so PCTs don’t make the savings. There is a big practical challenge around
risk sharing because practices effectively spend the money. PCTs are worried by this and the
independent sector should be.
The implicit model under consideration during the discussion had been for PCTs to contract the
independent sector to undertake commissioning and develop the PCT for a specified time. But
the alternative is to introduce active competition throughout the contracting process. Therefore
you need multiple private sector providers and the development of a market. There is a need
to develop longer term incentives to attract providers and to enhance performance. It takes
time to develop an effective market in developing commissioning services and politicians don’t
have time, so they try to lead with top down policy directives.
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Local models
Several people made the point that the development of commissioning and the use of external
agencies has to be locally driven. The Department of Health don’t have the right expertise or
local knowledge instead ownership of the commissioning model has to come from PCT and
genuine public engagement. There was a plea not to use independent sector involvement as a
reform tool (like ISTCs have been) it needs to be more of a locally driven partnership
arrangement, driven by PCTs.
The Role of local authorities
PCTs can learn from local authority commissioning. Local authority commissioning has
improved and they often commission well for mixed provision and at low cost and they are well
regulated.
However, another participant pointed out that there have been two major reviews of local
authority commissioning and although much is way ahead of the NHS, both reports suggested
there is a lot of room for improvement. Local authorities have driven down costs, but not
improved quality. The NHS still needs to improve quality.
PCTs, accountability and legitimacy
A number of participants suggested that PCTs need to retain and strengthen accountability. It
is currently difficult for PCT boards to hold the system to account. PCT boards need much
more capacity to do this, particularly if PCTs are contracting with the independent sector for
support with commissioning. Overview and Scrutiny Committees and LINKs find holding PCTs
to account is arms length and unattractive. They would also like to call GPs and the
independent sector for scrutiny.
If a PCT was to outsource commissioning and the private sector were to do a bad job that
could create significant problems in terms of accountability for the decisions. PCTs are
statutory public bodies, they make implicit tradeoffs and decisions around the margins of the
NHS about what they should provide. They already lack legitimacy and accountability.
Practices have even less legitimacy which is why they don’t have hard budgets.
Assessments of PCTs
The missing policy piece is assessment of PCTs, there is a need for a clear simple and
transparent assessment of how well they are managing their commissioning process and the
outcomes. This may develop from fitness for purpose work.
This work has been made possible due to the generous support of BUPA and Prime
PLC
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