Contradictory NHS policy will undermine improvements in care

5 January 2017

Who delivers healthcare is almost as contentious as its quality. Research published this week indicates that private-sector companies were invited to bid for 14 per cent more NHS contracts in the year to August than the previous 12 months. According to the Department of Health, the NHS spent 6.3 per cent of its budget on independent-sector providers in 2014-15. Take into consideration independent contractors omitted from that figure, such as pharmacists and dentists, and the total could be as high as 28 per cent.

This figure also includes general practitioners – the most familiar independent NHS contractors. GPs have held this status since the establishment of the NHS in 1948. They are handed budgets based on registered patient lists via one of three contracts: PMS, GMS or APMS. These are used to deliver care, by paying employees, maintaining facilities and buying equipment – with GP ‘partners’ taking home the profit. These partners should be motivated to deliver care at the best cost within these funding packages, or face going out of business. A fully functioning public-sector market would also put pressure on current providers to constantly innovate, with the threat of competitors winning contracts incentivising GPs to embrace new technology, ways of working and treatments to improve care.

The real story of NHS ‘outsourcing’ is that this competition does not happen in general practice. In the year to August 2016, the official EU procurement portal shows that 47 contracts were tendered for 96 GP sites across England. That represents 1.3 per cent of practices. Contracts are designed for this: GMS contacts have no end date; PMS contracts are subject to negotiation, but in practice have no end date or are renegotiated (not re-tendered) periodically. These account for almost 100 per cent of GP contracts.

This misses an opportunity. In healthcare, the recent rise of new models of general practice, such as Lakeside Healthcare and Modality, are disrupting the 70-year-old model of primary care to meet the problem of an increasingly unhealthy population within tighter budgets. As Reform research published last year shows, diagnostic and urgent-care services, online triaging and extended opening hours are removing pressure from hospitals under pressure.

In England, providers will gain few opportunities to spread best practice without the ability to regularly compete for contracts. Indefinite contracts in any market will undermine opportunities to improve services: in private markets, at least half of productivity increases over a 10-year period are due to the replacement of less-productive organisations with more-productive ones. How long GP contracts last should be a matter for commissioners to decide, based on their understanding of how competing providers can deliver health outcomes. Current APMS contracts, designed for ‘private’ providers such as VirginCare, can last up to 15 years. Pioneering international providers, such as Ribera Salud in Valencia (which has improved care for those with long-term conditions at 26 per cent lower cost than others in the region), hold contracts of 15 years. Others are as short as three to five years, which is considered long term enough to incentivise investment and give providers time to “experiment” with solutions, by changing the workforce to respond to demand for mental-health services, for example.

Without a mature debate on how the NHS creates the conditions for providers to deliver the best care within an affordable model, patients will lose out. Shining a light on NHS outsourcing is a starting point. Distributing the benefits of competition across the NHS would be a real win for a healthcare system looking for bright ideas to reform.

Alexander Hitchcock, Senior Researcher, Reform

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