In last month’s NHS White Paper and the accompanying consultation paper (the NHS Provider Selection Regime) the Government set out a new framework for the NHS to use when it commissions clinical services from NHS trusts and private providers.

Currently, contracting for these services is governed by government-wide rules that apply across the public sector. In future, however, these government-wide rules will only apply to the NHS when it buys goods and non-clinical services, and contracting for clinical services will be subject to the new framework.

This new framework, if it operates as planned, should remove some of the uncertainty and potentially excessively risk-averse behaviour that has arisen under the current rules for commissioning clinical services. This will benefit NHS commissioners, trusts and private providers. It seems unlikely that the number of NHS contracts put out to tender will reduce significantly and Government claims about reducing bureaucracy and supporting integration should probably be taken with a grain of salt.

New rules will give greater certainty to Commissioners, NHS trusts and private providers

The new regime can be thought of as putting NHS clinical services into three buckets:

  • first, ‘Reserved Services’ that can only be supplied by NHS trusts and are not be subject to any tendering requirements;
  • second, ‘Any Willing Provider services’ that any NHS trust or private provider can always supply (subject to meeting NHS quality and price requirements) without being subject to any additional procurement-related process; and
  • finally, ‘Middle Ground Services’, where NHS commissioners can award contracts directly or use competitive tendering to select a provider.

The clarity that this will bring to how clinical services will be procured should reduce uncertainty for commissioners when making procurement decisions. It should also reduce the uncertainty for NHS trusts and private providers when they think about the long-term future of the services that they offer. (The categorisation set out above is a little different to that described in the White Paper, but can be helpfully thought of in these terms.)

In recent years, commissioners have held the occasional tender for what will now be Reserved Services out of a seeming abundance of caution, even though only one provider could possibly supply the service and the risk of a legal challenge was probably very small. The new framework should bring an end to tenders that are intended to reduce the risk of a legal challenge but which have little benefit as a meaningful process for selecting between potential service providers.

It should also reduce uncertainty for private providers that offer Any Willing Provider services (which are mainly routine elective care services). Some commissioners have used local commissioning arrangements to restrict private providers’ ability to supply these services (e.g. through prime provider contracts with local NHS acute trusts). Private providers should now have the right to offer Any Willing Provider services to NHS patients – so long as they meet NHS price and service quality standards – without having to jump through procurement-related hoops as well. This should go some way to ensuring that the Any Willing Provider model operates as intended and that patient choice is maintained.

NHS tender volumes will probably be unaffected by new rules

Commissioners will have quite a lot of flexibility under the new framework to decide whether Middle Ground Services should be tendered, and possibly also in deciding where the boundary lies between Reserved and Middle Ground Services. Some Commissioners may decide that a very large proportion of services are Reserved and very few are Middle Ground, while others may take a different view. Over time, commissioners are likely to change their mind about which services are in which category.

Critics of the way in which current public sector procurement rules apply to the NHS argue that commissioners are forced to tender contracts that would otherwise have been awarded to local NHS trusts. Our view, however, is that this kind of forced tendering, against commissioners’ better judgement, accounts for only a small proportion of NHS tenders. We think that commissioners more commonly decide to tender a service when their relationship with the incumbent provider has broken down, and they have a degree of confidence that other providers (either private sector or other NHS trusts) could supply a better service.

It seems to us that the new procurement regime for NHS clinical services formally facilitates the process for making decisions about tenders that already exists. For this reason, we expect that the number of tenders for NHS clinical services will remain at about the same level as has been the case in recent years.

Private providers that supply Middle Ground Services will, just like now, need good relationships with commissioners and a good track record in delivering services to grow their business. Business strategies that rely on responding to tenders that are ‘forced’ by the procurement rules, and that have not arisen from a commissioner’s genuine desire to explore alternative service provision, have always been a dead end. The new rules simply formalise this reality.

Less Bureaucracy and More Integration?

The Government has claimed that the new NHS procurement regime will better support NHS plans for integrating services and will reduce bureaucracy.

This suggestion of reduced bureaucracy probably needs to be taken with a grain of salt. The NHS will now have two procurement regimes instead of one (i.e. one for clinical services and one for everything else) and this, on its own, will contribute to greater costs and complexity.

The Government has set out rules to ensure transparent decision-making under the new regime and for ensuring that providers are selected according to: (i) Quality; (ii) Value; (iii) Integration & Collaboration; (iv) Access, inequalities & choice; and (v) Service sustainability and social value. Complying with these requirements seems likely to generate quite a bit of administration and internal process assurance activity.

The flexibility that NHS commissioners will gain through being able to design their own processes for selecting providers of Middle Ground Services may significantly increase costs if each commissioner designs its own new, unique process for each contract award. Risk averse commissioners, and even those slightly less risk averse, may end up with new processes that are just as complex as those required under existing public sector procurement rules.

To the extent that legal challenges arise under the new regime, further cost and complexity may be added as case law develops on how tenders need to be conducted to comply with the new rules. Commissioners may become increasingly dependent on external advice to ensure compliance.

Similarly, the claim about the new procurement regime better supporting plans for service integration is probably a little shaky. If the current procurement rules were preventing service integration by forcing competitive tendering processes on commissioners then the new regime may obviate this pressure. However, we suspect – as set out above – that the amount of NHS tendering has been a function of commissioners’ relationships with their providers not the requirements of the procurement regime.

If ICSs are successful in engendering better relationships between incumbent providers and commissioners then this will be more likely to reduce the amount of competitive tendering than the procurement rules themselves.

So, while the new procurement regime seems unlikely to do much to reduce bureaucracy or increase integration, it holds out the potential for a better and more certain set of arrangements compared to those that are currently in place.