Procurement’s part in shaping the NHS journey ahead
As Jeroen van Os, Finance Director of ERS Medical writes, planned changes to how NHS and related health and care services are procured are intended to reduce bureaucratic processes and encourage joined-up care. How will this work and reassure commissioners they can procure with confidence to deliver a better service?
In February this year, an NHS white paper outlined changes to procurement as part of proposals to “improve health and social care for all”. The paper references the NHS Provider Selection Regime intended to give commissioners greater flexibility in how health services are arranged.
On 6 July, the Department of Health and Social Care introduced a health and care bill to the House of Commons. The bill will enable a separate procurement regime when arranging clinical healthcare services (whether hospital or community services).
While the NHS Provider Selection Regime will only apply to the procurement of clinical healthcare services, the bill will enable allowances to be made for mixed procurements in the regime and in the interests of joined-up care, for instance, when a health service is being commissioned along with social care. The procurement of non-clinical services, such as professional services or clinical consumables, will remain subject to the Public Contract Regulations 2015 rules until these are replaced by Cabinet Office procurement reforms.
Explanatory notes published alongside the bill say that this new procurement regime for NHS and public health services, the Provider Selection Regime, will reduce the need for competitive tendering where it adds limited or no value.
The bill will create a separate procurement regime for arranging clinical services, which will include removing the procurement of health care services for the purposes of the health service from scope of the Public Contracts Regulations 2015. It will also enable the development of a new procurement regime for the NHS and public health procurement (informed by public consultation) aimed at reducing bureaucracy for commissioners and providers alike.
New rules under discussion
Consultation on the Provider Selection Regime took place in February this year and the new regime would be established via a combination of primary and secondary legislation and set out in detail in statutory guidance. The consultation document proposes that certain rules be applied when healthcare services are procured in the future and that current procurement requirements be removed. When read along with the published information on the establishment of statutory integrated care system (ICS) boards, including Legislation for Integrated Care Systems: five recommendations to Government and Parliament, the Provider Selection Regime document aims to make it more straightforward for our system to continue with existing service provision, particularly where existing arrangements are working well and there is no value in seeking an alternative provider. Currently, there is an expectation that nearly all contracts procured for NHS services should be advertised and awarded following a competitive tendering exercise, which leads to continuous upheaval and disruption among providers.
This legacy procurement pattern would be replaced by the new regime specifically created for the NHS – reinforced in the ethos that services procured are in the best interests of patients, taxpayers and the population.
Applying the proposed regime
Although it would depend on the type of service being procured, there are three decision circumstances in the scope of the Provider Selection Regime. Here is our take on each of them.
- Continuing existing arrangements
If current arrangements are going well and are financially balanced, continuing with existing services has an immediate benefit to patients, commissioners and providers. However, if commissioning authorities must come out of the current procurement arrangement, which may only offer a marginal economical advantage, the question to ask is, is it worth potentially causing disruption to existing stakeholder relationships?
Continuing an existing arrangement offers contract security and encourages high-quality performance as all parties are invested in the contract for the longer term. It also promotes a partnership approach, with or without added investment in new technologies, infrastructure development and innovation, such as investing in electric vehicles for a long-term contract.
However, longer-term contracts, or continuing with existing arrangements, will still need to be clearly defined by certain parameters. Will it be a rolling contract with a short notice period? If so, this will once again lead to uncertainty and lack of commitment from all parties involved, not to mention a disrupted service to patients. For instance, a rolling contract with a six-month break clause could encourage an impassionate service that simply ticks the boxes to meet contractual key performance indicators (KPIs).
There has to be a sense of balance in continuing existing arrangements. Competition drives innovation, best practice and best value; continuing existing arrangements can lead to stagnation and a lack of development across the sector. There is no real drive for providers to continue to be industry leaders without a level of healthy competition. The plan for procuring authorities to continue with existing arrangements should be made with a clear service improvement and innovation agenda.
A lack of competition could shrink the overall supply chain, making it more difficult for the sector to collectively flex to changes in demand. This issue was spotlighted throughout the pandemic, when patient transport and frontline ambulance services collaboratively worked together to ensure patients were being transported to keep things flowing during an incredibly busy time.
Provider continuity must coincide with periodic quality and price evaluation, otherwise true value is difficult to establish. It is important to distinguish between best value and best price for the service as well, because a service should not just be procured on price. Regular service reviews must go beyond basic KPI. Contract reviews are important to ensure that procurement authorities are receiving the best value and a consistently effective and innovative service.
- Identifying the most suitable provider for new/substantially changed agreements
The second decision circumstance in the Provider Selection Regime is identifying the most suitable provider for new or substantially changed agreements. This sounds very much like a tender process, but the consultation document states that a full tendering process does not need to be conducted. If so, what timescales will this new procurement take and is there a financial cap? Moreover, if the existing arrangement has substantially changed, can the existing provider deliver it with current relationships and local knowledge, such as providing vertical services in the same space if their service portfolio allows it?
Identifying the most suitable provider needs to be done against the proposed criteria in the Provider Selection Regime. These are quality, value, integration and collaboration, access, inequalities and choice, service sustainability and social value. The Provider Selection Regime consultation notes that value is not about securing the cheapest option, but about selecting the most suitable option that offers a combination of benefits.
Another point to consider for this scope is that the process for identifying the most suitable provider must have a robust (qualitative and quantitative) analysis behind it. Taxpayers and patients want to know they are getting a good and reliable service. Commissioning organisations want to know they are getting best value for their budget with evidence of a provider’s experience. As it is public money, perhaps this information should be available in the public domain?
For instance, as mentioned in the August 2021 non-emergency patient transport services (NEPTS) review, Improving non-emergency patient transport services, Report of the non-emergency patient transport review, it is impractical to apply a holistic blueprint for all non-emergency patient transport as there are far too many variances in geographies, patient cohorts, local settings and technologies. However, local and regional planning of such services should be based on a national approach that raises the standards of service for patients as well as providing an incentive for investment and innovation in the overall sector.
- Competitive procurement
The third decision circumstance in the Provider Selection Regime is competitive procurement. We would assume this will follow a clear legal process, therefore allowing the decision-making authority a detailed insight into each provider, with specific scoring against requirements. This approach encourages healthy and fair competition in the economy.
Done properly, competitive procurement is the best way for decision-makers to evenly compare providers to ensure that they choose the most economically advantageous provider for the service they are procuring. This can result in the best value. However, there is a tendency to attribute the highest percentage of scores to price, which is not the true test of a well-rounded or value-added service. This method of procurement can also become time-consuming and lengthy – the very pitfalls the new regime aims to avoid.
Competitive procurement will also need to address whether the service is being obtained for the short term or as a long-term solution. While there is no “one size fits all” solution, longer-term procurement generally results in a service bedding in properly with healthcare staff and patients. It gives the provider time to adapt and make improvements where necessary and, perhaps more importantly, it allows strong working relationships to form for better collaboration across health and social care.
Short-term procurement is often the route to cost savings but, while it has a place in the healthcare economy, it can sometimes lead to poor service, procedures not being followed and compromises on any additional due diligence checks.
Competitive procurement also needs to consider benchmarking. What is the standard for a particular service? Are we directly comparing two service providers across the same geography or different geographies? Maybe the answer is to have a standard set of questions to establish a provider’s experience, their staff training, diligence checks and compliance standards, and to supplement this with a bespoke set of questions for patient cohorts, KPIs, local geography and service delivery compliance. Furthermore, how will the scoring be defined and what will it be based on? Setting a narrow range of scores between responses can stymie innovation.
It is accepted knowledge that securing best value goes beyond price and must include a clear route to innovation and contribution to social value. True value is also derived from the reduction of environmental impact with investment in new technologies, and long-term sustainability should be a central priority. When services to patients are being provided, patient opinion and feedback to shape the service are essential.
For instance, the August 2021 NEPTS review states that there will be a new national framework for patient transport comprising five components. One of these components is “better procurement and contract management, to improve service responsiveness and enable investment and innovation”.
The review gives initial advice and outlines further best practice principles and proposals on improving non-emergency patient transport services where “contracts for core specialist provision are agreed for a minimum of five years, comprise of a combination of fixed and variable payments, and that tender processes run for a minimum of 60 days; and that non-specialist provision draws on wider transport markets”.
Historically, procurement has sought responses in a written format, but there would be merit in exploring other ways of establishing a provider’s credibility and experience. For instance, procuring authorities could visit the provider’s premises to get a first-hand and close view of their experience, staffing levels, vehicles and premises. This could be an innovative way to supplement the presentation stage of procurement. The written format of a tender response could remain in place as a strong fact-finding exercise to determine the basics of a provider’s capability. However, an on-site visit could be hugely beneficial because, while Care Quality Commission (CQC) ratings are valuable, they do not reflect a provider’s service experience and value for a particular bid specification.
The NHS is continuing its recovery from the pandemic and at the same time undergoing transformative changes such as the formation of integrated care systems (ICSs) to provide more joined-up health and care to all. As providers, we have a collective responsibility to contribute experience, opinion and feedback to shape the NHS procurement journey ahead.