The government’s plans to reform the NHS have far-reaching implications for many public and private sector organisations. For joint commissioners of health and social care services, the reforms raise concerns as to how to “future proof” current arrangements and anticipate the effects of a potential fragmentation of the purchasing role.
For more information on the government’s proposals, see Legal update, Government publishes next steps in NHS reform.
Until the proposed Health and Social Care Bill is published (later in January 2011), the detail of how the government proposes to manage the transfer of functions from PCTs to GP consortia remains unclear. However, a document published in December 2010, Liberating the NHS: Legislative Framework and Next Steps gives some clues.
GP consortia- what will they look like?
Under the current plans, GP consortia will be statutory bodies, probably social enterprises. Their legal structure has not been specified so various models could be used (see Practice note, Social enterprises: legal forms). Neither is it clear whether their boundaries will be coterminous with local authorities, nor how many consortia will operate in a particular area. Rather, the government intends to give consortia the flexibility to expand, merge and dissolve, within and outside their original areas.
Early indications are that GP consortia will be considerably smaller than the PCT they will be replacing, meaning that local authorities may find themselves partnering with several bodies instead of one.
Partnerships with local authorities
The flexibility of the consortia arrangements could prove difficult for local authorities, particularly where budgets are pooled and contracts concluded which commit resources over several years.
However, the government intends partnerships between local authorities and NHS bodies to continue and even expand, though such partnering will not be obligatory.
“The Bill will therefore place a duty on GP consortia and local authorities, through the health and wellbeing board, in drawing up the joint strategy, to consider how to make best use of the flexibilities they have at their disposal, such as pooled budgets.”
(Paragraph 5.31 of the Legislative Framework document).
It will be interesting to see whether the Health and Social Care Bill extends the scope of functions capable of delegation. (For more information on current health and social care partnerships, see Practice note, Partnerships between local government and NHS bodies).
In any event, future section 75 agreements, or their equivalent, will need very robust governance provisions to ensure the increase in parties does not militate against swift decision-making and clear accountability.
Existing partnership arrangements
The government has made it clear that the consortia should continue with existing agreements “that have been working well” at least until new arrangements are put in place. It is unclear whether this means existing contracts will be novated or assigned to the consortia and it is difficult to see how this can occur if the contracts are split into new, possibly smaller, contracts.
Until this issue is clarified, commissioners may prefer not to enter into long-term contracts, meaning those extending beyond April 2013, unless they have an appropriate break clause.
Impact on the market and procurement
More purchasers in the market may mean more work for SMEs or third sector organisations, as contracts become smaller and more localised and the government has identified this as an objective. However, an increase in purchasers may also have the effect of reducing economies of scale as the public sector’s buying power becomes diluted. Furthermore, if the arrangements lead to increased outsourcing, the consortia could find costs increasing as smaller providers grapple with maintaining former NHS employees’ terms, and providing them with access to an appropriate pension scheme.
Many contracts in the health sector are increasingly competitively tendered. Case law illustrates that procurement challenges can succeed, even in respect of Part B or below threshold contracts, and the consortia will need to ensure that their commissioners have a sound knowledge of procurement law and practice, as well as the skills required to drive efficiencies from their contracts (see Legal update, ECJ rules that Ireland breached principles of equal treatment and transparency by altering weighting of award criteria).
There is likely to be a stronger role for local authorities here, as they have the legal and technical expertise to procure and manage high value and complex contracts. Some consortia may prefer to delegate their commissioning function to the local authority to take advantage of their expertise as well as to retain the benefits accruing to a dominant purchaser.
Movement of PCT employees
The Legal Framework document makes it clear that PCT staff are expected to transfer under TUPE to GP consortia and other organisations, including local authorities. However, TUPE may also apply to local authority staff if they are assigned to commission health services, for example where the local authority is lead commissioner for a PCT under a section 75 agreement
The government states it has allowed for some redundancy costs arising from the transfer of functions, but TUPE can throw up some anomalies, not least when an employee’s role is split, and it is sometimes unclear whether or to whom an employee is entitled to transfer. Local authorities who are lead commissioners under a section 75 agreement should bear in mind that they could be liable for costs associated with dismissals if the consortia choose not to continue with existing partnership arrangements, if there is no discernible employer to whom the staff transfer (due to a fragmentation of their role across several consortia), or even in respect of post-transfer claims. However, it is difficult to see how local authorities could pre-empt these issues, for example by ring-fencing staff to each consortia’s area in advance of the transfer, without losing the benefits of the pooled arrangements. In these circumstances, it is probably wise to seek an indemnity from the PCT and hope it will be honoured by the consortia.