Creating an NHS family of shareholders
A GP-owned private company is coming into its stride with provision and has just secured a £30m urgent care contract with two other providers. Vale Health’s commercial director John Butler explains
A GP-owned private company is coming into its stride with provision and has just secured a £30m urgent care contract with two other providers. Vale Health's commercial director John Butler explains
When the Department of Health launched practice-based commissioning in March 2005, the 21 GP practices that made up the Vale of Aylesbury PCT in Buckinghamshire were among the first in the country to embrace the concept. We were also early adopters of the potential of combining commissioning with providing.
The initial move was that the practices set up the United Commissioning Collaborative as the local commissioning body – a not-for-profit limited liability partnership. Once that was achieved, a small group of us began to look in depth at the providing side.
We had two reasons for wanting to provide services. First, we knew GPs were the best people to know what's needed locally. Second, we realised that if we set up our own provider company, we would not only be able to design the services but actually deliver them as well, which had to be an enormous advantage in terms of ensuring the quality of care.
We started out with a social enterprise ethos, so setting up as a standard for-profit company was a secondary consideration. But it made sense that those involved should be able to profit from their efforts.
In May 2006, Vale Health Limited was registered as an independent legal entity.
To get started we needed seed funding, but realised that whatever investment was put into the company was ‘at risk' money.
If the venture was a flop, there were no guarantees there would be a return.
With this in mind, we offered shares to the GPs and their staff, just to see if they wanted to invest. About 110 GPs and practice staff did so, buying between one and 10 shares at £100 each. The amount any one person could buy was capped so that one individual would not have undue influence.
Limiting the shareholders to members of the NHS family also facilitated the transfer of staff from the NHS to us. It meant we could employ NHS clinicians part-time without them losing their NHS pensions. When they're working for us they're still paying into their pensions, which removes a major barrier.
In the initial tranche we raised about £40,000, which enabled us to get started, then with a second share issue we raised more money. A board of directors including local GPs was set up to oversee the company and embarked on tendering for work.
Conflicts of interest
The issue of conflict of interest that profit introduces is real. Conceivably, to make extra money, we could divert people to our services who don't need them. But we work very closely with the PCT as a partnership and are audited by them, which introduces stringent checks and balances. In addition, the clinicians we employ make their own professional clinical judgments that we can't influence.
At the time, the DH was actively encouraging ‘a plethora of providers' with the idea of promoting competition to raise quality and lower costs, so the PCT was fine with the private company idea. But it was keen that we clearly differentiated between commissioning and providing.
When we started off, Wendover GP Dr Johnny Marshall (see box, page 35) was chair of both arms but it became necessary for him to withdraw from chairing Vale Health to make the distinction clear. We haven't gone back to the overlap we started with, but there is now a greater understanding with the PCT that the two sides working closely together is no bad thing.
Although we had the cash to get going, we initially found it difficult to work as cost-effectively as established organisations such as Community Health Bucks, the provider arm of the PCT. Our cost per service was high because we didn't have the infrastructure behind us. We struggled with issues like this, which took an inordinate amount of time to surmount.
It has been a real saga to get the whole thing onto a contractual basis but the introduction of the Standard Community Health Service Contract simplified matters and we are just in the process of signing that off.
The delay has meant that, until now, we haven't been able to offer contracts to clinicians working for us. The lack of contracts has also made it difficult for us to grow as a company because NHS contracts count for a great deal with banks and other funding sources.
However, we were fortunate on another level. Because PCTs weren't commercially experienced when we started, the tendering process was easier then than it is now.
After an initial struggle, we eventually got a couple of services up and running.
Our pulmonary rehabilitation services began with nine programmes within the Vale of Aylesbury PCT in 2006. Further programmes have been rolled out across the rest of Buckinghamshire. Each programme was for eight weeks with a maximum of 10 patients.
In April 2008, our musculoskeletal community assessment and treatment service was launched across the whole of Buckinghamshire.
Both services were set up on a shoestring staff-wise – the day-to-day running of the company is carried out by two people including me and we subcontract most of the clinical administration work to the provider arm of the PCT.
In our musculoskeletal service, six specialist clinicians work for us part-time on a self-employed basis and we use specialist physiotherapists and podiatrists who are subcontracted from Community Health Buckinghamshire.
As we were given short notice to launch the musculoskeletal service it was a difficult start. However, we're now up and running at 10 sites the length and breadth of the county with patient convenience in mind.
Annual running costs are hard to estimate at present because the business is constantly developing. The company has yet to meet its target profit for shareholders.
Growing the business
Having survived the initial difficulties, we knew we had to get more business to spread our overheads. At that point, the urgent care contract for Buckinghamshire came along to cover out-of-hours as well as attendance and admissions avoidance, which on its own involves coordinating many different services. It's a complex single contract – possibly the most complex one ever put together.
It was far too big for us to do independently so we collaborated with providers in the south of the county, independent healthcare provider Harmoni and Chiltern Health, another GP practice-funded provider. This was partly because the costs and risks in tendering are high.
Completing the pre-qualification questionnaire, just to get on the tender list, can cost several thousand pounds. And the tender itself costs many tens of thousands of pounds.
Another thing that has become clear is the need for people who are skilled in tender work. GPs who are thinking of forming provider companies should be aware of this and not be afraid of collaboration.
Although competition was stiff, we won the tender on quality and value for money and started work on the contract in late summer last year. It was signed in early November and will come into play in March next year for an initial five years, worth more than £30m in total.
There are no clear figures yet for the outcomes of our musculoskeletal service but we are diverting significant numbers of patients out of secondary care and into community-based care. This is more accessible for patients, it benefits the local health economy and patient feedback shows that car parking is usually easy.
An evaluation of the pulmonary rehabilitation pilot carried out in 2005/6 showed the following (we would expect results to decline over the full 18-24 months):
• number of chest infections reduced by 65%
• number of hospital admissions cut by 53%
• number of GP visits for exacerbations of COPD reduced by 80%
• increased exercise tolerance
• 21% average increase in distance walked
• 88% of patients were still exercising
• course was a positive experience for 94% of patients
• 95% of patients had increased confidence in managing their condition.
Since then the service has extended and we are currently collating results that look encouraging.
Among our future plans are extending services beyond the geographical confines of the Vale of Aylesbury, still using our in-house skills.
We are convinced our for-profit model is the way forward. Public services do not organise things cost-effectively, but the private company will be more efficient.
If they were in the hands of the NHS the services we provide would cost more than we charge.
Ultimately, if the ethos is to provide free care at the point of delivery, it doesn't really matter who provides that care as long as it's of the highest possible quality.
John Butler is commercial director and company secretary of Vale Health Ltd
firstname.lastname@example.orgThe GP's view
The GP's view
Dr Johnny Marshall is a GP in Wendover, Buckinghamshire, chair of the NAPC and a founder of Vale Health. Here he shares the lessons learned during the challenging process of setting up Vale Health's services
'Our services – particularly the community musculoskeletal service – have been a real success, but it's been a difficult process. The PCT has been learning as it's gone along and we are now heading towards a much faster service procurement.
We're now looking at expanding our current services. It's still very expensive to tender for new ones but with the urgent care contract under our belt we can work on expanding what we have.
Once you start looking at much bigger contracts, you realise you need to work in partnership. But you can still accelerate service design while keeping local ownership, which is very important.The reality is commissioning and providing are not separate. There is clear blue water between the organisations (Vale Health and United Commissioning). But you need to be careful that separation is not for separation's sake. The two sides have much to learn from each other.The message to other GPs wanting to try a similar arrangement is that this is not without risk. You need to make sure you go in with your eyes open and plan very carefully. You need a sense of forward planning and make sure you think beyond step one.