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Clinical commissioning: what financial risks could be heading your way?

Legal expert Ross Clark discusses the pitfalls presented by issues such as TUPE and inherited debt.

There have been a number of recent developments that have thrown the progress of the Health and Social Care Bill into doubt.

In addition to the three month listening exercise, the Kings Fund recently published a major report (The Future of Leadership and Management in the NHS, No More Heroes) stating, amongst other findings, that the NHS is under-managed, not over-managed and that the DH should urgently rethink the cuts to NHS management structures. We have also had Nick Clegg threatening to oppose certain aspects of the Bill and there is no doubt that Trade Unions are waiting in the wings to see the impact the Bill could have on NHS staff.

However, PCT's have been clustered, the NHS Commissioning Board is being formed, there is no suggestion that PCT's will survive (although it is now clear that this process will be phased in as and when clinical commissioning groups (CCGs) are ready to take over) and redundancy processes are well underway. Accordingly, there is little doubt that, with some changes, the Bill will progress and the handing over of commissioning responsibilities to CCGs will continue at pace.

It is important to understand that, once that baton is handed over to consortia, they will have to hit the ground running with procured services in place.

Andrew Lansley clarified recently two important aspects that have caused concern since the publication of the Bill. First, he made it clear that CCGs will inherit deficits from their local PCTs, to the extent that the deficit has been incurred since 1 April 2011 in conjunction with the CCG. The Health Secretary explained that he could not give a blanket assurance that deficit inheritance would not take place as that would simply give an open cheque book to PCTs and CCGs to incur debt prior to formal handover of functions to the CCGs. Accordingly, he believes that CCGs must be liable for any deficit incurred whilst shadow consortia are working with and directing the PCT in its commissioning functions.

This, of course, assumes that CCGs are now fully established and working closely with their PCTs in making commissioning decisions and our experience in working with GPs and CCGs across the country is that this is often not the case. The assumptions made in relation to deficit inheritance are compounded by the fact that some, if not most, CCGs are not being sufficiently advanced in their formation to actively and effectively engage with PCTs, especially in relation to the Assignment for Transition guidance, which requires a jointly agreed approach. However, in response to a question from a GP that a particular PCT was not being overly co-operative, he made it quite clear that this should not be happening. In other words, PCTs should be there to facilitate the wishes and intentions of the CCG and not the other way about.

It is a hard time for GP's but they must not make the mistake of assuming that, because the progress of the Bill has slowed, they can take their foot off the pedal. On the contrary, they need to be moving faster to ensure they are ready for the handover when it comes, and it will come and soon!

There are three particular areas of concern for CCGs

1. The application of TUPE
The Transfer of Undertaking (Protection of Employment) Regulations 2006 ("TUPE") will have an important effect on CCGs and GPs must be aware of and prepare for its application.

Under TUPE, where any "undertaking" (and this could be any distinct business unit or entity, such as the commissioning arm of a PCT) transfers to another organisation, the staff that spend the majority of their time working in that undertaking will transfer to the acquiring body. This transfer operates as a matter of law, cannot be avoided by a contractual arrangement between the two organisations and transfers the staff to the recipient body with all of their existing employment rights and benefits (salary, bonus, holiday entitlement, length of service etc). One important exception is that TUPE does not apply to transfer pension entitlements but, that said, a Cabinet Office Statement has made it clear that, in a transfer between public bodies, the recipient must offer "a broadly equivalent pension".

Accordingly, CCGs could find themselves inheriting significant numbers of staff when they take over the commissioning functions of PCTs (the transfer of the commissioning function will be the transfer of an "undertaking") and will be bound to employ them on their then terms of employment.

2. The Assignment for Transition Process
The Department of Health's guidance (Assignment for Transition – Gateway reference 15864) sets out the process of aligning relevant PCT employees during the transition period to support emerging CCGs. The aims of this process include:
• Giving emerging CCGs appropriate expert support during the transition period;
• Providing PCT employees with an opportunity to contribute to the shaping of the emerging commissioning system;
• Encouraging the development of new mindsets and approaches to commissioning;
• Helping create the most cost effective and efficient commissioning system possible;
• Promoting a fair and transparent process for employees which has been agreed in advance with trade unions so that employees are engaged in the decision that effect them (as required by the NHS constitution).

Accordingly, Assignment for Transition is a process to align employees with functions which CCGs will become responsible for once established. You can see how this process, when linked with TUPE, will result in the staff aligned to commissioning functions transferring to CCGss (on their existing terms of employment) once the GPCC takes over responsibility for commissioning from the PCT.

Sir David Nicholson's letter to all NHS Chief Executives (15 December 2010 – Gateway reference 15272) asked SHAs and PCTs to work with emerging CCGs to assign employees by the end of June 2011 "at the latest". Most PCTs have now gone through this assignment process and aligned staff to commissioning support functions but the difficulty for CCGs is that, in many if not most cases, they have not been involved. In some cases this is because PCTs have not actively encouraged them to be involved and have dealt with the process themselves but, in most cases, CCGs are not sufficiently advanced and are still trying to resolve their own internal arrangements before dealing with the PCT and issues such as assignment of staff for support purposes.

Accordingly, this presents a real risk for CCGs in that they are going to inherit a staff force through the application of TUPE but are not actively engaging in the assignment process. However, TUPE will not apply until the CCG formally takes over the commissioning function (once the GPCC is authorised under the Bill) and so there is time for CCGs to work with their PCT to create the shared agreement envisaged by the Assignment for Transition guidance.

Accordingly, CCGs should be acting now to investigate what their PCTs are doing and, in particular, to identify the staff being aligned to commissioning support duties and the terms of their employment contracts. If the CCG has concerns about the staff being aligned to support duties, now is the time for the CCG to address this directly with the PCT and, ideally, a list of commissioning support staff would be agreed in full knowledge of the terms and conditions of employment of those employees;

3. Deficit inheritance
Andrew Lansley's clarification on this issue was helpful but, as noted above, many GPCCs are not yet sufficiently advanced to be working closely with their PCTs in determining their commissioning decisions and supervising and monitoring the contracts that the PCTs are entering into. Many PCTs are also going through redundancy processes, have entered into financing arrangements that are not often apparent from the balance sheet and many PCT budgets are dependent upon payments being received from the DoH and SHAs which are not always guaranteed.

Accordingly, there is a real risk here for CCGs and they must take steps as soon as possible to carry out some "due diligence" on their PCT to determine the current financial position, budgets for this year and next and the likely position when they take over commissioning responsibility in April 2013 or later. This may involve an element of forensic accounting but this process is vital to ensure that CCGs have a clear picture of what is happening within their PCT so that they can then start to take control of the budget (if not in real terms through a sub – committee of the PCT, then by directing the PCT in relation to its commissioning decisions and other key decisions that may have a material impact on the financial situation of the PCT).
 

Ross Clark is a Partner and Head of Corporate at Hempsons, GP specialist lawyers. r.clark@hempsons.co.uk
 

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