Rebalancing relationships – how GP commissioners can strike a new balance with their acute trusts

GP commissioners face having to influence powerful acute trust providers if they are to successfully change the way healthcare is provided. Alisdair Stirling reports

The forthcoming health bill will hand GPs responsibility for commissioning budgets and pave the way for the abolition of PCTs. But if GPs are going to use their new powers to change the commissioning landscape, they are also going to have to forge new relationships with providers – particularly acute trusts.

In many cases, existing relationships between PCTs and acute trusts have been in place since the beginnings of the internal NHS market in the 1990s. These relationships are enshrined in the provider contracts between them. And because of pre-existing power balances between hospitals and primary care – and the fact that acute trusts in many parts of the country have long been monopoly providers – the relationships are often one-sided.

‘Macho' provider attitude

Professor Maria Goddard, director of the Centre for Health Economics at York University, found in her 1997 landmark study Contracting in the UK NHS: purpose, process and policy that from the first days of the internal market, the default NHS contract tended to be a rolling block contract, simply involving an annual fee for a range of services.

The study found this situation had evolved in part because NHS contracts are not legally enforceable, as they are in the commercial sector and disputes are settled by internal arbitration rather than the courts. The study found this had contributed to a ‘macho' provider attitude that hampered competition and made it easiest for commissioners to settle for long term ‘cosy relationships' with providers amounting to: ‘Here's the money, see you in three years.'

The dominance of the simple block contract has since given way to a wider range of cost-plus-volume contracts, cost-per-case contracts and other more sophisticated models. While ‘cosy relationships' still exist, there are signs that recent reforms have had their own impact. The increased emphasis on value for money in the NHS has begun to break up monopolies and increase the flexibility of contracting in primary care.

Mark Dusheiko, research fellow at the Centre for Health Economics at York University, said new data from his research about to be published suggests NHS contracts have been changed much more regularly since Payment by Results was introduced: ‘PBR has changed the landscape quite a lot. Since it was fully implemented for outpatients and A&E in 2008/9, we've seen much more flexibility in PCT contracting with hospitals. PCTs have begun spreading activity, shifting contracts between providers.'

Larger consortia might be at an advantage in breaking up local healthcare monopolies, he added: ‘We found that the size of the purchasing organisations influenced commissioning behaviour. Larger PCTs tend to have more providers so larger consortia could continue that trend.'

Leaning on suppliers

Some observers, however, believe the changes in purchasing have been too slow and see GP commissioning as a real opportunity to make NHS contracting much more rigorous.

Dr Peter Cutler, health economist and former economic adviser to the Department of Health, points out that the dire state of the UK economy means purchasers, such as large chain stores, are leaning heavily on their suppliers and forcing prices down by aggressively renegotiating contracts.

And he believes GP consortia should follow suit: ‘Contracting is still very primitive in the NHS – particularly in primary care. There's not enough granularity in there. A lot is still done on block contracts without proper measurement – and even when there is measurement, it's still very primitive.'

‘It's quite easy for providers to game the system should they want to. And if they can can game the system, it means there are loopholes that can be closed.'

‘If the PCT has had a massive overspend, your question as a consortium should be "Why?". You need to drill down and do some sampling and see what's been going on.'

‘We are in the middle of a deflationary depression and what the private sector are doing is going down their supply chains, leaning on their suppliers and they are in turn leaning on theirs. GP consortia need to do the same and make sure they get value for money out of providers.'

‘Even if it's a monopoly supplier like an acute trust, consortia can start nibbling away at the edges, market testing different suppliers and renegotiating contracts to make them much more detailed.'

‘It's about adult relationships with providers. It doesn't have to be adversarial, but you can say to them "We have got a problem we need to talk about" and call them to the table to negotiate.'

‘It might mean consortia employing some hard-nosed negotiators from the commercial sector but it can be done.'

‘All business is about relationships and it's in suppliers' interests to help solve the problem otherwise they might not get the contract next time around.'

‘GP consortia should be out to break up the monopolies. Look at foreign markets and educate the patient to seek the best. It might be that the best cancer care is in the Midlands and you are down south. But why not educate patients to travel in search of the best care rather than put up with second best from their local trust?'

‘When consortia take over from PCTs they should look at the existing contracts they inherit. Find out if they are working – are you getting the standard of service you require? If not, decommission them and renegotiate them. The Government needs to open things up to proper competition. Allow failing trusts to fail and their business to be picked up by others. At the moment, it's a stitch-up – not a free market. Contracts need to be managed like they are in the private sector. And if we manage to secure world-class commissioning and a mixed economy, we could become the model health service for all free-market economies.'

A huge ask

GP commissioners looking to redefine the long-term ‘cosy relationships' that have existed between PCTs and acute trusts should not underestimate the size of the challenge ahead.

A standard contract between PCTs and acute trusts totals almost 340 pages of legalese, which will be difficult to unpick.

Julia Manning, director of centre-right think tank 2020health, believes renegotiating contracts will be ‘a huge ask'.

'It's like driving a car while being told to redesign the engine. Acute trusts have traditionally run roughshod over PCTs – as illustrated by how little care has so far gone out into the community. It's going to be very difficult for consortia to change these relationships when they've got so much else on their plates.'

‘A significant number of PCTs have not been sharp at negotiating. As a result, they haven't negotiated the best contracts they could and GPs are going to be under pressure to drive through better deals. It may entail commissioning boards getting together across consortia to give them enough clout to negotiate with trusts.'

Elizabeth Fells, head of health services reform at the Confederation of British Industry, advises GPs to turn to the private sector for help with contracting: ‘Independent sector organisations have much to offer, and some have experience through the Framework for Procuring External Support for Commissioners.'

‘GPs are trained to make clinical assessments – not design specifications, choose providers and performance manage packages of services.'

Ms Fell singles out the East of England SHA's Commercial Advisory Board (see box), which advises on complex commissioning and contract management with the private sector, as a good example of how GPs could be given better assistance.

‘Commissioners and potential providers need to engage strategically and constructively from early stages of any process. This will help create efficiencies, economies of scale and more productive ways of working. Commissioners should use "meet the market" or "provider engagement" programmes with a range of providers to inform their commissioning plans.'

Such events, where commissioners and providers come together to discuss local needs and demographics are widely used in local government.

Ms Fell adds: ‘Involving providers in developing procurement methods could streamline processes that cause unnecessary delays and cost increases. And it will help commissioners consider how best to structure contracts and develop appropriate payment and performance mechanisms. The NHS East of England with its Commercial Advisory Board is an example of how this is working in practice. It's a great example of an initiative that should move from being best practice to standard practice.'

Her colleague Andrew Bell, secretary to the CBI's health panel, made up of business leaders from 30 companies providing services to the NHS, says that the new emphasis on contracting for quality outcomes rather than output will implicitly mean that contracts will have to be better managed.

‘It hasn't been the case in the past in the NHS, but if outcomes are not being met then contracts have to be reviewed and if necessary renegotiated. That's the way it works in the private sector and certainly our members will expect that from consortia.'

Alisdair Stirling is a freelance journalist

East of England Strategic Health Authority launched its commercial advisory board in 2008 to help build the SHA's relationship with the private sector and create a functioning health market locally.

The board incorporates membership from the public, private and voluntary sectors and acts as a forum for advising the provider market on forthcoming opportunities and testing out the SHA's thinking on areas such as QIPP. Organisations such as the CBI and the Department of Health are invited to to promote debate on topics such as ‘any willing provider'.

A spokesperson for the SHA said the board was now evolving to take account of GP commissioning and to encourage the private sector to make their services relevant to the emerging market rather than just to bid.

Member organisations include Priory Group, BUPA Home Healthcare, Care UK, Boots Alliance, Fortis Healthcare, Nuffield Health, Assura Medical, Circle Health, Spire Healthcare, CBI and Clinicenta. NHS bodies including Addenbrooke's, NHS Mid Essex, NHS Bedfordshire and NHS Norfolk are also members.