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Government’s preferred provider rules clear way for further privatisation

By Ian Quinn

The Government today finally revealed its long-awaited policy to back health secretary Andy Burnham's claim that the NHS is its preferred provider - and its guidance was immediately interpreted by NHS managers as a licence to ramp up privatisation.

The new procurement guidance does include specific measures which will mean NHS managers must operate a two strikes and you're out policy for NHS contractors before escalating to procurement of private providers or termination of contracts.

However, while stressing that with existing services the focus should be on remedy rather than termination of contracts, the document also calls for trusts to step up their procurement of private companies to increase competition.

And the Government also issued today two other documents for trust commissioners, making it clear that not only should the private sector have a level playing field with NHS providers, but that barriers to private firms should be removed. NHS managers have been instructed to be far more commercially minded in their efforts to transfer large numbers of hospital services into the community.

‘Where there is underperformance the focus should be on remedy and improvement before considering termination or procurement,' says the new DH Procurement Guide for Health Services.

‘The existing provider should be given two opportunities to improve,' it adds.

However, it goes on: ‘Where a provider has failed to improve, despite being given two opportunities in line with contractual terms, then a commissioner should serve notice of termination and engage with potential alternative providers.

‘ Any subsequent procurement should be transparent and non-discriminatory.'

Mr Burnham's previous pledge to make the NHS the preferred provider had won support from the BMA but it has proved hugely controversial with big business and even members of his own party who are in favour of ramping up the use of private providers, as are the Conservatives.

And while the document says that concerns over performance ‘should be addressed through contract management in the first instance' it goes on to encourage more use of independent providers.

‘ PCTs will continue to work with the independent and third sectors, particularly where new services or new service models are required to meet future needs or to offer patients more choice,' it says.

‘Competition for such services will be transparent and fair, with all providers having an equal opportunity to bid, potentially in new partnerships and joint ventures.'

It lists ways for trusts to ramp up private interest in services, including holding ‘provider fairs' and inviting bids for services on trust websites.

In a further sign of its determination to increase competition by using the private sector as a lever, separate guidance on Commercial Skills for the NHS has also been launched today.

This calls on trusts to use procurement and contracting to support a major shifting for people with long-term conditions from acute to community settings. This is despite the DH in the wake of yesterday's budget pledging to slash up to £1.5bn from procurement spending.

The document calls for the NHS to ‘continue to remove potential barriers to the participation of non-NHS providers, including access to information systems.'

David Worskett, director of the NHS Partners Network, an alliance of private and not-for–profit firms set up by the NHS Confederation, said the new procurement guidance was a ‘further significant step' towards further use of private providers.

He said: ‘The NHS will benefit from having this greater clarity about procurement in the challenging period that lies ahead.

‘The guidelines stress the importance of non-discrimination between providers, make a fresh commitment to the use of the independent sector and are clear about the need to use robust procurement to tackle under-performance.

‘They effectively concede that while mainstream NHS organisations and their staff will inevitably continue to be the principle providers of healthcare, the unwise and anti-competitive concept of preferred provider has essentially been neutered.

‘Mr. Burnham and his advisers have clearly listened to the arguments and realised that it is only by moving to a more open and competitive market, with lower barriers to entry, that can we all be sure of getting the best value for taxpayers and driving quality up for patients.

Health Secretary Andy Burnham