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The New Providers
(Published December 2005)

The decision of the then Conservative Government in the early 1990s to separate commissioning from service provision met with widespread opposition at the time, from those who felt it was dismantling the NHS, to those who wanted to see a much more radical free market in healthcare in the UK. Who would have thought then, that fifteen or more years on, it would be the Labour Party in power that would redefine the NHS and open up provision in such a way that even the most right wing Tory of the last generation to taste power might have hesitated at?

Labour health policy has been characterised by the mantra of modernisation – articulated by key policies in the areas of:

- Patient Choice
- Foundation Trusts
- Plurality of Provision
- Payment Systems
- And more recently – beefed up Commissioning

History tells us that since 1948 the NHS has been both a monopoly provider and (largely) an owner of capital assets. The Private Finance Initiative (PFI) and Local Improvement Finance Trusts (LIFT) policies have progressively eroded the latter as the Government seeks to lessen the impact of capital investment in public services on the public purse. So what of the monopoly provider position?

The reality is that the NHS has never been a monopoly provider of all services – in secondary care yes, to a large part, but general practitioners, community pharmacists and some other primary care providers have always been independent contractors – even if their trading area has been protected by mechanisms aimed at regulating market entry. So what’s new now?

The first major step in this policy was the introduction of Independent Sector Treatment Centres (ISTCs) which were contracted centrally to the Department of Health in order to boost capacity as the NHS struggled to get to grips with waiting times (or so it seemed at the time). The use of such services rapidly became not only a means of increasing patient throughput, but also a way of creating a stimulus to the healthcare market and then nurturing it. PCTs were required to consider investment in the independent sector with some claiming a requirement to invest 15% of the total allocation in independent provision. Under the new “Choose and Book” arrangements PCTs are required to give any patient requiring hospital admission a choice of five providers by the end of 2006, one of which must be in the independent sector. The market of the 1990s had returned with a new twist – compulsory utilisation. This led Alan Milburn, then Secretary of State to declare that the NHS was a set of values and a funding stream – not a monopoly provider of services. The redefinition of the NHS had begun.

All of this is of course the behaviour of a government that needs to create a market, not use an existing one, to modernise healthcare provision funded by the state. So as long as the provider can deliver services that both meet national standards and at price commissioners are willing to pay, then the doors are open – welcome the new NHS.

We are becoming accustomed to this in the field of hospital services – but what comes next is even more interesting – the opening up of provision in community and primary care to the competition of the “new providers”. In a recent survey run by the Health Service Journal 60% of PCT Chief Executives thought that the “private sector” would have a significant role in the NHS by 2006/7. An interesting example of this movement is that taken by Calderdale PCT – currently inviting organisations interested in providing community based services to undergo a Pre-qualification process.

In primary care, this is made possible by section 16CC(2)(b) of the NHS Act 1977 with specific provision for individuals, companies, partnerships and societies of various kinds. This has led to the current expanded routes of contracting from GMS, firstly to personal medical service (PMS), Alternative personal medical service (APMS) and Specialist personal medical service SPMS. Now the discussion has turned to the “new providers”, with much speculation about the white paper “Health Outside of Hospitals” due shortly. Who are these new providers?

The basic message is ……. anyone. NHS Trusts will continue for the time being, but Sir Nigel Crisp, Chief Executive of the NHS has made it clear that foundation status is a target for all by 2008. Then of course we have the current independent providers of GPs, community pharmacists, dentists, optometrists etc. but the new breed of providers can be seen warming up in the wings and includes:

» Private companies eg BUPA, United Healthcare etc. but also new entrants to healthcare – perhaps even supermarkets?

» Pharmaceutical companies – witness Pfizer Healthcare Solutions already with half a foot under the table in Birmingham

» The Voluntary Sector – if only they could get their act together

» New social enterprise models – largely not for profit organisations based on some form of cooperative approach supplying public services. This includes new models of doctors, nurses and pharmacists coming together – both in the area of general care but also the management of long term conditions.

» Self-management models of clinicians banding together in either limited companies or other models and perhaps even including “chambers” of clinicians – perhaps bridging primary and secondary care –that would be interesting.

» Industrial and provident societies, friendly societies

» Foundation Trusts looking to “vertically integrate” care

» Walk in Centres

» NHS Direct

» Commuter Centres

The limits of this are only bounded by imagination – and the ability to deliver the right quality at the right price.

What of the future – well the White Paper seems certain to allow more flexible registration which may well be the key to real plurality of provision in primary and community provision, and patients will be encouraged to exercise choice in order to create the market outside of hospitals. There remain however two major problems to be overcome. Firstly, that of regulation, and secondly that of robust commissioning.

The regulation of healthcare provision in England is duplicative and confused. Monitor and the Healthcare Commission vie for roles, and the field is crowded with other bit players, such as the Audit Commission, Royal Colleges and so on. Even the Department of Health and the Strategic Health Authorities fail to clarify exactly where their role in policy making and implementation versus regulation lies and some see the future of regulation as lying more with commissioners than with third party quangos.

Commissioning brings its own deficiencies and problems. Commissioning was introduced in 1990 and in the author’s view is that it has yet to make a real difference. Commissioning is fine in theory but has to demonstrate it works in practice. Commissioning of primary care outside of the “mainstream” has been possible since 1997 but not yet widely used; de-commissioning of poor providers even less so.

These is not only, or even mainly, the fault of commissioners through the ages… Health Authorities… Fund Holders… locality commissioners… Total purchasing pilots…Primary Care Groups… Primary Care Trusts… and now Practice Based Commissioners (surely a misnomer as most are congregating around localities or equivalent), but rather the fault of successive governments failing to allow for policies to mature and unable to resist the urge to tinker on a daily basis with the NHS. This time, once the new commissioners are in place, they must be allowed to get on with the job if we with the NHS. This time, once the new commissioners are in place, they must be allowed to get on with the job if we really to see an NHS revolution. This will involve tough decisions ahead as unnecessary and poor performing providers go to the wall.

A modernised NHS is a far cry from that envisaged by its founding fathers – strong commissioners, multiple providers, tough regulators, national tariff pricing. The future is here, and a multiplicity of providers in a market environment is a key ingredient of New Labour’s NHS. The key test will of course be whether it produces better health and health care – will we ever know?

Implications for the Industry

The fragmentation of provision in the way indicted above will mean different types of customer, with different types of roles, motivations, wants and needs. The role of the new commissioners and their inter-relationship with PCTs and each other will also be a key factor in the new NHS.

The ability of the industry to understand these changes as it seeks to maintain and develop new relationships and influencing approaches will, in large part, dictate the success of pharmaceutical companies in the future. Turning data into knowledge and understanding, but then acting accordingly, is of critical importance.

Mike Sobanja is the NHS Alliance Chief Executive and a Non-Executive Director of Health Direction Ltd

About the author

Health Direction Ltd is entirely focused on collecting, processing and analysing high quality UK-based health information for dissemination through intuitive, browser-based products via the internet, company intranet and CD-Rom. Privately owned and run you will find our staff friendly, knowledgeable and helpful. We put customer satisfaction at the top of our agenda.

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