NHS commissioners have been routinely depriving patients of their entitlement to choice of hospital for several years and may be in breach of competition rules, regulators have found.

The Cooperation and Competition Panel is today due to publish interim findings of its review into the policy of giving patients choice of “any willing provider”. Offering choice in elective hospital care has been government policy since 2006.

The panel’s report, seen by HSJ, says several commonplace NHS commissioning practices such as block contracts and caps on activity are restricting choice.

It says it has evidence “nearly half of all primary care trusts” are engaged in such practices, which potentially breach the government’s principles and rules of cooperation and competition, introduced in 2007, and Department of Health provider choice directions issued in 2009.

Behaviours said to restrict choice include directing GPs to particular providers, limiting providers to certain treatments, and setting minimum waiting times for treatment. They also include “setting different prices for different providers” and using block contracts, both of which incentivise referral to particular providers.

The panel’s report comes as the DH last week attempted to put an end to accusations it is happy to see a “race to the bottom” in quality by denying that the move to the tariff price being the “maximum”, as opposed to set price, was tantamount to promoting price competition.

Insisting there had been “no U-turn” the DH drew a distinction between competition on price and below tariff pricing in a mutually agreed, non-competitive context.

The latter was set out in a letter to the NHS from deputy NHS chief executive David Flory last week which said that from April providers will be able to “offer” commissioners services “at less than published mandatory tariff price”. But it added that “flexibility cannot be imposed through a competitive tender process”.

However, the panel’s interim findings suggest many existing examples of below tariff pricing restrict choice and may be ruled out by competition rules.

PCTs have submitted evidence arguing they are “operating against a backdrop of unprecedented financial constraint”, and a fear of the competition rules “is constraining [their] freedom to negotiate improved terms”, the report says. The panel will assess these potentially mitigating factors in the next stage of its review.

The interim findings contrast with the announcement by prime minister David Cameron on Monday that the government will reform public services by encouraging non-state provision.

He said: “Instead of having to justify why it makes sense to introduce competition in some public services - as we are now doing with schools and in the NHS - the state will have to justify why it should ever operate a monopoly.”

The findings bring a focus to vital decisions the DH is yet to announce about extending any willing provider into community and mental health services. These include decisions on which services will be opened to any willing provider and how providers will be approved.

The British Medical Association’s GPs committee last week said consortia should be able to approve and veto providers locally. But the panel’s interim findings suggest this approach, compared with national or regional approval, limits market entry and patient choice.

The DH also has to decide how to introduce fixed prices for community services, currently agreed under local contracts.

NHS East of England director of provider development Stephen Dunn said providers should be approved nationally or regionally. He called for the rapid development of a community tariff.

Some commissioners fear extending any willing provider and fixed prices could undermine attempts to make £20bn in efficiency savings.

Shane Gordon, a Colchester GP and North East Essex GP Commissioning Group chief executive, said the changes could empower patients and commissioners. But he said they could also see providers stimulating additional demand for services currently not widely provided. Dr Gordon said there would also be financial “winners and losers” from a community tariff.

NHS Partners Network director David Worskett said: “Any willing provider is at the heart of delivering an NHS which is patient centred and gets the best results, but the principle of competition will clearly need to work in different ways for different services.”

The DH responded to the CCP’s report by accepting its interim recommendation that the department extend the deadline for private sector provider contracts to be moved from central to local contracts by April 1 this year.

Health Minister Lord Howe, said:”The panel’s report reinforces the urgency to modernise the NHS. There is no justification for PCTs thinking that they know better than patients or their doctors where patients should be treated.

“These barriers to patient choice must be removed. Although significant problems are restricted to a small number of PCTs, we will implement the panel’s recommendation immediately and extend existing contracts until 30 June 2011. Extending the deadline will ensure patients continue to be able to choose where they can be treated. We have written to the NHS today to confirm the extension.”

‘At odds with policy’: Bath dispute

An independent hospital group has referred two primary care trusts to the Cooperation and Competition Panel over claims of unfair procurement policy, including sub-tariff pricing.

Circle, which last year won the bid to run Hinchingbrooke Hospital in Cambridgeshire, says NHS Wiltshire and NHS Bath and North East Somerset’s any willing provider policy discriminated against them.

The practices highlighted by Circle are similar to those described in the panel’s interim report. The firm told the panel commissioners insisted on sub-tariff pricing, providers agreeing to “all or none” service deals and sometimes delays in treatment by up to 15 weeks from referral.

Circle said the restrictions were “an overt attempt to manage the NHS healthcare market in a way entirely at odds with government policy” and that it had been told by the South West strategic health authority’s chief executive that the SHA “support[ed] the PCTs’ approach”.

NHS Wiltshire, which commissioned on behalf of both PCTs, said they had “taken the same approach to the ‘maximum tariff’ in the any willing provider framework as they have with all of their NHS providers which are on the NHS standard contract”.

The PCTs’ submission to the panel added: “The PCTs have finite resources for commissioning. They are quite entitled to operate tighter restrictions on providers.”

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