Introduction to the standard NHS contract 2012/13

Contracts for NHS funded clinical services must be entered into using standard contracts produced by the Department of Health. CCGs, when taking on commissioning responsibility, will have to use these standard NHS contracts. In the longer term, the NHS Commissioning Board will be responsible for producing any applicable contractual models.

Until recently, there were several different standard NHS contracts, each for different types of services. For 2012/13, there is now a single standard NHS contract covering acute, mental health, community and ambulance services. This guide focuses on the new contract. There remain separate contracts for certain other services (eg care homes).

Structure of the standard contract

The new standard contract has the following structure for 2012/13:

• Section A – the particulars.  This covers basic detail such as the parties, commencement date and contract duration.
• Section B – the services.  This includes the service specification, activity plans, pricing and quality requirements (key performance indicators).
• Section C – service matters.  This picks up a lot of the detail previously contained in the schedules of older versions (eg conditions precedent, transition and exit plans, sub-contractors and various policies and procedures).
• Section D – recorded variations, disputes and changes in control.  This should be completed as required.
• Section E – core legal clauses.  This sets out the standard terms and conditions of the contract.

Note that some current contracts may still be on earlier versions of the standard contracts. These will have a different structure and different terms (see our short guide to the 2011/12 contracts).

Which parts are mandatory?

The majority of terms in the standard NHS contract are mandatory. Guidance explains what can and cannot be changed:

• Nationally mandated standard terms are RED and cannot be changed – these include all terms and conditions (which is why they are available as a PDF only), along with parts of the other sections
• Elements necessary for the contract to be legally completed but requiring local negotiation or completion are AMBER and generally just need to be filled in – for example names and the commencement date
• Elements entirely for local negotiation and completion are GREEN and are the only areas where the parties to the contract have any real control over the content – for example, locally agreed performance indicators and non-tariff prices

Bilateral or multilateral?

The standard NHS contract comes in two versions – bilateral and multilateral:

• Bilateral – for use where one commissioner commissions services from a provider, covering that commissioner’s requirements only 
• Multilateral – for use where a lead commissioner enters into a contract with a provider, on behalf of itself and other named commissioners, for the requirements of all of those commissioners (note that the multilateral version is mandatory for acute services)

Key areas of the contract

In any contract, there are a handful of core issues to focus on. If you get them right, the contract will usually operate well. In the context of the standard NHS contract, these include:

• The services to be provided under the contract
• Performance and quality requirements
• Price and payment terms
• Liability and risk
• Termination provisions

Whereas many of these elements would normally be negotiated, that is not necessarily the case with the standard NHS contract:

• Many of the performance/quality requirements are mandatory so there is limited scope to negotiate something different 
• Price is at least partly determined by payment by results tariff prices, though some prices are locally negotiated 
• Liability and risk provisions fall within the mandatory terms – this means the levels of risk and liability imposed on each party cannot be negotiated 
• The circumstances allowing for termination are also mandatory 
• For acute services, termination of the contract is likely to be unrealistic, other than in exceptional circumstances

While much of the contract is mandatory, some very important areas do need to be completed by commissioners. These include the service specifications and activity levels, quality requirements, some reporting requirements, locally agreed incentive schemes and local commissioning plans. Commissioners should focus their attention on ensuring that these areas are comprehensive, correct and clear as these are the areas you can control.

Contract monitoring and contract management

An important area for commissioners to get to know and understand is performance monitoring and performance management. The standard NHS contract contains detailed processes which must be followed when raising performance issues. These provisions set out what notices must be served, along with any requirements for meetings, remedial plans, exception reports etc. There are also provisions allowing the commissioner to withhold or retain payment, which is a useful contractual lever.

Using these contract management tools properly will help to ensure that outcomes are achieved.

Common disputes

The following are examples of areas in which disputes commonly arise under the standard contract:

• Financial miscalculations including coding issues 
• Activity levels – especially where there is overperformance 
• Uncertainty or a lack of clarity in the contract – especially where areas for local agreement have not been completed
• Disagreement over the interpretation of guidance
• Commissioners trying to impose variations – note the need to follow the correct processes set out in the contract

You can find copies of the standard NHS contract by visiting Mills & Reeve’s links page.