The NHS Commissioning Board has revealed the future market in commissioning support services is likely to be heavily regulated, potentially including restrictions on firms making a dividend.

In an exclusive interview with HSJ, Joe Rafferty, the outgoing head of the board’s business development unit, also set out three possible long-term corporate structures for NHS commissioning support services. These would allow the board to retain a share in the bodies.

CSSs are currently being set up by primary care trust clusters. They will be hosted by the commissioning board from October until they are deemed ready to become freestanding organisations and “externalised” by a deadline of December 2016.

While ministers are committed to introducing a market for CSSs, Mr Rafferty said the board was determined to avoid the mistakes of past privatisations.

Mr Rafferty said: “If you think about some of the public flotations we’ve had in the past – water, gas, the railways – people who know about them say there are certain incentives you wouldn’t put in the system, because we know now they don’t work.”

Asked whether that included a model of privatisation allowing operators to make large dividends which are not reinvested in services, Mr Rafferty said: “Yes. There are a number of things you just wouldn’t do… we don’t want to make the barn-door obvious mistakes that have been made in the past.”

He also revealed the commissioning board is considering the “reasonably strong case” that it should regulate the market. Mr Rafferty said: “In markets things come and things go. But when we’re commissioning healthcare services, there are some things we always need.”

A CSS market where, for example, strategic needs assessment was not offered would be “a nonsense”, Mr Rafferty argued. Business intelligence services are also understood to be considered too important to fail.

“My view is we need to think about some sort of regulatory framework for commissioning support. Most systems that have public good enshrined in them ended up with regulation at the back of it to protect the public.”

Mr Rafferty, who will leave his post in September to run Mersey Care Trust, outlined three possible corporate structures for externalised CSSs. These were: a staff-owned mutual or social enterprise; a joint venture with a private company, with the commissioning board retaining a share; and a contracted model, with the company still owned by the board but operations outsourced to the private sector.

He added that CSSs might wish to consider a combination of those options – raising possibilities such as outsourcing to a staff-owned mutual.

The Commissioning Support Market - data visualisation

The commissioning board estimates around 8,000 people will eventually work in the CSS sector, which will be worth a total of around £700m a year.

The board also confirmed this week that all of the current 23 CSSs will continue to be developed until at least the end of 2013-14, in a move officials hope will inject some stability and certainty into the system as clinical commissioning groups take over from PCTs.

That represents a shift from the position of a week ago, when board guidance on “checkpoint three” of the CSS development process, which will take place between August and October, said CSSs could fail or be stopped at any stage between now and externalisation. However, the board could still force CSSs to change their size or their management team.

The board has added two stages to the process. Checkpoint four will take place in October and November this year, and checkpoint five will conclude in January 2013. These will focus on the size of CSSs, assessing their planned staffing structures against how much income they will be receiving from CCGs – an acknowledgement that as an employer of CSS staff the board will be at risk if posts are insufficiently funded.

The NHS Commissioning Board will establish a procurement framework to enable CCGs to change their supplier of commissioning support services from April 2013.

The mechanism will allow CCGs to choose between accredited commissioning support suppliers without having to enter into a lengthy and expensive tender process.

The board is understood to be keen to avoid a scenario where all 212 CCGs seek to procure commissioning support at the same time, which could lead to the entire system breaking down.

The framework would relate to a CCG’s main supplier of commissioning support services – rather than one-off contracts, or deals with suppliers of a single service line.

Mr Rafferty said:  “I am personally pretty convinced of the need for some sort of framework agreement which would allow us do reasonably significant amounts of change in and around commissioning support but in a slightly more organised and ordered way.”

A requirement for the board to set up a procurement framework is included in the Department of Health’s draft mandate for the NHS Commissioning Board, published earlier this month.

The consultation says: “The government expects the board to publish a procurement framework to enable CCGs to procure support from a wide range of providers.”