Updated: Private firm wins first full commissioning support tender

Optum, part of UnitedHealth Group, has won a £9m contract to provide the full range of support services for two clinical commissioning groups, it was announced today. They are South Lincolnshire and South West Lincolnshire CCGs.

The groups are currently supported by Arden and Greater East Midlands Commissioning Support Unit, which has until now dominated the market in the East Midlands.

The deal is worth £3m a year over three years – less than half of the total running cost allowance allocated to the CCGs. Some services will transfer to the new supplier in January, with the rest following in April.

It is not yet clear how much VAT CCGs will have to pay on top of the £3m. If VAT is not recoverable, it could increase the costs by up to 20 per cent. The tax is not currently charged where the supplier is an NHS owned CSU.

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Allan Kitt, chief officer of South West Lincolnshire CCG, said he was “awaiting clarification” on the issue from NHS England, but did not expect VAT would be charged.

An NHS England spokesman said that, while VAT was not applied to transactions between NHS organisations, the tax “has always been chargeable for some commissioning support services provided outside the NHS.

“CCGs will be able to recover the majority of this VAT but the exact amount will depend on the services included within the scope of the procurement.” NHS England estimates that VAT costs are like to add between 5 and 9 per cent to the cost of end-to-end procurements.

Mr Kitt also said that if bringing in Optum left the CCGs’ current supplier with any “stranded costs”, these would be met by NHS England. He questioned how extensive they would be. “I think there has been a lot of noise in the system about the extent of stranded costs, Mr Kitt said. “We need to see the facts.” Stranded costs are financial liabilities associated with the old provider that do not transfer to the new one.

NHS England declined to comment on stranded costs.

It is the first contract for the full “end to end” range of commissioning support services to be awarded under the NHS England’s lead provider framework, which was developed specially for CCGs to procure support services.

Optum was selected via a competitive tender from a shortlist of four bidders. The CCGs initially received expressions of interest from all nine suppliers on the framework, which includes NHS owned and private organisations.

Thirty CSU staff mainly support the two CCGs at present. These could transfer to Optum under transfer of undertakings (protection of employment) rules, although the precise number is still to be decided.

Mr Kitt described the framework process as “helpful” and said Optum was the “best fit” for the CCGs. He said: “They offered a real sense of partnership. They understood what we were trying to achieve and our vision as CCGs. They had real enthusiasm, real commitment and had gone the extra mile to understand what was needed.”

The two CCGs cover a combined population of less than 300,000.

The framework has been blighted by delays in recent weeks, with one much larger procurement stalling due to a lack of provider interest, while another failed amid a lack of confidence among CCGs.

This article was updated on 30 September to include information supplied by NHS England on VAT.