Exclusive: Private provider pulls out of contract with cash-strapped CCG

In a letter sent yesterday, the private provider told East Staffordshire CCG it intends to terminate its community service contract after failing to reach a funding agreement with the commissioner.

Virgin Care was contracted to provide community services for East Staffordshire CCG under a prime provider agreement in 2015, worth £270m over seven years. Under the contract, the CCG effectively outsourced its responsibility for commissioning and integrating services for patients with long-term health conditions and frail, older people to Virgin Care. The company also provided some services directly. 

At the time, the CCG told HSJ it had initially awarded the contract to the company as it did not have the capacity to integrate services and that it would become unsustainable without the deal going through.

The CCG said the prime provider model was used because expected increases in demand and costs which Virgin Care would have to absorb over the seven years of the deal. At the time the deal was signed, commentators warned the contract would be handed back after an initial period due to the savings required.

Following an 18-month dispute, the provider decided to terminate the commissioning element of the contract in October last year.

The CCG and provider have since been in negotiations over the remaining elements of the contract. These include community nursing, specialist nursing, care coordination and care navigation.

In a statement, Virgin Care told HSJ it had not been able to reach an agreement with the CCG over the budget it would need to meet local need. According to the provider, it would have had to subsidise the contract by more than £1m if it had agreed to the funding proposed by the CCG.

According to the provider, East Staffordshire CCG had proposed a contract for around £9m, whereas previously the services were allocated £10m within the contract. 

In an interview with HSJ, Vivienne McVey, chief executive for Virgin Care, said this would mean providing services for less than was they cost three years ago.

Dr McVey added: “In the last year we have invested £1.7m overall. We have continued to develop the hearing failure service, the diabetes service, put more into the care co-ordination centre, introduced a pulmonary rehab service and invested heavily in mobile technology for the community nursing services.

“For the next 12 months, we will continue to deliver high-quality services, then it is up to whatever the CCG provides. It will be up to the new provider to provide what it is willing to, under whatever funding the CCG provides.”

She continued: “We’re proud of what we achieved, but we have been unable to agree sustainable future funding for the contract. As we are not able to meet the difference between the funding from the CCG and what the services cost to run, it is with a very heavy heart that we will step aside and allow the CCG to develop its plans for the future.”

In a statement, East Staffordshire CCG said: “We can confirm that we have received a 12-month termination notice from Virgin Care. They will no longer provide community services under the Improving Lives contract from 9 April 2020. 

“The CCG is keen to involve patients, clinicians and partners over the coming months, before beginning a procurement process to commission a new contract. The CCG remains committed to the principal of integrated services that improve health outcomes for local people, in particular for those with long-term conditions and for frail, older people.

“Our priority will be to ensure patients continue to receive high-quality services during this termination period. We will also work closely with Virgin Care to ensure staff are kept informed.

“The new contract is expected to be in place by 9 April 2020 and we will work with Virgin Care to ensure a smooth transition for patients.”