Outsourcing quotas to drive mixed health services provider market

The spending review last week said the coalition government would look at “setting proportions of appropriate services that should be delivered by independent providers” – starting with pathology and community health services.

The pathology move has been widely trailed since Lord Carter of Cole’s December 2008 review identified £250m-£500m of potential savings through centralising the function.

Since then two London foundation trusts – Guy’s and St Thomas’ and King’s College Hospital have already been working with the outsourcing company Serco.

Perhaps surprisingly, business and third sector leaders have not welcomed the quota proposal with open arms. Chief among their concerns was that a quota could soon become a “cap” rather than minimum target.

NHS Partners Network director David Worskett said: “If it emerges as a maximum – a cap – not only will it contradict any willing provider, it will contradict best procurement practice.”

Mr Worskett cited as a possible model the BBC’s obligation to outsource a proportion of its productions. Half the corporation’s productions are made in-house while 25 per cent are outsourced and the remaining quarter is open to competition from both in-house and external producers. The system is policed by the BBC Trust, an independent governing body.

However, the existence of two main levels of commissioners within the NHS – the national commissioning board and GP consortia – could make replication of the BBC model hard to implement, Mr Worskett said.

Confederation of British Industry senior policy adviser for NHS reform Chris Heathcote was similarly muted in his response, saying the quota proposal was “slightly surprising”.

He told HSJ: “Our submission to the spending review was for more competition among providers; this is what we want to see rather than a potentially arbitrary proportion. At this stage there really are more questions than answers. If you start to set percentages by provider you might actually put a cap on it.”

But he said there was much that was encouraging in the spending review for independent providers.

“Where this is helpful is that it might coax the sector away from the traditional models,” he said.

He said businesses were looking at commercial possibilities involving underperforming trusts that were unlikely to make foundation trust status, and at supporting GP commissioning – despite being “a little alarmed by some of the things the British Medical Association has been saying about an NHS only approach, or that it might be only new services going to tender”.

The Association of Chief Executives of Voluntary Organisations was also concerned about the use of “crude” measures to open the market.

Head of policy Ralph Michell said: “The intention is something we would support but the idea of proportions for outsourcing in some areas will be quite crude where a mature market is already developed.

“It raises questions over whether [quotas] will be different for private and third sector providers. Obviously we would push for parity in light of the big society agenda.”