The Treasury has announced plans to “explore” setting quotas for outsourcing key health services.

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.”

Midlands trusts plan joint pathology service

The 2008 Lord Carter of Coles review of NHS pathology services was the trigger for a steady reconfiguration of the market and consolidation of providers.

The first trust to enter into a joint venture with the private provider Serco to run its pathology services was Guy’s and St Thomas’ Foundation Trust in 2009. This month King’s College Hospital Foundation Trust followed suit.

Plans now being drawn up by Nottingham University Hospitals and University Hospitals of Leicester trusts could create the biggest single pathology provider in England. The trusts plan to merge their pathology services.

NUH chief executive Peter Homa said: “Discussions are at an early stage, but the intention is to look at a single managed service that will create one of Europe’s major pathology services. We are pretty sure this will be the largest pathology service in the country and is an opportunity to combine two strong units into an even stronger one, with all the benefits to the service and research.”

If they were combined as they stand the new service would employ more than 1,000 staff and have a combined budget of £65m. In 2009-10 the two services performed roughly 23 million tests.

Mr Homa said the two trusts were also exploring the “benefits of working with a third party”.

Private companies are also gearing up to enter the market more generally. In July facilities management group Sodexo announced it was setting up Integrated Pathology Partnerships with medical diagnostics group Labco to bid for services in the NHS and private sector.

HSJ understands at least one other medical group, in this case from the US, is also planning to enter the NHS market.

Outsourcing quotas to drive mixed health services provider market