COMMERCIAL: A primary care trust whose plans to transfer community services to a social enterprise were halted by a legal challenge has decided to keep the services within the NHS.

The board of NHS Gloucestershire on Monday decided to ask the Department of Health to set up a new NHS trust to run the services, worth around £100m annually.

Under the transforming community services programme, which required PCTs to stop providing services, the PCT had originally intended a social enterprise ran the service. However, the PCT agreed to reconsider after service user Michael Lloyd sought a judicial review. In May the DH gave the PCT special permission to consider the option of a new NHS trust to begin the journey to foundation trust status.

In a statement the PCT said the decision would allow necessary improvements in quality and efficiency and financial sustainability to be achieved in a shorter timescale. If the PCT had opted to go out to tender the process would have had to be managed by the clinical commissioning group and the services temporarily “parked” with a local NHS provider in the meantime.

David Lock QC, who represented Mr Lloyd in the High Court in February, argued that while services could be commissioned from NHS providers without the need for a procurement process, it had been unlawful for them to be transferred to a social enterprise without competition.

He told HSJ this week the outcome of the case was “potentially a very significant policy shift” which could mean community services transferred to NHS trusts under TCS on a short term contract would not have to be put out to tender at the end of the contract period, as has been widely expected. In addition, in areas where services were transferred to social enterprises Mr Lock said commissioners “could take the view they should be re-established within the NHS”.

Mr Lock said that argument appeared to reflect NHS chief executive Sir David Nicholson’s recent comments that competition should be used as a “rifle shot” to deal with specific issues rather than a “carpet bombing” approach.  

However, he admitted there were “arguments both ways” about whether this approach could work with foundation trusts, where the contracts are legally binding.

Robert McGough, partner at DAC Beachcroft, told HSJ contracts with foundation trusts would be subject to procurement law and NHS trusts commissioners would still need to ensure NHS trusts were achieving value for money and not restricting patient choice.

He added: “There is an emerging market for community services and anyone who is looking to contract for these services needs to be aware there are a variety of providers and you cannot just say only an NHS provider can provide them.”

David Owens, partner at Bevan Brittan, questioned whether the decision had significance as it the DH would be likely to argue the circumstances were “exceptional” if another area sought the creation of a new NHS trust.

He also highlighted concerns that some community trusts might not be viable as foundation trusts. If this was the case the services would have to find another home in line with the government’s policy that all NHS trusts became foundation trusts.