Published: 22/04/2002, Volume II4, No. 5902 Page 10 11

The independent treatment centre programme promised to come to the rescue of an NHS in need of an urgent capacity boost.But with the collapse of the second national chain, is the policy's survival in doubt? Helen Mooney investigates

Last week, Anglo-Canadian, the preferred bidder for the London chain of independent treatment centres, was 'deselected' from the bid by the Department of Health.

This decision not to proceed with the bid for the scheme, which the DoH had heralded as the solution to many of the ills of the NHS, has come at a time of heightened activity in the ITC policy.

The situation seemed much simpler back in December 2002, when invitations to tender for the first wave of the ITC procurement programme were placed in the Official Journal of the European Communities. The DoH appeared frustrated by the limited impact of its concordat with the UK private sector drawn up two years earlier:

it wanted to open up the market to international companies.

It promised that the first wave would treat 250,000 patients a year, with contracts being awarded for five years.

The DoH and its mandarins in the ITC procurement programme's national implementation team (NIT) initially offered six chains in the scheme: a£300m spine chain covering the whole country for general surgery and orthopaedics, a£114m ophthalmic chain for mobile units and four smaller chains in the South East, London, the North West, and a mini chain across Kent and Essex.

These were to run side by side with a raft of locally procured schemes, offering a range of tailor-made contracts to furnish the local health economy with a means of meeting specific need - largely in orthopaedics and general day case surgery.

And so the bids came in. Some companies must have rubbed their hands with glee at the prospect of getting a toehold in the UK health economy.

Through the first half of 2003, the government considered the bids it had received. By the summer the DoH and the NIT had agreed a shortlist of 16 bidders, including domestic providers Bupa, BMI and Nuffield and a range of companies from South Africa, the US and Canada.

By September, ministers had decided which companies would be awarded preferred-bidder status for three of the chains and the majority of local schemes.

None of the domestic sector were named. South Africa's Netcare became preferred bidder for the ophthalmology chain and is now providing services to patients in mobile units nationwide.

But for the other two chains announced in September, preferred bidder status has not meant winning the contract.

Last week, HSJ revealed that Anglo-Canadian lost out on the London chain because at the last minute the NIT and DoH decided that the consortium bid did not represent value for money (news, pages 3-4, 15 April).

And - according to a leaked memo from the NIT to NHS representatives in the London chain and seen by HSJ - there are 'similar concerns' as to the viability of Anglo-Canadian at the local scheme in Southend.

Southend Hospital trust deputy chief executive Chris Humbles would only say: 'We are currently in discussions with the DoH, the NIT and Anglo-Canadian. However, it would be inappropriate to comment further at this time'.

Mercury Health, a consortium of companies headed by Tribal Group, also came unstuck during its ITC negotiations.

Until February, it was preferred bidder for the spine chain.Changes to the case-mix meant it was no longer wanted and so it, too, was 'de-selected' by the NIT - this time in favour of the reserve preferred bidder, Swedish-run consortium Capio. Mercury Health was, however, offered a£190m fillip in the shape of the South East chain announced at the same time.

At the time, Mercury Health chief executive Peter Martin admitted that 'changes shifted the emphasis from day case and diagnostics to a significantly greater proportion of inpatient surgery'.

'This did not fit with our original proposals, ' he explained.

So is government policy on the private sector procurement programme on the rocks?

No, insist those close to negotiations.One private-sector provider suggests the collapse of the Mercury Health and AngloCanadian deals demonstrates 'courage' by the NIT and government in being prepared to face up to the problems with the schemes.

Meanwhile, the national ophthalmology chain is up and operating.

The North West chain is in talks with Interhealth-Jarvis and many ofthe local chains are moving on apace.

Earlier this month an ITC at Ilkeston, Nottingham, opened.

The centre, the result of a£100m deal for a five-year contract agreed with joint venture company Care UK Afrox, is the first local ITC run in partnership with an overseas company to open its doors.

Sam Milbank, chief executive of Nottingham City primary care trust, which led the deal, says that from the time OJEC notices were issued in December 2002 to commercial close earlier this year the process moved very quickly.

'The whole thing was concluded in 14 months...there were 28 PCTs involved in this as well as two strategic health authorities and the acute hospitals.'

She explains that when Care UK Afrox was awarded preferred bidder status the PCTs as commissioners had already worked hard to ensure that they got a rough target price agreed for the bid.

However, Ms Milbank admits that throughout the negotiating process the local NHS team along with the NIT kept negotiating with Care UK Afrox on the price.

She says that 'there has been some movement' but she is confident that the local NHS was able to secure a 'competitive price'.

Other centres have been subject to even more significant changes along the way - in areas such as case-mix. This happened in Maidstone, another local scheme where the preferred bidder is also Care UK Afrox.

Initially this was set to be part of a Kent and Essex mini chain with Southend Hospital, but it has since broken away.When Care UK Afrox became preferred bidder for the centre last September the understanding was that the case-mix would be for general surgery and orthopaedics. This has now changed substantially to a urological case-mix. Had the NIT and the local NHS not been able to offer this alternative the scheme may have become redundant.

Care UK Afrox group marketing manager Geoff Benn, who is leading on the Maidstone scheme, argues that Care UK Afrox is keen that the centre does not 'sit as a pimple on the side of the local NHS' but becomes fully integrated in the economy.

Another problem rearing its head during negotiations is the engagement of local clinicians.

In Trent, local orthopaedic surgeons were affronted that they had not been brought into the discussion process over the Ilkeston centre and a further ITC planned for Nottingham. They wrote a letter to their local GPs claiming that the centre offered 'inadequate arrangements for the care of patients who develop serious complications during and after surgery'.

Plymouth PCT director of commissioning Kevin Baber, who is leading on the treatment centre project for Derriford with Care UK Afrox, says that there are also problems with the registration process for South African consultants which has meant that consultants will have to be recruited from EU countries.And both Mr Baber and Mr Benn are confident that financial close for the centre will be reached 'within a matter of weeks'.

If the ITC programme succeeds in its aims of increasing capacity and slashing waits, it has huge implications not only for the NHS, but for the future of the UK's own private sector.

But is it too late for the domestic market to get a toehold in ITCs?

It would seem not. As this page went to press, an announcement was expected that Nuffield and Capio had been awarded the contract for the next wave of the DoH procurement process, with contracts for 25,000 operations - largely in orthopaedics - to go live this year, known as 'year one' of the second wave of the five-year programme.

The ability to start work in the next couple of months was a key factor in the success of the domestic bids. Success on the one-year contract may give home providers a chance to 'prove' to the government that they might provide a more long-term solution.

'Year one' of the second wave of the programme is just the start of a major programme.

Many of the current international bidders are impatiently awaiting a further procurement announcement this summer which could open up a further 750,000 NHS patients to the private sector in years two to five (2005-06 to 2010-11) of the initiative .

One private sector bidder chief executive says that adding up all the activity from both these waves of operations equates to just 4 per cent of the total NHS market.

Given that health secretary John Reid has already said that he would be happy to see up to 15 per cent of NHS operations opened up to private providers, an awful lot of capacity remains up for grabs.

A significant proportion of activity is likely to come from diagnostics. Earlier this month, the DoH began by placing a tender for bids for 80,000 magnetic resonance imaging scans - an initiative which is likely to pave the way for further investment in the area.

But one international bidder warns that if the government wants to succeed, it will need to learn from its mistakes so far.

In short, it faces a choice: 'The government will either have to engage with the domestic private sector or give international bidders more time to put their bids together and form consortiums to provide the work.'