Good intentions could be disguising a big, bad threat

It is the much-heralded new model for 21st century healthcare provision, but could confusion over its meaning and the lack of safeguards against manipulation leave social enterprise open to abuse from profit-makers? Helen Mooney finds out

'Social enterprises are businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or the community, rather than being driven by the need to maximise profit for shareholders and owners.'

This is the government definition for the new world of social enterprise, which health secretary Patricia Hewitt and Department of Health mandarins are championing as the community model for primary care in the 21st century.

The definition sets out social enterprise as a helpful and potentially innovative ideology which could provide utopian healthcare provision for all. But what does the phrase social enterprise really mean?

King's Fund senior fellow Richard Lewis says the theory is that social enterprise describes 'a style of operation with underlying social principles, a company that trades with a social aim, is not profit-seeking and is committed to the needs of the community.' But how does this nice idea translate into the real world?

Mr Lewis says one of the problems with defining social enterprise is the different forms companies can take. Broadly speaking there are three models: community interest company; companies registered as charities; and industrial and provident societies which operate 'for the benefit of the community'.

'There is a huge amount of confusion out there,' says Mr Lewis. The one thing that is clear is that social enterprise organisations, in whatever form, must have a 'social aim' and in theory invest any profits they make back into the community. The other stipulation is that they involve some sort of patient, public and staff membership.

Going sour

But what is to stop social enterprise from turning into a bad apple, initially created for the greater good of the community but then morphing into - or being bought out by - a bigger, for-profit private healthcare company?

David Owens, a specialist in social enterprise at law firm Bevan Brittan, says that if a social enterprise organisation is registered in one of the three forms mentioned, there will be a built in safeguard in what he calls an 'asset lock'.

This guarantees that any money invested or generated by the company must by law be reinvested or used for the community. The problem is that the government has yet to draw up a model constitution or contract to make sure social enterprise organisations remain in their original form.

Mr Lewis also warns against the possibility that companies could 'masquerade' as social enterprises. 'There is no hard and fast line on the interpretation a social aim,' he says.

This job will fall to the Department of Health's social enterprise unit, which was launched last month by social care minister Ivan Lewis. According to him the unit 'will encourage social enterprises to involve staff and service users in designing and delivering services tailored to meet people's needs, and also achieve greater value for money'. Ministers have promised a social enterprise fund from April 2007 which is intended to help start-up and fledgling social enterprises.

Social enterprise unit head Sue White says the unit is also developing a resource pack to 'support' social enterprises in health and social care. It aims to complement existing sources of support, including regional development agencies and the social enterprise coalition.

The DoH is also set to publish a report to help commissioners and 'third-sector organisations', such as not-for-profit companies and charities, to work more closely together. 'This will feed in to the wider reform programme and its influence will be demonstrated in the health reform in England's commissioning framework,' explains Ms White.

All very nice in theory, but the DoH appears light on the detail of how a critical mass of social enterprise will be formed and what safeguards will be put in place to ensure they don't start trying to turn a profit within a few years.

Jonathan Bland, chief executive of the Social Enterprise Coalition, which is working closely with the social enterprise unit, also has concerns about whether the social enterprise movement can get off the ground quickly enough.

'It takes a bit longer [to set up social enterprise companies] to get people to think and work in different ways. I am concerned that the government's drive for patient choice will open up very quickly and that the private sector will cherry-pick provision contracts from primary care trusts without giving social enterprise the opportunity to get in there,' cautions Mr Bland.

Tripping hazard

And this need to try to change the culture and mindset of NHS staff towards the social enterprise model could yet prove one of its biggest stumbling blocks.

Last month staff at East Elmbridge and Mid Surrey PCT took an 'indicative' vote against transfer to Central Surrey Health, a local, nurse-led social enterprise organisation.

Central Surrey Health is proposing to take over all primary and community services provided by the PCT when it merges into a Surrey-wide organisation. Although local union representatives have been given verbal reassurance that NHS staff terms and conditions - and perhaps most importantly NHS pensions - will be protected, they are yet to receive firm commitment from the DoH that this will be the case.

Mr Owens says he has concerns that NHS staff will be reluctant to move into social enterprise organisations. 'Although there is Cabinet Office guidance which says that if staff are transferred out they should be honoured with a broadly equivalent pension to the NHS pension, unless a company is limited by shares, which social enterprise organisations won't be, they cannot directly transfer their NHS pensions'.

He points out that the Central Surrey Health model will be able to transfer NHS pensions because it is not strictly a social enterprise. But as it is registered under a specialist general medical services contract, it is a company limited by shares.

There are dangers inherent in the social enterprise model if the government does not move
quickly, set the right legislation, and get the correct building blocks in place.

And there are real concerns that the politically driven desire to deliver rapid improvements will see contracts go to private organisations that can respond quickly enough.

One of the problems with the government's theory or social enterprise, says Richard Lewis, is that its policy for the health service is in itself inherently confused. 'On the one hand the government is intent on a process of decentralisation which is so dramatic that it gives away controls and says it does not matter who owns the health service, but on the other hand they think it does matter because they are setting up the social enterprise model and foundation trusts,' says Mr Lewis.

'If the public is not convinced that reform is not covert privatisation, the government needs to come up with a model that the public feels has appropriate accountability,' he adds. The social enterprise model is the answer, of course, but he argues that the social enterprise unit will have to achieve much more than the DoH has done so far to make the concept convincing.

Both Mr Lewis and Mr Bland warn that delays in releasing the cash that will kick-start social enterprise immediately puts the sector at a disadvantage.

'The funding will be a bit late as commissioners are starting to let contracts now,' cautions Mr Lewis. 'There is a real danger that by the time they are ready to roll all the contracts will be sewn up by the private sector,' he adds.

The government's vision for new social organisations to provide comprehensive mainstream primary and community health services will depend - partly, at least - on a range of new organisations that will be built from scratch. If they are to be successful they will need specific political encouragement and, importantly, developmental support in starting up.

As a recent Kings Fund's report on social enterprise warns (see box): 'The for-profit sector is ready and able to act quickly, and there is a distinct danger that for-profit providers will sweep into primary and community care unchallenged. If too much time passes before staff-led and patient-led organisations take shape, when they finally do enter the marketplace there may be little left for them. This particularly applies to new models of general practice organisation, where competition from the for-profit sector may be fierce.'

For the time being the worry is not that social enterprise organisations could turn into money making machines, but that the profit-making private healthcare sector will take most of the benefits from commissioning and patient choice before social enterprise has had a chance.