Commissioning mental health services from the private sector could be costly and risky. Then a team in Lancashire stepped in to help

Consider 45 year old "John". He has treatment-resistant schizophrenia and has had multiple admissions to mental health inpatient services. Following his last admission, John's primary care trust decided to fund his placement in a rehabilitation service run by an independent sector provider. The placement is intended to improve his daily living skills and prevent another relapse. His care will cost£125,000 this year.

John is one of the thousands of people each year who receive mental healthcare from the independent sector. Such services are offered by a range of for-profit and not-for-profit providers. Some placements are expensive and service standards vary. The uncomfortable yet familiar challenges that can be levelled at John's PCT are:

  • Why has his placement been spot purchased without a detailed knowledge of the provider?

  • Where is the robust contract setting out the commissioner's expectations?

  • Are there case management arrangements to ensure John's placement remains appropriate?

In Lancashire, a collaborative programme between five PCTs and three local authorities found answers to these questions by focusing on a cohort of the most expensive rehabilitation placements commissioned from the mental health independent sector.

The programme delivered:

  • a register of 11 approved independent sector providers whose standards of care have been formally assessed using a commissioner-led quality assurance framework;

  • a contract framework outlining specific terms and conditions and explicit performance standards;

  • agreement on an open and transparent set of prices;

  • clarity about the expectations of mental health case managers to monitor the objectives and outcomes of individual placements.

"We knew this programme could make a difference quickly," explains Andrew Bennett, assistant director of the Cumbria and Lancashire Commissioning Business Service, which co-ordinated the work.

"Historically, PCTs have classified mental healthcare in the independent sector as 'out of area treatment'. This reflects a fragmented relationship between commissioners and providers, where the potential for building the independent sector into a whole system of care is yet to be realised."

Blend of skills

The collaborative programme was underpinned by a small multidisciplinary project team. Programme manager David Brownlow, who has experience of commissioning surgical services from the independent sector, was supported by a mental health clinical lead and a finance manager seconded from a local authority.

"This blend of skills helped us to work confidently with a large number of commissioners and providers," explains Mr Brownlow.

A formal advertisement invited expressions of interest from providers of rehabilitation services. Those shortlisted could demonstrate that they were already offering these services and were fit for purpose. There was then a structured process of quality assurance through which commissioners obtained further evidence of performance on more than 60 factors, including care planning, environment and governance.

Most providers approved through the programme are already delivering services for local commissioners. Mr Brownlow says: "This process has demonstrated objectively that independent sector providers are offering a high quality of service and our commissioners can make confident decisions about future placements."

The quality assurance framework can now be built on to encourage a greater openness between commissioners and providers, supported by clear standards and the exchange of information.

It was agreed that this programme would not deliberately stimulate price competition between providers, recognising that the marketplace was already vibrant and flexible and that commissioners did not wish to guarantee levels of activity through the contract.

The project team uncovered a legacy of highly variable pricing for rehabilitation services. This was because of the diverse nature of independent providers, varying models of service delivery and the spot purchasing of placements by commissioners.

But by working closely with providers, the programme has secured all-inclusive prices from each provider, which offers a foundation for much clearer discussions in the future about costs, quality and outcomes.

The framework contract allows a much more distinct market for mental health rehabilitation, removing the requirement for spot purchasing and helping commissioners and providers to respond to future needs.

Open to new providers

The contract does not offer guaranteed levels of activity or expenditure to any provider. It remains open to new providers that can demonstrate service quality through the quality assurance process and accept the contract terms and performance standards. The contract also confirms an obligation on PCTs to ensure effective care planning.

While the programme delivered a contract in advance of the national model contract for mental health services, the project team say the process was not too complex or difficult to complete.

What was critical was to use the process to strengthen relationships between commissioners and providers, and positive engagement with representatives from the independent sector was important.

"It was vital to ensure providers understood the outcomes PCTs wanted to achieve," says Mr Bennett.

Equilibrium Healthcare provides mental health services from a number of sites in the North West. Operations director Warren Irving says: "We have been used to working with individual PCTs. The common approach adopted by the commissioners in Lancashire has been open and transparent. We believe it will be invaluable in providing the best services to clients."

It will be possible to replicate the contract and quality frameworks to support the commissioning of services for other client groups.


The main stages in the collaborative programme

  • Engage with existing providers about the aims of programme.

  • Develop specifications.

  • Advertise for expressions of interest and then shortlist providers.

  • Develop contract terms and conditions and performance standards.

  • Conduct quality assurance inspections of shortlisted providers.

  • Agree on pricing packages.

  • Sign the contract framework and begin local contract management.

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