Primary care trusts face a confusing array of options in handling their provider arms, says Jeremy Roper

Primary care trusts contemplating what to do with their provider arms are faced with an array of options.

Each 'solution' carries a different set of benefits and risks, and what might suit one PCT may be completely inappropriate for another.

Demands for contestability and demonstrable fitness for purpose mean the one option not available is not to change.

Some PCTs may decide that they will keep provider functions in house, albeit at arm’s length. However this is set up, the PCT will still be contracting with itself, and demonstrating robust commissioning will not be easy.

An alternative is to 'float off' at least some of the services within the provider arm. Since the much-publicised Central Surrey Health example in 2006, where nursing and therapy staff were transferred to a limited company owned by the staff and granted a three-year special provider medical services contract by Surrey PCT, the European Commission has issued guidance which indicates that health bodies should not be awarding such contracts without testing the market.

This guidance is not legally binding and, if it survives, a current legal challenge is likely to influence courts. It will be interesting to see how far the private sector has the stomach to start mounting challenges where it feels it has been deprived of an opportunity to bid.

Willing providers

The concept of the willing provider has its risks. It is misleading to assume that because a provider is not guaranteed any work under the contract awarded to it that means that there may be no requirement to market test.

If after a few months a significant amount of work has been awarded to just one provider where the market has not been tested, then this could also lead to challenges.

Acute trusts are one sector likely to lose out as care is shifted closer to home.

Some acute trusts are looking at involvement in the community services market and this could even raise the prospect of a procurement challenge from foundation trusts that feel their primary care trusts are excluding them from the process.

There is much food for thought for PCTs considering moving their provider function to, for example, a social enterprise body. In addition to procurement issues, other matters to consider include pensions for transferring staff, conflicts of interest and governance and managing public consultation exercises.

Various pilot schemes are or will soon be under way to explore some of these options and develop models for PCTs to use. But it seems unlikely that many whole provider arms will be converted to social enterprise bodies. It is more realistic to expect specific community services or groups of services being bundled together and then put into separate entities.

The assumption is that where services are not retained in the NHS family (in-house but at arm’s length or through a care trust or community foundation trust) they will be transferred into some form of social enterprise body. This could take the form of a company limited by shares or by guarantee, a community interest company, a community benefit society or co-operative – or become part of a charity or other third-sector organisation. Whether it is a commercial or not-for-profit organisation it will need to be economically viable.

If a new provider body is established there is still the question of which form of contract to use. Traditional in-house service-level arrangements will no longer be appropriate. Currently, contracts based on alternative provider medical services and specialist provider medical services agreements and the NHS model commissioning contracts are being used. The pilots referred to above may assist in this process.

Time will tell, if and when the dust settles, whether these changes will improve patient choice and patient care.