The role of private providers and the voluntary sector in mental healthcare delivery is going through a process of evolution as some services become less viable while demand for others increases. But, as the NHS purse strings draw tighter, how can a good 'fit' be achieved? Emma Dent reports

A predictable part of modern NHS life is the furore that greets any announcement on the involvement of a private provider in NHS provision. Except, that is, in mental health.

Private companies and voluntary sector organisations are long-standing and widely accepted contributors to NHS mental health services. There are no firm numbers on what proportion of these are provided by non-statutory services, though some sources put it as high as 10 per cent.

As much as 80 per cent of brain injury rehabilitation work, around 25 per cent of medium and low-security settings and a significant proportion of eating disorder and substance misuse care and psychiatric intensive care settings are provided in the private sector. Many are services which the NHS is unwilling or unable to provide.

'When large numbers of NHS beds were closed and services moved into the community, there were fragments left behind,' says Dr Mark Spurrell, medical director of Affinity Healthcare's Cheadle Royal Hospital, Cheshire. 'Firms like ours pulled those together.

'Private provision has evolved in response to areas that lacked services and where needs were not being met. Our role is not to duplicate what the NHS can do but to complement it.'

This is a phrase often repeated by private and voluntary sector providers alike. A less circumspect way of putting it is that both sectors provide what has fallen between the gaps of statutory care. For the private sector this often comprises long-term, complex care that the NHS has not been encouraged to provide for some years.

Capio UK chief executive and former NHS mental health manager and senior Department of Health civil servant Tom Mann says: 'Although NHS mental health acute and general services will never be under threat, over the last 20 to 30 years cost pressures and moves into the community have resulted in a patchy service.

'Areas such as eating disorders, talking therapies and substance misuse are strong in some parts of the country, but in others are at best found in the community and at worst hard to find at all.'

Additional burdens

Director of policy and regulation at private provider Partnerships in Care Steven Woolgar believes the involvement of the private sector has grown increasingly acceptable to the service.

'We are a better fit with NHS mental health services as most of our work comes from the service, compared to the acute private sector, which still does a lot of privately funded and insurance work,' he says. 'But the biggest issue for us is that we would like to be treated the same as the NHS.'

Mr Woolgar, who also chairs an NHS Confederation affiliate group of mental health providers, says private providers face additional regulatory burdens. For example, they have to pay for their inspection regime (equivalent to the Healthcare Commission's work with NHS trusts), which includes visits under the terms of the Care Standards Act 2000. The private sector has additional tax issues and does not receive funding for training staff even if they are working in services commissioned by the NHS.

'This creates differences in how we cost a service,' Mr Woolgar points out.

What private firms do have, says Partnerships in Care director of business and service development Giles Mahoney, is the flexibility to move out of services that are no longer viable and into new ones.

'Our ethos is to be as flexible as possible. We do not have to go through the same planning processes as the NHS and can be much more focused, more flexible. Our costs can also be cheaper,' adds the former NHS manager.

'Partnerships with specialist commissioners, groups of primary care trusts or strategic health authority-wide solutions can bring together larger numbers of patients. It enables them to provide for patients who in one area would be too small in number and get better value for money.'

Mr Woolgar agrees: 'Some very good relationships have started to develop in recent years when we have talked to commissioners about services we are considering starting up and are looking for their support. Niche services cannot be provided in isolation.'

Financial pressures faced by commissioning PCTs juggling demand with deficits and budget cuts are coupled with policy changes and the pressures that arise from them.

As a result, secure settings and psychiatric intensive care units are two areas where private provision is in decline as trusts stop using out-of-area placements in favour of setting up their own facilities.

Providers say they anticipate more of these moves as they are flagged up in Department of Health reports and guidance.

'The need to plan services is vital,' says Mr Woolgar. 'The private sector and commissioners alike need to look at sharing information on trends and standardising services.'

There is some debate over whether the private sector will continue to provide niche services or aim to compete for services that are becoming more mainstream.

Mr Woolgar points to the likely growth in availability of talking therapies as one area that could be tendered outside the NHS. Capio's Dr Tom Mann comments that the rise in the number of people with organic brain disorders such as dementia is so great that the NHS will struggle to manage. Services with variable care provision such as eating disorders and children's and adolescents' services, described as patchy at best in the NHS, are also likely to continue to need private provision to supplement care or provide it outright.

Mr Mahoney believes there are opportunities to join up with the growing market of mental health foundation trusts that have more freedom to provide services in innovative partnerships with a range of providers.

'There are chances for joint ventures; we are talking to trusts about CAMHS and other areas. Psychological therapies provision for trusts and PCTs is another possibility,' he says.

However, Dr Mann strikes a note of caution: 'We would love to work in partnership, but before doing so we would need a clear understanding of what the risks were going to be. Foundation trusts are young and it may be best to wait three or four years until they have grown stronger.'

What is needed, he says, is clear guidance about future direction from the DoH within 12 months. 'There is currently massive uncertainty,' he says.

Dr Spurrell believes that the private sector will continue to provide care in areas of high risk that require high investment, but that new specialisms will have to be found as the NHS becomes more effective at providing them itself.

'There will be other complex areas such as treatment-resistant cases that we will focus on,' he says.

There may also be increased competition to look out for. Jeremy Taylor, former Nottinghamshire Healthcare trust chief executive and now director of newly launched provider Avier Healthcare, believes mental health provision for whole districts could be competitively tendered in the medium term.

'A few firms have had a pretty much unchallenged run at providing niche services for many years but the picture is now changing,' he says. 'There is the prospect of getting away from strictly niche-based provision as practice-based commissioning based on GP practice clusters emerges. In the spending patterns of PCTs, mental health has taken the single largest slice of expenditure and there will be growing pressure to get better value for money from that large slice of cash.'

Innovative partnerships

Mr Taylor echoes the need to work in partnership with both the voluntary and statutory sectors on integrated care.

'It offers great possibilities for innovation and improvement in efficiency and outcomes. It is going to be an interesting time for everyone, and provided GPs and PCTs are prepared to be the pioneers I can only see service users gaining.'

Some private providers mention an increased urgency in being asked by PCTs to account for every pound spent.

It is clear that such pressures are also being felt keenly in the voluntary sector.

As any NHS manager who has tasted life in the voluntary sector can tell you, third sector gives a whole new meaning to budget management. Charities acknowledge that accounting for every last penny is nothing new to them.

'Commissioners are always looking for the cheaper option. Trying to get a focus on quality, not cost, is a big issue for our members,' says Judy Weleminsky, chief executive of voluntary provider the Mental Health Providers Forum.

She adds that the short-term nature of many voluntary sector contracts creates unnecessary work and distress for many organisations.

'Having to rebid after a year restricts the amount of planning that can be done for a good service. More longer-term contracts that are fully costed are needed, with more focus on outcomes,' says Ms Weleminsky.

What voluntary providers are less accustomed to, in common with private providers, is the level of uncertainty pervading relationships and dealings with commissioners, and the consequent pressure being put on service provision arrangements.

As Mind director of network support Lee Smith puts it, the only thing that is consistent 'is the level of uncertainty'. He is not alone in being concerned. One senior voluntary sector figure, who asked not to be named, says: 'We are often getting into unhelpful dialogue about contracts. A huge amount of time and resources are being spent on contract disputes that are often not resolved without resorting to legal action.

'Relationships that we thought were going well suddenly sour when they turn round and say they want to cut the cost of your work by 20 per cent. It has nothing to do with quality and everything to do with finance.

'I do not want to suggest that we are against value for public money. But when we are in danger of losing a contract not because we have not delivered the service but because they want to save money on it, it is often a knee-jerk response to financial problems. We are not a sponge that can keep being squeezed. And it is service users who are losing out.'

The squeeze does not only come from the commissioners wanting to pay less but also from increasing costs, particularly around staffing. Although larger organisations will be able to balance this by increasing the diversity of their service provision, some smaller bodies that concentrate on just a few areas may be pushed to the wire. And there is a danger that their strengths will be lost, warns Richmond Fellowship director of operations Nigel Pink.

'The unique point of the voluntary sector is that we have a choice over how we provide services and as to what stance we will take. Our growth is not governed by targets; so long as we work within regulations, we can do what we think needs to be done to provide the most effective service. We want to be a distinct alternative,' he says, adding that around 30 per cent of the organisation's turnover is made up of contracts with PCTs.

However, this can often be a moot point. 'If commissioners disagree with us we do not win the contract,' adds Mr Pink. Around 30 per cent of his organisation's turnover is made up of contracts with PCTs.

Cost recovery is another issue, says Rethink deputy chief executive Liz Felton. 'As a sector we have always had difficulties with this. Organisations are always being put under pressure to reduce cost pressures and their total expenditure. There is a sense that we are being expected to force our prices down and undercut each other. We have also seen non-specific providers coming in and offering to run mental health services. They are cheaper, but quality is variable.'

Other charities also report difficulties in recouping the costs of their services.

'We can fundraise to fund some innovative services but we still need to ensure continuity of funding,' says United Response director of supported employment Diane Lightfoot.

'Without that, services cannot be planned; we cannot afford to subsidise services.'

Organisations worry that commissioners do not understand the need for full cost recovery and lack general understanding from commissioners about what the voluntary sector does and what its costs actually are.

'They think that the voluntary sector is literally run by volunteers, that we do not have an infrastructure to support unpaid staff, ' says Mr Smith. 'It is often felt that we are not capable of handling issues such as clinical governance.'

He adds that though the increased pressure on contracts is time consuming and painful, it does mean that the sector is being treated more professionally.

Joined-up linking

Voluntary sector providers believe they can create closer links with communities and with service users and carers than statutory services.

'It is a bit of a cliché ¢ut when it works well local communities can be engaged,' says Mr Smith.

Ms Lightfoot says service users consider voluntary sector providers to be more flexible and less stigmatising. 'We are not interested in putting people in boxes, which the statutory sector has to do because of the way it is funded.'

However, strong local links can be jeopardised by commissioners thinking that national issues can only be dealt with by national organisations.

Such naive thinking is a threat to small, local organisations,' adds Mr Smith. 'People with mental health issues are about more than their condition; their situations are about community cohesion and local environments.'

Organisations are now examining how they must modernise to deal with the evolving market and not specialise too much. Areas for growth include work around modernising day hospitals, developing the social exclusion agenda and work with people with complex needs.

Mr Pink points to several areas of 'complete under-provision', including women's services and work with black and ethnic minority groups and organisations.

Ms Felton says: 'Service users have different expectations now; they demand a modern service. We have to see how we can add value and build on our service user and carer involvement,' says Ms Felton. 'Services will be more outward facing, more community based and less buildings focused. The bigger question is, when the NHS has settled down, what will they be looking to us to do? It is about having the confidence to meet that challenge.'