Money for nothing in the ISTC labour crisis

First-wave independent sector treatment centres did 50,000 fewer operations than the Department of Health expected last year, and primary care trusts are footing the bill for those that did not take place.

Details given to HSJ under the Freedom of Information Act show how much of the work the first-wave was contracted to do that ISTCs actually performed up to 31 March this year.

PCT figures indicate that only three centres are performing at the contracted level and just two are over-performing, and so potentially ‘paying back’ underperformance from previous years. But many are still struggling to establish themselves, with several operating at only around 50 per cent of contracted value (see table below).

PCTs are locked into five-year contracts worth a total of£1.4bn, based on a guaranteed minimum volume. They are effectively paying for work that has not taken place.

Last year, when HSJ highlighted how few procedures ISTCs had carried out in 2005-06, the DoH stressed the long-term nature of the contracts and said the NHS would work with providers to ‘shift capacity to the future, where it is needed’ (for more background, click here).

Slight improvement

The 2006-07 figures show an improvement but not a dramatic one. Certainly, the centres are not performing the 117,000 procedures up to 31 March 2007 that DoH head of demand-side reform Bob Ricketts predicted last year in evidence to the Commons health select committee.

Data from individual PCTs does not give a complete national picture but the DoH told HSJ that more than 53,000 procedures were delivered in 2005-06 and over 67,000 in 2006-07 - 50,000 fewer than Mr Ricketts’ prediction.

The DoH says it is confident that more than 800,000 procedures will be delivered over the lifetime of the contracts - but even this is far below the 1.25 million expected when they were announced. The headache this causes for the NHS is obvious.

NHS Alliance chief officer Michael Sobanja calls it ‘madhouse economics’. He says: ‘It would make you grind the enamel off your teeth to think you are closing services and losing staff to balance the books when thousands of pounds of capacity is not being used.’

But the companies involved dispute some figures and say more ISTCs are now performing better - Capio says many of its centres are receiving referrals above the 100 per cent level.

Graham Kendall, acting general manager of the NHS Partners Network, which represents independent healthcare providers, says: ‘Many [ISTCs] are providing close to or above their contracted value and patients are disproportionately opting for them [under choice]. ISTCs are working closely with PCTs to improve take-up as well as to improve awareness of patient choice.’

So why has this happened? The DoH spokesperson said cancellation of ISTC schemes and change of case-mix at others had affected numbers.

Others point to several factors - difficulty building up a new service, GPs’ reluctance to refer to the new services, and poor capacity-planning which led to the services getting the green light.

Fragmented responsibility

This year HSJ found that responsibility for ISTCs at PCT level was hard to establish - raising questions about how well these contracts can be monitored locally.

One lead PCT said it received information about the value of work performed but not the number of operations.

PCT reorganisation last year seems to have fragmented responsibility for the contract - making it hard to find one person with an overall picture of how it is performing. But PCTs have little option but to try to use available capacity by increasing referrals. So what can be done?

Patient choice presents one glimmer of hope, although there is as much chance of a patient choosing their local hospital as opting for the ISTC. Waiting times will be a crucial factor.

Practice-based commissioning may have some impact - in some areas GPs are receiving an ‘allocation’ for their use of ISTCs as part of their indicative budgets. Western Cheshire PCT has gone further and asked GPs to refer directly to the centre, bypassing the usual triage service for orthopaedics.

Transferring work from local acute hospitals to ISTCs is another option and can help waiting-time targets - although it is often unpopular with local consultants and time consuming to arrange. The north east London ISTC at St George’s Hospital in Essex is expected to take 8,900 cases a year from NHS providers. This can involve doctors from the NHS, as at Kent’s ISTC, which has taken on medics seconded from Maidstone and Tunbridge Wells trust.

Service reconfigurations raise the chance of more people going to ISTCs. Where acute trusts have effectively withdrawn from simple elective surgery, the ISTC gets a greater share, although it is hard to see it as enhancing patients’ choice.

But where hospitals insist on continuing to do the work, PCTs have worked to rearrange what ISTCs do, in the hope they will be more attractive.

For example, St Mary’s treatment centre in Portsmouth has set up a new diabetic retinopathy service to run alongside existing ISTC services.

Portsmouth City PCT associate director of secondary care Lyn Darby says: ‘We did a case-mix change to remove activity that was not being used fully and to replace it, within the same financial envelope.

‘The amount of work that this change took to bring about was in itself fairly daunting - but persistence paid off. The new service has been very successful for the trust.’

This prospect has legs, says Douglas Watson, NHS contracts manager for Capio, which has made 64 different case-mix adjustments.

Takeovers can make all the difference. Private provider Centres of Clinical Excellence - which is part-owned by GPs and consultants - took over two ISTCs earlier this year. Uptake at its Midlands treatment centre, for example, has increased from 50-60 per cent of guaranteed minimum workload to 85 per cent now, says managing partner Dr Ali Parsa.

What are the overall prospects for the future?

Geoff Benn, group development director of Care UK, which runs some centres and part-owns another operator, admits catching up on work which has not been done in the first two years will be ‘difficult but not impossible’.

‘It is possible, it is going to be hard work but that is fine. I would not write them off as lost causes,’ he says.

But even if more patients come forward to ISTCs, to treat them may also require goodwill from the private providers as some contracts may not allow for rollover of substantial numbers of procedures.

Last year, providers seemed happy to do this, sensing long-term opportunities to enter the elective market. But with the cancellation of wave three and a shift in tone from the DoH will this goodwill endure?

Mr Benn says his company has already rolled over more work than it is obliged to under the contracts and is committed to continuing to work with its NHS partners.

‘To sit there and sulk or not co-operate is not a way in which we approach business,’ he adds. Capio has also rolled over work, allowing additional referrals without added cost to the PCT. Decisions are made looking at the local circumstances, says Mr Watson.

Late developers

Doing more work in the last years of the contract may increase costs for the companies, although the additional costs are ‘not horrendous,’ says Mr Benn. This could be a sticking point with PCTs.

But it may not be a good idea for firms with a long-term interest in the NHS to put up such resistance.

As the NHS has no commitment to these centres beyond the five-year contract, there is a real incentive for the companies to make them work, or see them revert to NHS control.

Capio and Care UK both want to retain contracts beyond the initial five years and are happy to work at tariff under payment by results in the future.

But Mr Benn suggests that the work the centres are asked to do is likely to change as the needs of the NHS develop.

PCTs are already thinking about the future, while trying to get the best out of the remaining years of the contract. ‘Like most PCTs with a wave-one ISTC we are now working out how the end of the five-year contract will affect us and we are beginning to work through how we wish to develop our relationship with the private sector in the future,’ says Lyn Darby.

Should this under-use of ISTCs sound alarm bells? Certainly it is putting financial pressure on PCTs. Some commentators suggest the government regards any under-use as a small price to pay for introducing competition into this core element of hospital activity and undermine the idea that some consultants keep patients waiting so they give up and go private.

But this strategy has dangers: paying for non-existent operations makes for risky public relations - which may explain why financial details about ISTCs are so hard to find in PCT board papers.

Already second-wave contracts are on significantly different terms and the government is not procuring the third wave centrally. This may represent either a cooling of government ardour towards the private sector or simply smarter procurement: but that may be little consolation for PCTs that risk three more years of paying for unused capacity.