PCTs warned not to throw provider arms 'into abyss'

The warning comes as the Department of Health prepares to set out deadlines for PCTs to decide the future of their provider services.

HSJ understands that draft guidance on provider arm divestment, expected in final form next week alongside the operating framework, will require PCTs to show provider arms are "business ready" by April. Strategic health authorities must approve the plans by October 2009.

The guidance is likely to set out the pros and cons of different provider models.

But managers, lawyers and trade unions are warning of significant problems with at least two of the models on offer. As a result, PCTs could be tempted to hand their provider arms over to acute trusts, creating local monopolies.

Matthew Winn, chief operating officer of community foundation pilot organisation Cambridgeshire Community Services, said PCTs risked creating models without clear purpose, inadvertently passing on financial risks to other NHS organisations and facing challenges over the contestability of their proposals unless they planned rigorously.

World class commissioning decision

He said PCTs must decide what kind of market they are trying to foster. "It really needs to be a world class commissioning decision as well, saying what do we think is possible from a provider perspective," he said.

Birmingham East and North PCT director of commissioning and re-design Andrew Donald said: "A lot of people have jumped into the abyss before they realised what's in there.

"We've always said we couldn't have achieved what we've achieved as a PCT without having a close relationship with the provider arm."

There are growing concerns over some of the department's provider models.

Christian Dingwall, a partner at solicitors Hempsons, said commissioning PCT chief executives would be legally accountable for arm's-length provider organisations. "You can't change that problem even if they change legislation; the legal liabilities will stay with the PCT," he said.

Social enterprises, a provider model heavily pushed by the DH, could also run into difficulties, with the Royal College of Nursing warning detailed guidance issued last week raised pension problems.

RCN senior employment relations adviser Karen Didovich said: "That might be a barrier to some people even going down the route of setting up a social enterprise."