Published: 11/08/2005, Volume II5, No. 5967 Page 15

So farewell primary care trusts, aged seven and a half. Conceived in 1997 (in the white paper The New NHS - Modern, Dependable), born 1999 (in that year's Health Act), and wound down 28 July 2005 (Department of Health circular).

For readers who were on holiday and missed the premature obituaries, let's recap. PCTs are to revert to a pure commissioning model. The new PCTs, larger in population and more closely aligned with local government boundaries, will devolve budgets to GPs while buying-in commissioning expertise from the private sector.

By October 2006 PCTs will have merged into larger units; by December 2006 practice-based commissioning will be universal;

and by December 2008 PCTs will have shed their community health provider functions altogether.

Good news for patients, or just good news for the headed notepaper industry? You decide. Here are three respectable reasons for the change, plus one dud.

First, there is a widespread view that the NHS needs a highly sophisticated commissioning function. Part of the solution lies in engaging international expertise on the purchaser side. There is also the need to utilise good PCT managers more widely (hence mergers) and to remove the apparent distraction of managing a direct workforce of community nurses and others (hence commissioning-only).

The second good reason is a recognition of the importance of good demand management - which cannot happen without GPs (hence the renewed push for GP commissioning budgets).

In the late 1990s, when fundholding was scrapped, there was not much extra purchasing power flowing into the NHS, so risk of inflation was low. Hospital waits were also very long, so GPs were deterred from referring. Neither situation now holds. The nightmare is that the extra cash buys more elective activity - but in the absence of GP budgets their referrals go up as fast, so waits remain stuck at their current levels.

Third, care pathway redesign will require a radical a shake-up in community and intermediate health services, as well as hospital care, and PCTs may find it more effective to manage that through vigorous commissioning relationships rather than weak line management.

The corollary is that it will be easier for PCTs to consider purchasing services from alternative providers of home-based healthcare, which will generate additional pressure on their PCTs' erstwhile provider arms.

The fourth, and dud, reason is that PCT management spending should be cut by 15 per cent. No doubt there are savings to be made, But the new-model NHS will fall on its face without equal sophistication on the purchaser and provider sides.

So every penny of these 'savings' needs to be reinvested in beefing up the commissioning capacity.

So what are the implications of these changes for PCTs' provider functions?

The immediate question on the minds of district nurses, health visitors and others will be 'who will be my new employer?'.At least seven different answers are possible. The existing community health services could transfer to new communityoriented foundation trusts; to local government; to general practices; to existing voluntary organisations; to acute hospitals; or to private companies.

Given issues around the transfer of undertakings (protection of employment) regulations and the NHS pension scheme, it seems that the most likely solutions for the existing workforce will be either to become a bespoke community foundation trust, create specialist provider medical services or join an existing NHS provider.

However these apparently comfortable options miss the fact that, as the contestability the DoH wants begins to bite, other charitable and commercial organisations will enter the space with more entrepreneurial skills and flexible forms of service delivery.

One solution, however, should be ruled out immediately - namely that community health services should simply be bundled in with acute trusts. Why?

In part because there is now ample evidence from the UK and internationally that hospitals tend to suck in primary and community health resources, rather than funding flowing the other way. One of the main reasons for putting activities in separate organisations is precisely to dilute this effect and ensure that decisions on community resource allocation are not simply unaccountable budget decisions made within integrated trusts.

The alternative strategy of having integrated but competing Kaiser-like foundation trusts in every locality is simply not practical given current numbers of hospitals. However, if these Kaiser-like organisations lacked this competitive pressure and were just geographical monopolies they would soon resemble NHS Wales - not an attractive proposition.

Furthermore, where NHS hospitals face little 'horizontal' competition from other local hospitals, the main challenge to their local monopoly comes from the threat of vertical substitution by incumbent primary and community health services.

Handing hospitals control of one of their main sources of competition would therefore further weaken commissioners' influence over acute trusts. It is also imperative that the payment by results tariff does not apply to services provided by primary care. Compliance with a fixed tariff would prevent primary care providers from taking advantage of their lower cost base to offer commissioners savings on service delivery.

So it turns out that a relatively arcane debate about where to locate PCTs' provider functions brings up fundamental questions. Who, on behalf of patients, is to be the care system orchestrator? The hospital, or the commissioner? In my view it has to be the latter. .

Simon Stevens is president of UnitedHealth Europe and was the government's health adviser 19972004. Simon_L_Stevens@uhc. com See Feedback, page 16.