Two private firms have been shortlisted for a £280m ‘prime provider’ contract in East Staffordshire in a competition that has seen all NHS bidders squeezed out of the race.

Virgin Care and Optum - part of United Health - will now work with the East Staffordshire Clinical Commissioning Group to design the outcomes for the Improving Lives Programme.

This will provide services for people with long term conditions, the frail elderly and those requiring intermediate care.

The winning bidder is due to be picked in 2015 with a view to begin the revamped service in 2016.

The CCG’s accountable officer Tony Bruce confirmed that NHS organisations that had expressed an interest in bidding for the contract had not made the shortlist.

The programme is supported by the 19 East Staffordshire GP practices and serve around 38,000 people in the area who live with long term conditions such as heart disease or diabetes. It will also cover an estimated 6,000 frail elderly people.

According to CCG modelling of future demand, the services would be unsustainable by 2018, at which time the CCG claims it will be overspent against its NHS England allocation by £10m.

Mr Bruce denied the procurement was driven by the need to cuts costs. It aimed instead to improve standards of care which he said were not currently “to the standard we would expect”.

Asked why the CCG itself could not deliver better integration of local services, he told HSJ: “The CCG can’t do that partly because we don’t have the capacity.

“What we are talking about is supply chain management.

“CCGs were not set up in scale or expectation to micro manage the interactions between different providers.

“We were set up to identify and prioritise health needs and health outcomes and commission services to meet those needs.”

He added that the CCG would not direct the winning company to place a contract with any existing hospital or community providers, but he said: “It would be unexpected I think if it did not have a contract with the acute provider that is in the centre of our main town.”

Chair of East Staffordshire CCG Charles Pidsley added: “We decided it was vital to take a different approach to buying services after it became clear many patients in East Staffordshire are not getting the same quality of care as they would in other parts of the country.”

The prime provider will need to deliver financial balance across the seven years while absorbing increased demand. Ongoing contract management will be provided by the Midlands and Lancashire Commissioning Support Unit.

Optum is also bidding for both cancer and end of life prime provider contracts worth £1.2bn in Staffordshire, while Virgin Care is bidding only for the end of life contract.