A group of organisations has developed a stepped approach for healthcare services to identify the best ways of joining forces in the search for bigger savings.

Under pressure to generate £20bn in efficiency savings by 2015, while improving care under the quality, innovation, productivity and prevention programme, the NHS faces some of its greatest ever challenges to the way it works, and the way it cares for patients.

Following repeated waves of NHS restructuring, healthcare is currently being delivered through a range of primary and secondary care organisations, including primary care trust provider arms, NHS trusts, foundation trusts, care trusts, organisational hybrids and independent general practices. All operate to different contracting arrangements and, in many cases, service gaps, overlaps and misalignments arise between the diverse providers.

Current economic pressures herald yet another era of NHS change, in which tried and tested approaches to cost saving will not suffice. Required levels of productivity gain will only be possible if the NHS thinks in innovative ways, and acts on a macro scale to match the size of the challenge.

The diversity of the NHS provider landscape creates a sound rationale for developing a more cohesive approach to service delivery, by pursuing formal collaboration in order to reduce costs, embed best practice and buoy up non-viable services.

This more cohesive approach involves the formation of healthcare groups.

Healthcare groups are a business model innovation that could generate the large scale quality and productivity gains required by the NHS beyond 2010-11.

We define a healthcare group as “two or more NHS trusts, or other healthcare bodies, working together to deliver specific functions and services”. Any healthcare related provider organisation could be a member of such a group.

Given the nature of the NHS, full mergers and acquisitions are difficult to implement. However, through extensive research and consultation, we have developed a range of delivery models, which enable collaborative group working, without requiring full integration of parent organisations.

We have developed these into a “step model”, which helps organisations identify the best ways of working collaboratively.

The model maps the amount of control each organisation must concede, against organisational change and benefits generated, showing simple collaboration to the left; a step change to a more formal, co-ownership structure in the centre; and a second step change to the right, leading towards full integration (see diagram).

Ideal healthcare group models can be split into two types: models developed around shared service contracts; and models developed around organisational realignment (see table, below).

The benefits of contract models include: value for money from economies of scale; better management of pooled resources; commoditisation of business processes; specialisation and operational expertise; quality assurance via service level agreements; and scalability to match demand.

Alternatively, the benefits of organisation models include: improved management quality at reduced cost; alignment of organisational cultures; incentivisation mechanisms to raise performance; weaker members benefit from group processes and competencies; and innovation via sharing of best practice. However, it is worth noting these two groups are not mutually exclusive

The characteristics of each contract model reflects local priorities and the chosen focus for collaboration (see diagram). Depending on local priorities, collaboration can be aligned around performance improvement, via benchmarking, training, service improvement and performance management, or around specific groups of services.

The services selected for collaboration could be support services, such as HR, IT, procurement and estates, core services, that is general clinical and patient-facing services, or “challenging” services, which are those that are more complicated or less sustainable due to low patient volumes, such as paediatrics.  

In addition, internal and exogenous factors should be intricately understood in order to ensure the most appropriate model is taken forward.

Local criteria that will influence the choice of model include strategic alignment, geographical proximity (catchment areas), leadership effectiveness, service quality, board governance and financial performance.

Healthcare groups are a business model innovation that could help your organisation to collaboratively improve quality and efficiency on a macro level.

An approach for every situation

Contract Models 
Mutual collaborationOrganisations pool resources to form a single resource group, enabling flexible response to demand fluctuations through economies of scale. Third-party providers are often given responsibility under a service level agreement (SLA), but clinical/ financial accountability remains with the respective organisations
Direct outsourcingServices are directly subcontracted to a third-party organisation (public or private sector), with responsibilities set out in an SLA. Accountability for service standards remains with commissioning trust
Specialist provider medical services   A legal mechanism representing a contract between a PCT and a provider to deliver specific clinical services. This has been used by consultants delivering outpatient clinics and minor surgery in primary care (ie outsourcing patient care to consultants)
Joint venture outsourcingServices subcontracted to a joint venture (partnership) between an NHS provider and a private sector organisation, where the NHS trust undertakes the commissioning. Responsibility for services delegated to the third party, but accountability for delivery remains with the trust


Organisation models 
Shared leadershipLeaders from two organisations sit on each other’s boards (for example, shared chief executive or management teams). Individuals are employed by both trusts, but act on behalf of one of them as appropriate. Clinical responsibility remains with individual trusts
Operational franchiseResponsibility for running all or most of an organisation is awarded to a franchisor, typically through a fixed-term operating licence. A likely mechanism would be an NHS trust “shell”, retaining property, staff, assets and accountability. This allows a trust to run other trusts or services
Co-ownershipEmployees hold a significant, but minority stake in an organisation, maximising motivation. Employees could earn dividends only, or actually hold shares. The operating company is responsible for service management
Federated modelOrganisations retain individual sovereignty and accountability, but delegate responsibility for some functions to a federated group, which they co-own. Member organisations vary in size and influence, so governance arrangements are introduced to clarify relative standing of members and mechanisms for resolving differences



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  • Gary Howe and Steve Kirby, Ernst and Young
  • Mike Deegan, Central Manchester and Manchester Children’s NHS FT
  • Mike Farrar, NHS North West
  • Nigel Edwards, NHS Confederation
  • Steven Michael, South West Yorkshire Mental Health NHS FT