'PCGs will want to be sure the means to achieve quality and value for money exist, otherwise many will say they have lost their old teeth and the new set don't bite'

In the new NHS, 'purchasing is dead and we are all commissioners now'. That is the cry, but the reality may be a balance between planning and purchasing.

The white paper set a new direction based on partnership and co-operation, emphasising needs assessment, quality and value for money. Yet a modified form of purchasing will still exist in the form of three-yearly service agreements. To what extent will effective commissioning depend on these?

The internal market's focus on purchasing risked diverting effort from real health improvement. It created opportunities for apparent micro-savings, but these often remained as costs elsewhere. However, it did mean that providers, faced with potential or actual loss of income, had to respond by improving quality and/or cutting costs.

Primary care groups will enter local healthcare economies with many of the internal market's structures and behaviours in place. Their challenge will be to develop the culture of quality-led commissioning, and not to perpetuate the culture of financially-led purchasing. But they will want to be sure the means to achieve quality and value for money exist, otherwise many will say they have lost their old teeth and the new set don't bite. Health improvement programmes will be crucial in formulating the policy within which three-yearly service agreements will be made. Indeed, if they are specific enough, they may well take on some of the agreements' functions themselves. Potentially, therefore, HImPs might alone achieve efficiencies which neither health authorities nor fundholders realised by purchasing.

Meanwhile, PCGs will need to decide how they are going to meet trusts and specialists. Commissioning groups have already shown the importance of the GP/specialist interface in developing workable ideas owned by both groups. It would waste time for each PCG to meet each specialist department; PCGs could meet specialties collectively, or each could lead on a range of specialties. This might make service agreements a formality in the right circumstances.

Plans will eventually need to be identified in long-term service agreements. Where things are not going right, it will remain possible for a PCG to change its provider. Long-term service agreements will therefore still provide an important safeguard where planning fails to deliver the goods.

Will PCGs working individually be able to use service agreements effectively? It is unlikely as things stand. Fundholders were able to win benefits for their own patients, but were limited in their ability to alter radically trust behaviour or transfer services from secondary to primary care. Trusts were able to play off purchasers against each other.1 The same will be true for PCGs.

For stability, service agreements will be long-term. But they are pointless unless they improve the NHS's cost-effectiveness. This is only likely to happen in a concerted way if each trust's commissioners can arrange that all PCGs purchasing from it collectively use service agreements to improve the cost-effectiveness of its services.

Threatening? It will be for a trust whose average costs are too high or whose average quality of service is too low, as neither can be disguised under a monopoly buyer. The National Costs Register will enable benchmarking, allowing clinicians to concentrate on quality issues. Where there is good clinician-to-clinician involvement between trusts and PCGs, there are unlikely to be many problems. The work entailed in drawing up service agreements is in most cases likely to be far more important than the agreements themselves, which could become redundant in the long term.

So how is a monopoly or near-monopoly for commissioning services from a trust to be orchestrated? As PCGs find their feet, it will be up to the HA itself. In time it may be a conglomeration of PCGs or even a 'wholesaler' appointed by them. This will guarantee equity between PCGs as they will be negotiating broadly similar service agreements. Such 'collegiate' working will better co-ordinate efforts to meet the HImP. And it will allow commissioning to transfer smoothly from HAs to PCGs where desirable.

Newcastle and North Tyneside HA has produced an interesting model, which separates fixed and running costs by making PCGs purchase trust shares and pay for treatment costs according to use.2 This gives PCGs an important incentive to regulate their use of services, but as inefficiencies may lie at the capital end, a monopoly purchaser will still be needed.

Where do primary care trusts fit in? At level four there will clearly be no service agreements for community services, but there is no reason why PCTs should not collectively make service agreements with specialist services. The question will remain whether community services will best be made effective and efficient by being provided under one umbrella with the rest of primary care or by being commissioned by PCGs, while leaving the operational management outside the PCG.

The fundamental issue is whether a unified NHS requires separate institutions. The first evidence may come from comparing PCG commissioning with the integrated provision of primary care trusts, which is exactly what is implied when PCGs move from levels one to three to level four. In the long term, will the use of needs assessment, evidence-based practice and efficiency benchmarking be enough? In the meantime, it is ironic that PCGs have the opportunity to use the old currency of purchasing more effectively than was ever possible before the demise of the open market.


1 Light D. Effective Commissioning. 1998.

2 Milne E. Health Service J 1998; 108(5621): 22.