Published: 26/02/2004, Volume II2, No. 5894 Page 10 11
From April, the arrival of foundations will bring about a profound change to the commissioning process between PCTs and provider trusts. Graham Clews looks at how the new relationship is being forged
In just over a month, assuming that independent regulator Bill Moyes gives them the nod, the first foundation trusts will be up and running.
And once the 12 trusts begin trading under their new status, the entire commissioning relationship with primary care trusts will undergo a significant change.
Service-level agreements will be replaced by legally binding contracts with PCTs.
Currently, SLAs are not legally binding because both PCTs and acute trusts are directly accountable to the health secretary via strategic health authorities. But foundation trusts' free-standing status will end this.
Similarly, at the moment both PCTs and trusts are responsible to the health secretary for outcomes in terms of volume, quality and responsiveness achieved for patients. Under new arrangements, PCTs will need to agree outcomes with foundation trusts and incorporate this into their contracts.
Foundation trusts will also pilot the payment by results system, and although in the short term the tariffs will only apply to a relatively small proportion of services, planning among PCTs for commissioning on a fixed-cost basis is under way.
The south Yorkshire health economy is a foundation trust pioneer, with all four acute trusts in the area set to swap status within the next six months.
Sheffield Teaching Hospitals, Rotherham General Hospitals, and Doncaster and Bassetlaw Hospitals trusts are among the first wave of applicants, with all three due to achieve foundation status in either April or July.
Barnsley District General Hospital trust has passed its preliminary application for foundation status and could be established from October.
The nine PCTs across the economy have agreed that they will procure collectively from the foundation trusts, although North Sheffield PCT chief executive Andy Buck believes it is important to distinguish between commissioning and purchasing services.
'We are very clear that the responsibility for commissioning and assessing the health needs of the population remains with each PCT, but we see considerable advantages with collective procurement, ' he says.
Nine PCTs commissioning in bulk will allow them extra purchasing power, as well as simplifying the commissioning process.
A model for legally secure contracts between PCTs and foundation trusts has been developed, but some management consultants warn that PCTs should use the model only as a guide and they should be aware of the pitfalls and opportunities the contract offers.
For example, they suggest that PCTs should insert clauses allowing them to take advantage of more efficient services offered by foundation trusts where the trust has developed a new service using its surpluses, even if the service was not commissioned by the PCT.
National Association of Primary Care president Dr Rhidian Morris agrees that foundation trusts are likely to take an 'aggressive' marketing stance where they have excess capacity, particularly for an area with difficulties, such as orthopaedics. And he says commissioners should take advantage of that.
The legal niceties of the new contracts are themselves presenting problems, particularly for smaller PCTs.
Rotherham PCT director of commissioning and change management Philip Watson says: 'We want to get [into the contract] as much as we can and ensure there are no pitfalls, but something has to be in place by the end of March'.
Mr Watson says the new-style contracts will give PCTs a chance to monitor activity throughout the year, but he says there is a certain amount of 'anxiety' in the PCT over whether it will be able to challenge the foundation trusts' performance.
He worries that although the PCT will be able to demand extra data, will it be of high enough quality? And is there enough expertise in the PCT to analyse and act on the data produced?
Mr Buck says the PCTs across south Yorkshire already share a health informatics system, and he says part of the challenge is to ensure that they have proper data flows. The PCTs are working collaboratively to analyse information separately, avoiding duplication.
Mr Watson says PCTs will need high-quality data as he believes SHAs and the Department of Health will encourage PCTs to flex their muscles over time.
Mr Buck agrees that the producer/provider relationship is likely to be brought into sharper focus by the changes.
'It will be a transition from relationships that were a little looser and a little more based on partnership to ones that are very robust and businesslike, but we are anxious not to throw the baby out with the bath water, ' he maintains.
'We do not want to simply move to a legally binding contract because we want to maintain a strong care pathway that includes everything from social care and primary care to acute care.'
One senior PCT manager says there are currently what amount to 'gentleman's agreements' within SLAs to tweak arrangements during the year, ensuring that sufficient work is provided to PCTs - and at a reasonable price.
Mr Buck agrees that the introduction of payment by results will present a challenge for PCTs: it will allow for funding arrangements, at tariff price, for over or under-performance such as greater accident and emergency admissions or increased elective work .
Sheffield West PCT director of commissioning and planning Tim Furness agrees, but he says the combination of legally binding contracts based on fixed tariffs will define trusts' and PCTs' responsibilities, making it easier to identify where the risk lies.
He says that PCTs know they will be responsible for achieving the levels of referrals they have contracted for, and this may require referral management schemes set up to prevent excessive referrals to providers. Trusts, on the other hand, will know they must handle the risk of meeting the agreed work levels.
A likely bone of contention will be the financial penalties that can be inserted into the contracts, allowing PCTs to withhold payment if they are unhappy with the level of work being done by trusts.
Guidance suggests that this should be a maximum of 3 per cent, but Mr Watson points out that this could be significant for foundation trusts in terms of cash flow.
Everyone agrees that the relationship between PCTs and provider foundation trusts is bound to change, but it is too early to say how.
Dr Morris says that although it is overly simplistic to say foundation trusts will only be interested in profit, it is true that they will be looking to make money where they can.
Mr Furness believes that relationships between PCTs and foundation trusts may improve, rather than deteriorate, within the confines of the hard-nosed financial structure. Unlike the rather woolly current arrangements, where responsibilities are effectively shared, a clearer demarcation of who does what could reduce possible tensions.
But there is some degree of consensus about the new system. As one PCT director of commissioning puts it: 'The bottom line is that foundation trusts are out to make a surplus.'
Commissioning models: 'I think we must do it better'
While some primary care trusts wrestle with the new challenges posed by commissioning from foundation trust providers, other PCTs are developing new models of commissioning to improve their effectiveness.
Newcastle PCT is leading on a 'commissioning consortium' that will pool its resources with North Tyneside PCT and Northumberland Care trust, giving it an annual purchasing power of close to£1bn.
Newcastle PCT chief executive Andrew Gibson, who is leading the creation of the consortium, says It is 'embryonic', but he believes PCTs have to think innovatively when designing commissioning structures for the future.
The Tyneside scheme followed on from discussions between the three primary care organisations and Northumberland, Tyne and Wear SHA on target-hitting and service delivery in the health economy.
Mr Gibson says that there was a perception that there were insufficient high-quality managers available to ensure a first-rate commissioning service, so the scheme will see five directors put in place across the whole consortium.
The corporate governance system for the consortium will be kept as simple as possible.An annual commissioning plan will be drawn up and presented to the three PCOs, which will still be responsible for resource allocation.Mr Gibson says he has had discussions on which commissioning requirements will be decided at a PCO level and which will be decided by the consortium.'We do not need to bring everything to the centre, only those things that would work better, 'he says.
Other parts of the country, including Manchester and Cumbria, are also developing innovative commissioning systems.Mr Gibson says: 'I think people will look at different ways of commissioning because I think we must do it better.
'We spend a lot of money and I do not think many people could put their hand on their heart and say they could not do it better.
'Am I convinced it is going to work? I am pretty comfortable with it, but we will need to assess the scheme once it is up and running.'
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