Government considers cap on 'egregious' agency spend

Several senior figures have confirmed to HSJ that the Cabinet Office is examining the legality of imposing a cap on payments made to agencies that supply temporary staff such as nurses and doctors.

NHS England chief executive Simon Stevens said at the authority’s board meeting yesterday that NHS trusts needed to clamp down on the “egregious prices being charged by some staffing agencies”.

A price cap would be a significant government intervention into the agency market. The proposal follows the provider sector spending £3.3bn on temporary staff in 2014-15, more than double what was planned.

Andrew Taylor, a partner at Aldwych Partners and a former chief executive of the NHS Cooperation and Competition Panel, told HSJ that without a change in the law to regulate prices, the NHS “could run into problems with the Competition Act”.

This was because “in effect what you might have is an anti-competitive agreement between all the NHS trusts if they say they’re going to act without any legislative basis and refuse to pay above a certain rate”.

The key concern of NHS leaders is the refusal of some agencies to join local procurement deals, which are designed to limit agency prices in advance. Instead, these agencies “hold out” until the NHS is unable to source staff by any other means, and then charge a higher price. In some cases commission rates can reach as high as 40 per cent of the individual placement cost, inflating the cost to NHS providers.

Central and North West London Foundation Trust chief executive Claire Murdoch told HSJ she would welcome a cap on agency charges. She said: “It would be one of the single most useful measures that could be taken centrally to assist services locally.”

She said some agency rates “were simply too high and are an exploitation of the current situation”.

HSJ understands the Cabinet Office has not yet made a decision over whether it will intervene in the market. In the meantime, Monitor and the NHS Trust Development Authority are working with providers to try to reduce their agency spending.

In an exclusive interview with HSJ published today, Monitor chief executive David Bennett said the regulator would require trusts to cut their agency spending, provided it did not impact on patient safety.

HSJ has learned it is working with three pilot trusts where agency spend is above average, including Sherwood Forest Hospitals FT.

A Monitor spokesman said it was providing the trusts with “workforce planning expertise” and “upgrading” the organisation’s skills in identifying problems - for example, the last minute booking of agency staff where the highest rates are charged.

The aim is to improve workforce planning, bank staff usage and the use of automated tools such as e-rostering.

Monitor is also encouraging providers to establish a pool of in-house staff who can be called upon to work extra shifts without the trust needing to pay agency fees.

The TDA confirmed it was working with trusts to reduce their reliance on agency staff.

NHS Employers chief executive Danny Mortimer said: “Employers do report concerns about the behaviour of some agencies in terms of them not being willing to take part in procurement exercises and actually maximising their profit as a result, and employers would welcome anything that tackles such behaviour.”

One outer London trust chief executive raised concerns that a cap could disadvantage trusts outside major cities because they would no longer be able to attract staff with competitive rates.

He added: “Everyone at the top would need to buy in to it and stick to it across a wide geography for it to be truly effective, particularly in London. Otherwise outer-rim trusts would be disadvantaged versus inner teaching hospitals as it’s harder for us to recruit and retain staff anyway.”

The Cabinet Office declined to comment.