A legal word of caution before the STPs are rolled out

NHS England is undergoing significant transformation and there are clear moves away from the “NHS internal market” created in the 1990s. Sustainability and transformation partnerships are being rolled out with the main goal of creating accountable care organisations that overcome that purchaser-provider split.

This can have the double effect of facilitating the provision of integrated care, as well as insulating a layer of NHS governance from competition and public procurement law. Such a change of policy is not in principle prevented by either UK or EU law.

A clear example

However, the way it is being implemented raises important legal questions. An ongoing project to alter the market for the provision of out of hospital care services in Manchester offers a clear example of this. Given that Manchester’s is the first in a series of parallel ongoing projects, this can well serve as a cautionary tale.

The tendered contract exceeds the delivery capabilities of any given organisation and the entities involved in the design of the Manchester STP had a clear time advantage to prepare their tender

In the implementation of its STP, Manchester authorities responsible for health and social care (including three clinical commissioning groups and the Manchester City Council) tendered a contract for the creation of a “local care organisation” for a range of out of hospital health and care services that, in short, was a contract for the provision of virtually all health and social care services with the exception of in-hospital services.

The tendered contract was for a duration of 10 years and an estimated value of £5.9 billion, and was designed as a single block, thus excluding the possibility of awarding it by lots. The contract was advertised on 14 March and expressions of interest had to be submitted by 28 April, which does not seem like a particularly long time frame, given the complexity and duration of the contract.

This created time pressure and possibly discouraged interested tenderers that could not submit a competitive (or even a complete) qualification questionnaire within six weeks.

Unsurprisingly, as HSJ has recently reported, only one offer has been received, and it was submitted by “the Manchester Provider Board, which is a consortium made up of Manchester City Council, local GP federations, the city’s three acute trusts [ie hospitals], community service providers and the Greater Manchester Mental Health Trust”.

There are two plausible reasons for this less than competitive outcome: first, that the tendered contract exceeds the delivery capabilities of any given organisation; and, second, that the entities involved in the design of the Manchester STP had, at least, a clear time advantage to prepare their tender (if not also information not available to other potentially interested tenderers).

On the whole, it seems that the advertising of the contract was never intended to create real competition, and was simply a formal step aimed at creating an appearance of legality of this strategy aimed at side stepping the (NHS) market.

Implications of the strategy

I am concerned about at least three dimensions or implications of the strategy followed in the delivery of the Manchester STP through the tendering of such excessively broad, long term services contracts in less than competitive conditions.

I do not think that EU law or domestic law oppose or prevent the end result that the Manchester (and other) STPs aims to achieve

First, regarding the tender, I am concerned that its design is anti-competitive and potentially breaches the requirements of the principle of competition established in reg. 18(2) and (3) of the Public Contracts Regulations 2015 – which requires contracting entities not to artificially narrow competition, in particular by favouring or disadvantaging certain economic operators.

If I am right and there is a breach of this principle, the whole procurement process should be quashed (although it also seems clear that litigation is unlikely at this stage).

Second, and more generally, I think that the effort behind the STP is not merely aimed at streamlining the functioning of the existing NHS market for the provision of out of hospital health and social care services, but rather at setting aside that market altogether. Rather than simply searching for better service delivery through aggregation in the patients’ interest (within the limits of the NHS (Procurement, Patient Choice & Competition) No 2 Regulations 2013), this aims to deliver a change of model for the management of the NHS.

If this is the case, I do not think that this can be done through the procurement of a massive umbrella contract capable of eating up the NHS market. Legal reform is necessary to ensure full debate in parliament of the broader implications of this (apparent) project of de-marketisation of the NHS.

A change of model is not without consequences, in particular if (foreign) investors in private healthcare providers were to raise claims for what could amount to an expropriation under international investment law, as well as a potentially disproportionate (ex post) restriction of EU fundamental freedoms.

Third, and looking at the future, I am concerned that the delivery of this macro umbrella contract will be highly challenging and difficult to achieve. It seems clear that such a long term and broad contractual object will require permanent adjustments and modifications, which may trigger litigation down the line. The fact that a single contract has such a large scope creates legal risks of its own, in particular if it was to be set aside or terminated in the future.

Overall, I do not think that EU law or domestic law oppose or prevent the end result that the Manchester (and other) STPs aims to achieve. However, they do oppose and raise significant issues around the way in which this very fundamental change (ie reversion) of the NHS internal market model is being delivered. Before the Manchester strategy is rolled over or mimicked in other areas, I would suggest that a deeper rethinking and a commensurate reform of the applicable legal framework is necessary.

Dr Albert Sanchez-Graells, senior lecturer in law, University of Bristol Law School