The government is promoting the social enterprise model of service provision, but there are other options available to primary care trusts. Ingrid Torjesen offers an overview

The major question likely to be preoccupying primary care trusts this summer is how best to separate the provision and commissioning of services.

Would using an arm’s-length body be enough or would a completely separate organisation be a better solution? If so, which type?

PCTs are required under the NHS operating framework to at least distance their commissioning and provision functions by the end of this year. This is because, under co-operation and competition rules, the commissioning element of a PCT must treat its provider arm in the same way as it would treat any other provider.

Many PCTs find running an arm’s-length body while achieving contestability difficult because they are forced to share advisory and support services. There is also a concern that keeping the provider arm acts as a distraction from the PCT’s primary role as commissioner.

Health minister Lord Darzi’s report High Quality Care for All endeavours to make separation more appealing. It encourages models such as community foundation trusts and social enterprises, which extend freedoms offered to other provider organisations.

The report commits the Department of Health to removing the main stumbling block to NHS staff forming social enterprises to deliver NHS services by giving an assurance that employees can keep their NHS pensions. But critics say detail covering promotion or new staff joining is missing.

It also says PCTs will be obliged to consider applications from staff to form social enterprises, support their development and award them initial contracts of up to three years.

The DH plans to publish advice on the range of organisational options open to PCTs in the autumn, including implications for governance, patient choice, competition and employment.

It will also produce a flexible national contract enabling PCTs to hold to account the community health service model they choose.

Disruptive process

Divesting services to a separate body is disruptive, so PCTs reasonably happy with quality and value for money of services may decide to retain an arm’s-length organisation, says PCT Network director David Stout.

Some PCTs, fearing that there may not be much of a market for the provision of some services, might prefer to “ask” an arm’s-length body to provide them, he says.

“You might well be establishing fairly monopolistic providers over whom you have little or no commissioning control, which is potentially quite risky if you attach a lot of assets to that organisation to run the service,” Mr Stout warns.

But Birmingham University health services management centre senior fellow Helen Parker, who has been working with PCTs to help them assess the provision options open to them, disagrees.

She thinks most will decide that to achieve world class commissioning it is not appropriate for them to be providers, and view arm’s-length body status as just “a step change for the next move”.

Trusts that have already begun the separation process have taken markedly different approaches.

The six community foundation trust pilots are working to turn their provider arms into NHS trusts and then pursue foundation status.

They have even hired a PR firm to publicise their cause.

One of the largest pilots, with 2,500 staff, is Cambridgeshire PCT. Chief operating officer Matthew Winn says the board found the model appealing both in terms of business set-up and flexibility.

“Locally we are as big an operation as one of our big general hospitals or mental hospitals. Why wouldn’t you run that as a separate entity with total focus on it, and a board and the right governance structure round it?” he says.

He believes the foundation membership structure is tailor-made for community services because engaging with patients, carers and the wider membership is a daily part of their job. Attaining the flexibilities available to trusts in other sectors will enable community service organisations to compete on a level playing field.

Mr Winn says the PCT was put off the social enterprise model by the pensions question and saw it as risky because it is little used. But he adds some staff are interested so he expects to see smaller social enterprise businesses under a “foundation trust umbrella”.

Southampton City PCT was also a pilot site but dropped out. Managing director of provider services David Meehan says the DH and the strategic health authority had gone very quiet on the idea so the board decided to pull out to concentrate on commissioning.

The separation process moved 2,000 staff, including most clinicians and a lot of the corporate infrastructure, into the provision arm. The commissioning arm had only 100 staff, many of whom had training needs.

“It wasn’t helping the organisation perform at its best or develop as quickly as it might do as a commissioner. Our trust board recognising this made a decision that it was in the interests of the PCT to pull us out,” he says.

However, he anticipates the PCT will again go for foundation status, now the model seems to have regained political favour and the PCT has had time to beef up its commissioning skills.

The DH seems especially keen to promote the social enterprise model - Lord Darzi and Gordon Brown visited one of the largest examples on the day the next stage review was published. Central Surrey Health has a team of 900 nurses and therapy staff and its main contract is to provide some of Surrey PCT’s services.

The move to social enterprise status was driven by the former directors of nursing and therapy services at Surrey PCT, who are now its joint managing directors.

It has 750 co-owners holding nominal 1p shares and all profits are ploughed back into patient services.

High morale

Surrey PCT chief executive Chris Butler says: “Their co-ownership structure genuinely seems to create an environment that is empowering for employees, with high staff morale, and gives a real opportunity for innovation.”

However, he admits there are shortcomings in the infrastructure to make the policy work, which the DH is attempting to resolve through the development of tariffs and the new national contract.

Central Surrey Health executive lead for social enterprise and partnerships Valerie Graham says pensions were a massive stumbling block initially. But through a complex arrangement with the PCT, it managed to ensure all existing and new staff can be members of the NHS scheme. The PCT also manages the organisation’s estates.

Hull teaching PCT scoped its options for community services two years ago, before the foundation concept had been discussed. It favoured putting its community services into a social enterprise model, and prepared a business case.

Director of provider services and nursing Andrew Burnell says the pensions issue was a problem so the PCT started looking at the foundation model. But following Lord Darzi’s report it has returned to the social enterprise business case.

“It actually fits with the way the PCT wants to do work both as a commissioner and the way that the community works,” Mr Burnell says. “It is really a public well-being organisation in an area of such high deprivation and need. A lot of the staff in Hull live, work and are born and brought up in Hull and for them to be in something that adds value locally means a lot.”

He expects the PCT to hive off all its community services in one go and, if it goes for foundation status, to see smaller social enterprises within it.

Other alternatives for community service provision raised by the next stage review are care trusts and a series of integrated care pilots, to be chosen by the end of the financial year.

A few care trusts were set up in 2002 to integrate local authority health services into an NHS body. Sheffield Health and Social Care foundation trust provides mental health, learning disability and substance misuse services and has just been awarded foundation status.

Moving into community services for older people and intermediate care is part of its business plan. Chief executive Kevan Taylor says complications around pensions and the Agenda for Change pay reforms need to be resolved to allow integrated care to meet its potential. A local authority pension can be transferred to an NHS scheme but not vice versa, and Agenda for Change has priced many of the NHS posts higher than local authority equivalents.

Another option the DH is fleshing out is the “propco” or property company concept, which would free service providers from concerns over assets such as estates by putting them in the ownership of a company which would lease them to the provider.

But King’s Fund senior fellow Nick Goodwin warns the operating framework’s time frame for all PCTs to review their requirements this year is too tight.

“The worst thing that could happen is they look at the agenda the government has set and just do it in a very piecemeal fashion,” he says. “It may force PCTs down a direction of travel to actually make things happen without really thinking strategically about how it could be done best.”

Options open to PCTs

Arm’s-length body within PCT Commissioning and provider functions are separated within the organisation but the chief executive and board still retain responsibility for provider services as well as commissioning.

Care trust Introduced in 2002 - local authority health responsibilities are combined with PCT or mental health trust. Those derived from PCTs have commissioning responsibilities.

Social enterprise Not-for-profit model run by staff - used by charities, but relatively untested for large scale community services. Issues also need to be resolved over NHS pensions and ownership/management of estates.

Community foundation trust Six pilots under way - provider function must operate as an arm’s-length body for a year. The organisation must then meet Monitor’s governance tests for foundation status.

Integrated care pilots Pilots will be built around the general practice list to integrate care horizontally into social services or vertically into hospital services. The aim is to allow commissioning of chunks of the care pathway rather than individual services.

Propco Entity that manages assets of provider organisation.