A survey by HSJ in association with DWF suggests regulations introduced in 2013 are already causing waves in healthcare procurement, reports Alison Moore

The NHS could face numerous challenges to procurement decisions over the next few months, according to an exclusive survey carried out by HSJ.

Eight months after controversial procurement regulations came into force, their effects are already being felt across England, with two-thirds of those responding to the survey witnessing changes in commissioning behaviour.

‘60% of respondents feel the regulations will aid service integration’

The survey − in association with law firm DWF − received 93 completed responses. Of these, 38 per cent of providers felt their organisations might challenge a procurement process in the next six months.

A similar number said they would consider challenging for purely tactical reasons such as delaying the procurement or influencing how future procurements were run.

But DWF head of healthcare Michael Boyd suggests the impact on how much the NHS commissions from the independent sector might not be as profound as the overall response suggests.

Many respondents mentioned increased use of any qualified provider as a result of the regulations, although this is a development that would otherwise have occurred. Other responses suggested there was little evidence acute services were being opened to new providers.

“It does not seem to have led to the privatisation of the NHS that many opponents of the regulations feared,” says Mr Boyd.

“The acute sector is pretty much bulletproof as far as independent sector infiltration is concerned. It is community services – including some that are at the community end of the acute spectrum – that have become the battleground.”

The impact of this on individual organisations varied among respondents. One suggested that smaller organisations were being driven out of the market, while others spoke of commissioners being afraid to develop services with their current providers.

The responses also suggested a very wide spread of community services was being affected – anything from secondary care to smoking cessation, although musculoskeletal services featured prominently.

Grasping the nettle

Overall, those who took part felt they had a reasonable understanding of the regulations, with half saying they had a strong or very strong grasp, though 56 per cent felt their organisation’s understanding was only adequate or weak.

However, commissioners were lambasted, with only 16 per cent of those from the provider side describing their understanding as strong or very strong.

“If you don’t understand the procurement regulations, then are things really going to change?” asks Mr Boyd.

He warns that a lack of understanding could result in a business-as-usual approach that would make it harder to realise the benefits that were intended when the regulations were drawn up.

Inevitably, this lack of understanding could also lead to more challenges to the processes being used. One independent provider warned that “interpretation at the local level confuses the processes required”.

‘If you don’t understand the procurement regulations, then are things really going to change?’

Mr Boyd suggests there is “an enormous box-ticking mentality” in some CCGs, coupled with a fear of change, which could hold back the realisation of the potential benefits of procurement.

There is also a need for tailored solutions rather than a one size fits all approach to the procurement of services, he adds.

“When it comes to using procurement as a tool, there are going to be some very good CCGs but some fairly bad ones as well,” says Mr Boyd.

“If the regulations are to stand a chance of delivering their objectives, it will be important that the CCG performance monitoring system operates effectively.”

Over half of those surveyed had felt the regulations would have a negative impact on healthcare when they were introduced, while a third said the organisations they worked for saw it as an opportunity. Around 10 per cent have changed their views - either positively or negatively - in the last eight months.

One executive from Yorkshire and Humber suggested commissioners were not responding and were resistant to change.

The time spent and cost to the NHS of complying with legislation was a concern, together with the knowledge available to NHS organisations.

“NHS providers are generally inadequately resourced to meet the demands of competitive tendering,” noted one senior manager. Others referred to a “real time pause” in decision-making and wariness about commissioning services.

Integration benefits

There was some support for the idea that the regulations could boost service integration, with 60 per cent feeling they would contribute to this - though only 9 per cent felt it would have a considerable effect.

One said: “Integration is the last chance saloon for some trusts.” Another complained: “Mostly the changes have led to confusion about the role of integration and its conflict with competition.”

In one case, a community services manager said they might challenge a procurement because “stupidly, it is the only way to allow time for a sensible discussion as to how best to integrate services”.

‘Integration is the last chance saloon for some trusts’

There was a feeling among some independent sector providers that the NHS was still trying to protect its own. One respondent said they would likely challenge a procurement because of commissioners’ poor behaviour. Another said there was “circling of the wagons to protect the NHS”.

But views on the performance of Monitor and the Office of Fair Trading − charged with overseeing the procurement and competition system as a whole − were surprisingly positive.

Thumbs up for the OFT

Over half felt the OFT’s role was good for health, despite widespread concern about the outcome of the Poole/Bournemouth merger. Only 35 per cent felt Monitor was performing badly, while 30 per cent felt it was performing acceptably or better.

“Everything that has been published about the OFT’s role in the NHS has been very negative,” says Mr Boyd. “But a 50/50 split is hardly indicative of that.”

There were mixed views on whether the new regulatory regime was the right one for the NHS.

“If used selectively and strategically, there will be pockets of major benefits but it is a one-size-fits-all tool,” said a senior manager in community services in the East Midlands. Another manger in the North West warned that it would not lead to trust mergers, even when this was clearly in the public interest.

Meanwhile, a mental health senior manager in Yorkshire and Humber concluded: “Private sector market models deliver value through failure, which essential public services cannot contemplate.

Michael Boyd on regulation

On their introduction, the procurement, patient choice and competition regulations created a storm. Critics said they would be bad for service quality and clinical outcomes. Although Monitor is of the view that the regulations only consolidate existing requirements, the previous regime was not set against a landscape where the need to achieve improvements was as great, nor the financial challenges so significant.

The survey results seem to confirm that, thus far at least, not much has changed for one of the main concerns: increased competition. However, we need to bear in mind that the regulations require much more from commissioners and providers than simply participating in procurement processes. The behaviours that are both required and discouraged are at the heart of commissioning services from the best providers and achieving choice and service integration.

The survey indicates that there is a fair way to travel before the regulations achieve this objective. Commissioning behaviours have not changed materially and little progress has been made in delivering integration. However, a business-as-usual approach will hardly lead to a step-change in either the management of services or the delivery of improvements.

Exploit flexibility

Being “principles based” as opposed to setting out rigid processes that must be adhered to at all costs, the regulations provide a flexible environment within which to operate. It is by exploiting this flexibility that commissioners can adapt their practices to fit the context they are facing, rather than repeating the same, tired processes that fail to deliver optimal results.

We do need to recognise that with flexibility come the challenges of interpretation and compliance. The regulations have teeth and providers from both the NHS and the independent sector have demonstrated a willingness to lodge complaints with Monitor when they do not feel they have been treated properly. The effects of the fear of a challenge cannot be dismissed, but it does seem that there is room for a more courageous approach, underpinned by the confidence that greater understanding can provide.

The regulations and the extension of the role of the Office of Fair Trading into mergers and acquisitions have altered the compliance landscape within the NHS significantly. Like them or not, they are here to stay - for the time being at least. The challenge for the NHS is to demonstrate not only that it knows how to use the tools at its disposal but that it is also willing and capable of doing so.

Michael Boyd is head of healthcare at DWF

Further information on the DWF procurement and competition training for commissioners and providers and their review of the procurement, patient choice and competition regime.