Primary care trusts are facing some critical issues over the integrity of local services as they separate their commissioner and provider functions.

All PCTs must have ensured their provider services arm has moved into a contractual relationship with their PCT commissioning function using the new Standard NHS Contract for Community Services by April 2009. The degree of separation must be sufficient to avoid potential conflicts of interest.

In addition, by October 2009, all PCTs must review the operations and governance of their provider services arm to ensure it is the most appropriate form to suit local needs and to declare whether or not they are interested in establishing a social enterprise or community foundation trust for any services and agree a plan with their SHAs for their future development and management.

They must also produce a detailed plan for transforming community services which reflects their future shift to becoming world class commissioners focused around the needs of the local population and the opening up of local markets to competition. This competition is seen as key to driving up standards and improving efficiency.

Undertaking separation will require considerable resources and time – but the unprecedented and detailed review of services this entails should be a very instructive exercise, which will improve customer focus.

There is no prescribed formula for separation: it is a matter for local determination. The options for externalisation range from creation of an arm’s length organisation which remains legally part of the PCT, to creating a new organisation that exists outside the PCT, such as a social enterprise or a community foundation trust; or one which exists in alliance with another organisation or through vertical or horizontal organisation with another provider, such as an acute foundation trust seeking to extend its income from payment by results, or another PCT provider arm respectively.

There are also private sector organisations interested in partnering with PCTs to provide clinical and back-office support, as well as working capital and access to technology.

Provider arms are usually very diverse business units containing a variety of services, ranging from community nursing, older people’s services, specialist therapies, as well as urgent care, to children’s services and sexual health.

There will be no ‘one size fits all’ formula for divesting services. Rural areas will require different solutions to urban areas. In the organisations we have assisted, a mixture of partnerships with other agencies, social enterprise and the voluntary sector have all been feasible options.

In deciding which way to go, avoid creating structures of Byzantine complexity: fragmentation can easily bring a loss of ethos and values and hit staff morale. Any part of the business unit wanting to go it alone must be a viable and sustainable business in its own right. This may imply a preferred supplier contract for the initial years.

Separation will bring some important challenges. There may be change fatigue if the workforce has just undergone reorganisation. New organisations need the right leadership and management skills. In many cases this will come from outside the existing PCT board. New skills such as marketing, raising finance and cashflow management are needed.

PCTs must consider how separation and the consequent loss of control will impact on their ability to implement innovation in care pathways and integrated services. Losing a large section of the workforce into the provider organisation could expose skills gaps in the commissioning arm. Will it be acceptable for some staff to straddle the divide? 

Separation will also create tension. Solutions must be locally determined, taking service users along with them; form must follow function. A detailed project plan plus clear processes around information-sharing and confidentiality will be required. The scope of authority and powers delegated to the provider arm must be transparent.

The basis of charging for services will be critically important. This may be the first time that individual services have been rigorously costed.

The absence of national tariffs for community services in the short term will be problematic. Workforce issues, particularly around the transfer of NHS pensions and TUPE rights, require special care.

Successful provider organisations will need high standards of leadership and governance, strategic planning and financial control. To win patient trust and confidence, they will need to display a clear set of values and engage effectively with their local population. The challenge is there to be taken up.

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