With the success of practice based commissioning high on the agenda of the Department of Health and the pivotal role PBC plays in underpinning world class commissioning, it is important for PCT provider arms to understand the potential impact of giving GP practices commissioning power.

Here on Wirral we have already seen the impact of moving to a national tariff within acute care with GPs now influencing the commissioning and contracting practices between the PCT and NHS hospital trusts.

For years PCT provider arms have been funded via a block contract with their own PCT and competition from the private sector has been minimal. This is about to be challenged by PBC and a move towards a community contract financed eventually on a tariff basis.

GP practices will become influential in the commissioning of community services and the quest for value for money and efficiencies, as well as improved patient care, will become ever more apparent.

The slow but gradual coverage of PBC is now knocking at the door of community services and provider arms must be up for the challenges that lie ahead.

Within NHS Wirral many practices have started expanding their PBC agenda away from acute care and believe that having an input into community services can have just as big an impact on their practice population’s care and their bottom line PBC position. National guidance suggests that PCTs should now be devolving community budgets down to GP level and that the community contract should be part of PBC baselines.

Due to the lack of robust information and accurate contract monitoring to support these services, NHS Wirral has been cautious over the past couple of years about devolving these budgets within PBC. We have spent months ensuring data is accurate for our secondary care contracts and now we are ready to take on the challenge of the provider arm services.

Currently NHS Wirral maintains a close relationship with its provider arm despite pressures for it to be separated and become a standalone organisation. While it has its own separate board including non-executive directors and designated support staff, the PCT is determined to keep the link that has worked well in the past.

NHS Wirral believes there are many downsides to hiving off its provision side, e.g. ability to implement new services/pathways quickly, additional infrastructure costs, possible takeover by FT creating a local monopoly, etc. A community services contract has been drawn up and signed by both boards but the vast majority of the services are financed on a block contract basis.

During 2007-08 a number of GP practices and PBC consortiums made significant savings. Some of these savings have been reinvested in community services. Although community services have yet to be devolved to PBC budgets GPs argued that the increased provision of healthcare in a community setting would have an impact on secondary care budgets and likewise improve the health of their practice population.

One of the first community services to be commissioned through the PBC savings route was a physiotherapy service. When questioned on the reasons for setting up the new service the practices involved stated unsatisfactory waiting lists at the PCT run physiotherapy service as the main motivation, despite the fact the waits were within national timescales. The business cases went through the organisation and a private physiotherapy practice was commissioned on a cost per case basis.

While the intention was not for the new service to be in direct competition to the provider arm run service, but rather complementary, there were implications that needed to be recognised.

The opening up of competition to providers from other sectors has meant a vast and unrecognised challenge is faced by PCT provider arms. HSJ has recently reported on the need for community services to improve efficiencies and prove themselves to be value for money. In my eyes, the only way to do this and for the PCT to ensure this happens is to move from a block contract arrangement to a cost per case arrangement.  Here lies the problem for NHS Wirral.

Until robust information systems are implemented NHS Wirral will continue to run a block contract arrangement with its own provider arm but some services commissioned through PBC will be paid on a cost per case basis. The competition from private providers will mean either a reduction in throughput at the provider arm service or very low, and possibly unaffordable, waiting lists.

If it is the former this will start to have an impact on the provider arm reference costs as fewer patients will be seen for the same block financial value. Therefore the reference cost for that service will rise. This can only lead to inefficiencies and effectively inflated payment for certain services by NHS Wirral.

Further to this many of the new private providers will set prices according to reference cost prices. Strategically they will look to undercut these reference cost prices when competing for business but if reference costs are rising then so will the private provider prices leading to further inefficiencies and inflated prices. And so the cycle will continue.

The only solution to this shift in contracting and demand is to move to a full cost per case basis for provider arm community services. This way the provider arm will become more business like as it competes for income which will naturally lead to the efficiencies being asked of them.

This is a totally new way of working for many provider arm staff. Provider arms as entities need to keep up to speed and ensure clinicians lead the services and the business is driven by business managers. The competition they face from private providers will be tough. Well run, large, nationally backed companies will be tendering more and more for a slice of the PCT commissioning cake.

GP practices will have a number of choices when it comes to providers of community services and therefore competition will become fierce for referrals.

The patient experience can only be enhanced by this as modern new premises are built by private companies to house newly re-commissioned services. Channels of competition have been blown wide apart with “any willing provider” routes being available to practices wishing to commission services or providers wishing to provide services.

In some ways the same transition that faced secondary care hospitals with the introduction of payment by results is now faced by provider arms. They will need to review each service it provides and treat them as income centres and ensure that each is run efficiently. The move towards service line reporting for hospitals may now need to be adopted for provider arms. The comparisons between the two journeys are there to be seen.

NHS Wirral now needs to move forward quickly and not be delayed waiting for the perfect solution if it is to allow PBC to develop. A block contract can no longer be sustainable if PBC is to have the desired effect.

The challenge we face in finance is to push this agenda forward and get the majority of provider led services moved into PBC budgets. Whether the provider arm itself is ready for this dramatic change is questionable. Education around the new direction of travel is needed for the majority of people involved as I strongly believe that cost per case is no longer an option but an essential for all stakeholders – GPs, consortiums, the PCT and the provider arm itself.