Failed contracts reveal cracks in the NHS market model

Health care is understood by most people to be a social good rather than a source of profit. Various changes resulting from a series of health bills (eg 1989/ 2012) have led to healthcare being treated as a commodity - something to be bought and sold ('purchased' and 'provided'). The Health and Social Care Act passed in 2012 has resulted in many more NHS contracts being put out to tender. Hundreds of contracts are now advertised and awarded each year. Our research has found that over 60% are won by non-NHS bodies.

The cost of this healthcare market is difficult to calculate and estimates vary widely at between £10 billion and £4.5 billion per year. Part of this expense results from a growing list of contracts that have collapsed, or have been terminated prematurely. Most of these have failed due to financial reasons, typically because the provider was unable to generate a big enough return.

The growing list of contract failures spans all areas of healthcare from acute hospital care, through community care and the ambulance service to primary care and back-office functions of the NHS. And the list of failures is growing as more and more companies realise that the chronic underfunding of the NHS means that little or no profit can be made. 

In primary care, the government's enthusiasm for private company involvement led to encouraging groups of GPs to band together to set up their own private limited companies to run large groups of surgeries all in the name of efficiency. 2016 has seen a two of these federations collapse and go bankrupt - Danum Medical Services in Doncaster and surrounds and Horizon Health Choices Ltd in Bedfordshire. The common thread to the failure of these enterprises was not enough money is avialable to fund high quality services. In other cases, such as The Practice and Greenbrook Healthcare, private companies have abandoned contracts finding it impossible to make a profit.


Cambridgeshire and Peterborough Older Peoples Services Contract

This was an extremely high profile contract due to its high value – worth £700 to £800 million over five years – for the provision of older peoples services for Cambridgeshire and Peterborough CCG. The contract was also one of the first outcome-based contracts under which an element of payment was dependent on achieving agreed clinical outcomes. Outcome-based targets would have to be achieved for the provider to receive 15% of its income.

The process for procuring a provider began in 2013 and was time-consuming and costly according to many reports. A number of private companies were initially interested in the contract, including Circle, Virgin Care and Capita, however they withdrew during the process reportedly due to the steep financial efficiencies required by the contract. By August 2014, the CCG had spent around £1.1 million on the process and had had the contract start date delayed twice. Eventually in November 2014 UnitingCare Partnership, a consortium of NHS organisations, was awarded the contract. The contract began in April 2015 a year after its original start date, but just eight months later in December 2015 UnitingCare announced that it was handing back the contract as it was not financially viable.

In November 2016 the Public Accounts Committee published a damning report on the contract. The PAC describes the handling of the contract as a "catalogue of failures."  

The termination of the contract after just 8 months meant around £16 million in unfunded costs for UnitingCare Partnership. These costs had to be shared between its two trust partners—Cambridge University Hospitals NHS Foundation Trust and Cambridgeshire and Peterborough NHS Foundation Trust—as well as the CCG. As a result this reduced the amount of money available for patient services in the area.

Meg Hillier MP, Chair of the PAC, said:

"It beggars belief that a contract of such vital importance to patients should be handled with such incompetence."

Hillier also stated:

"The deal went ahead without parties agreeing on what would be provided and at what price—a failure of business acumen that would embarrass a child in a sweet shop, and one with far more serious consequences."


Coperforma and Sussex Patient Transport Services

In April 2016 Coperforma took over the contract for non-urgent patient transport services in Sussex from the NHS's South East Coast Ambulance service and almost immediately the problems began. Ambulances turned up hours late to take people to appointments, including to dialysis and chemotherapy appointments, and for others no ambulance appeared at all. Hospitals in Brighton and Hove had to pay for taxis to get people home as they had so many people waiting for transport in the hospital. Coperforma's call centre was unable to cope with the deluge of queries about ambulance whereabouts and complaints.

In October 2016 Coperforma lost the contract and it was handed to the South Central Ambulance Service in a phased manner beginning immediately and with a final takeover in April 2017. In early November it was revealed that the Care Quality Commission had served six improvement notices on the company. 

The CQC report showed significant concerns about Coperforma’s oversight of its subcontractors. Areas needing improvement included the timeliness of services, registering a manager with the CQC, and vehicles and equipment being appropriate for safe transport of patients, including those in wheelchairs.

The original Coperforma contract worth £62.6 million and lasting four years was drawn up by the seven Sussex CCGs with the High Weald Lewes Havens CCG as lead.  

Under the contract, Coperforma ran a demand management centre and sub-contracted the actual process of patient transport to a number of companies. On 21 June 2016 one of these contractors, VM Langfords, went into administration and its ambulances were seized by bailiffs. Many of its staff had moved from the South East Coast Ambulance service.

In September 2016, an email leaked to BBC South East from four of the sub-contractors claimed the problems had reached "critical levels". The email was highly critical of Coperforma's management, its staff, its operating system, and warned that the company was struggling financially. The email said Coperforma was withholding and refusing to pay invoices, with the three main providers owed more than £1.2 million. The email warned NHS managers "to act now before the service collapses."

A few days later another contractor Docklands Medical Services went into administration; Docklands had employed many drivers from VM Langfords. Many of the Docklands staff had not been paid for several weeks. By late September a deal was reached whereby Coperforma would pay the wages owed to employees of Docklands and if they did not then the CCG would foot the bill. In early November Coperforma had still not paid the money owed and the bill was paid by the High Weald and Lewes Havens CCG.


Capita and Primary Care Support Services

Capita took over the coordination of primary care care support services in September 2015. The contract from NHS England was designed to save £40 million per year by bringing together a previously fragmented service to a single national provider for Primary Care Support England (PCSE). Capita's bid hinged on making a £21 million per year saving. The contract is worth £330 million over seven years.

Capita centralised support services to three national hubs and implemented a single online ‘portal’ for practices to order supplies and ‘track’ the movement of patient records. However, since April 2016 when the previous local centres were closed there was a growing number of reports of problems with the services. Problems affected GPs, community pharmacists and optometrists.

Issues with the new service include surgeries running out of presciption pads and syringes and major problems with the secure transfer of patient notes around the country, with notes going missing or delivered to the wrong surgery. GP leaders have been urging practices to report every issue to NHS England.

GPC chair Dr Chaand Nagpaul wrote to NHS England demanding practices be compensated for extra workload due to the ‘systematic failure’ of PCSE, and indemnified against any claims as a result of support service issues.

In November 2016 the GPC (General Practice Council) reported that the support services remain a 'chaotic mess' despite nearly a year since the services were outsourced to Capita.

Dr Nagpaul said Capita “appears to have been considerably underprepared”. The poor service has increased practice workload and cost practices money, he said. He told HSJ: “This is a salutary lesson… it is another example of how the idea of outsourcing appears attractive in offering more for less, but that is based on a very simplistic view of how the NHS functions. The NHS has been very efficient and effective. The NHS functions on organisational memory, and you cannot just take a service over and run it better.”



Serco's Multiple Contract Failures

In December 2013 Serco announced that its contract to provide out-of-hours care in Cornwall for Kernow CCG would end 18 months early in May 2015. The contract has been dogged with controversy – Serco had to admit that some of its staff had falsified data to make the company’s performance appear better than it was and whistleblowers had raised concerns about poor staffing levels. In 2013 Serco unsuccessfully tried to sub-contract the work to Devon Doctors, the GP consortium that had failed to win the original bid; Serco had won the bid as it was cheaper.

Also in December 2013 Serco announced that it would be pulling out of its contract for running Braintree hospital in Essex before the end of the contract. In March 2014 the contract was handed by to the Mid Essex Hospital Trust nearly a year early. The company’s other major contract with the NHS for community care in Suffolk has not reaped the profits the company was hoping for and by August 2014, the company announced that it was withdrawing from the NHS clinical services market altogether. In September 2015, when Serco handed over the community care contract in Suffolk to new providers, the company noted that the £140 million the company was paid for the contract was "not adequate" for the work. Serco estimates that it had made an £18 million loss on its three NHS contracts.


Hinchingbrooke and Circle

In January 2015, Circle the private company running Hinchingbrooke hospital pulled out of the contract after just two years of a ten year contract. The company announcement came just before the publication of a damning report on the hospital from the Care Quality Commission (CQC): the CQC raised serious concerns about care quality, management and culture at the hospital. The CQC found a catalogue of serious failings at the hospital that put patients in danger and delayed pain relief. The hospital was put in to special measures, the first time the CQC has had to do this. Circle cited financial reasons for pulling out: under the contract the company was allowed to withdraw if it had to invest more than £5 million of its own money in the hospital and it looked extremely likely that it was going to have to invest much more than £5 million.


The West Sussex MSK contract

This £235 million contract for provision of musculoskeletal services in West Sussex with Coastal West Sussex CCG was awarded but never begun once it was determined just how much damage the contract would do to other NHS services in the region. In September 2014 Coastal West Sussex CCG awarded the contract to BUPA and social enterprise CSH Surrey. However, pressure from the public and Western Sussex Hospitals Trust, forced the CCG to employ an auditor to assess the effect the contract would have on other NHS services in the area. The auditors concluded that the cumulative impact of loss of MSK services would result in the trust falling into deficit over the next five years. Western Sussex Hospitals had also warned that the loss of the contract could destabilise its trauma services. BUPA and CH Surrey withdrew from the process in January 2015 prior to signing the final contract.


The Practice in Brighton and Hove

In January 2016 the private GP company The Practice announced that it was withdrawing from its contract with the Brighton & Hove CCG to run five GP surgeries in Brighton and Hove. The company's withdrawal will leave about 11,500 patients seeking a new GP. Although the company has blamed John Lewis for buying one of the buildings where a city centre practice was located, it is clear that problems bgan long before this took place in 2015. The Practice says that its practices have struggled with rising demand for services, difficulty in recruiting and retaining GPs and a reduction in funding. There was also a problem with quality: one of the company's surgeries was recently placed into special measures after a Care Quality Commission report published in December 2015 branded the surgery inadequate.


Greenbrook Healthcare in West London

In October 2016 Greenbrook Healthcare announced that it will be handing back the contract for five GP practices in west London. This will affect around 27,000 patients. Greenbrook noted that the contract was "not fit for purpose". 

Greenbrook Healthcare, a private company, had talks with NHS England, but found that no more money was forthcoming. As a result the company decided that the best option is to end its 10-year contract nine months early, to ‘allow NHS England to look at the contract afresh’. 


Horizon Health Choices Ltd in Bedfordshire

Horizon Health Choices Ltd is a private company set up by 54 GP surgeries in Bedford and the surrounding area. In November 2016 the decision was announced to liquidate the company due to problems with recruiting GPs and internal management issues. The liquidation of the comapny will lead to the closure of one GP surgery and the loss of thousands of pounds by the surgeries that had invested in the company.

Horizon was launched in response to Government encouragement for GPs to work at a large scale. NHS England has made such working at scale a national priority with the GP Forward View and the new Multispeciality Community Provider contract for groups of practices with at least 30,000 patients.


Danum Medical Services in Yorkshire and the Midlands

The private limited company Danum Medical Services Ltd was set up in Doncaster by 23 local practices and had 63 individual shareholding GPs’. The company held APMS contracts for six practices in the Midlands and Yorkshire. In March 2016 DMSL went into administration leaving individual GP surgeries in debt, with one surgery reported to be facing losses of £20,000.

The company reported that it provided a high quality service but as one GP involved said: "The reason they have failed is they have tried to provide high quality care on a budget where it is impossible to do so."


Arriva and North West Ambulances

In September 2015 the transport company Arriva was found to have wrongly claimed £1.5 million in bonuses on the contract to run non-emergency transport for NHS patients in Manchester. Arriva wrongly reported its performance in order to gain the bonus payments. Arriva was awarded the contract in 2013 after saying it could run the contract cheaper than the North West Ambulance service. In 2014 Arriva received 600 complaints about the service with 80% partially or wholly upheld. Arriva has paid back the bonuses and apologised.



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