New Models of Care: Affect on the NHS Market
The Five Year Forward View (5YFV) - a strategy for the NHS in England (Oct 2014) started a series of pilots to investigate new ways to organise care. This programme focused on a range of different services including primary and urgent care; community care; and mental health, with the major aim of integrating care and developing ways to move it away from hospitals into community settings.
Less than two years later in 2016 the Sustainability and Transformation Plan (STP) programme began, with the intention of rolling out these new models of care across the country. But this wasn’t the only purpose of STPs. Now known as sustainability and transformation partnerships, they were instructed to set out ways to turnaround the deficits in the 44 STP areas. Consequently, proposals to sell assets, close/merge units and reduce staff costs became a major feature of many of the plans.
The STP documents discussed a number of new models; the formation of multispeciality community providers (MCPs), primary and acute care systems (PACS), local care organisations (LCOs) and accountable care organisations (ACOs). These terms are used widely, but can mean slightly different things in each area. In February 2018, NHS England announced that it would no longer be using the term "accountable care systems" but would instead be refering to Integrated Care Systems (ICS) and presumably Integrated Care Organisations (ICO).
How are the new models affecting the NHS market?
The new models of care are changing the structure of healthcare planning and delivery - moving away from the competition model and the separate roles for purchasers and providers, but with no obvious cap on opportunities for private sector involvement. Already we can see that contracts for MCPs and ACOs tend to be large and to cover numerous services. Consequently, the number of mid-size contracts appears to be dwindling, whilst the number of contracts worth over £100 million has almost doubled in the last year.
Two super-contracts emerged in 2017
The first was a £6bn contract in Manchester to provide all non-acute healthcare - except core GMS contractual services - to 600,000 patients in a 10-year deal.
The second was a £5bn contract in Dudley to deliver a range of services that includes urgent and end of life care to over 300,000 patients in a contract lasting for 15 years.
In both cases it looked like the awards will be made to the existing providers that have been involved in developing the contracts - NHS trusts, GPs and the local councils. Neither procurement process gave much time for competing bids to be submitted and so far, the commercial sector has been absent from the development process. By January 2018, however, both these contracts had been put on hold due to complications surrounding contracts. The earliest either will be put in place is now some time in 2019.
Other areas have opted to develop alliances and partnerships to form MCPs and ACOs, and to this point have favoured consortiums made up of NHS trusts and GP federations, with seemingly limited input from the third sector and private companies.
However, despite the low level of involvement of the private sector in the new models of care, there is plenty of scope for them to expand their interests.
Accountable Care Organisations seen as the future for the NHS
The Health Secretary (at the time Jeremy Hunt) has made it clear how important Accountable Care Organisations will be in the future, they would take over the responsibility for the budget and for organising care in defined areas around the country. It is also clear from the ACO contract devised by NHS England that there is no barrier to a private company holding the contract.
And after several years of privatisation of community services across the country, there is the distinct possibility that a private company could bid for and win an ACO contract.
Any organisation holding an ACO contract will have organisational control over the allocation of NHS and taxpayers’ money for an entire area. Its accountability for spending it and its obligations to the public will be set through contracts, but so far without any defined lines of accountability or governance.
‘The Five Year Forward View is a vitally important plan. It's about the move to accountable care organisations…it is vital that we stick with that plan and implement it. And there will be lots of challenges and lots of bumps in the road but the sustainability and transformation plans are the way that we implement the Five Year Forward View and it is vital we stick with them.’ - Jeremy Hunt speaking to NHS leaders (Nov 2016).
The fact that commercial interests aren’t yet positioned to take on ACO contracts reflects the fact that in this early stage NHS providers control and are heavily invested in their development.
It is also perhaps unsurprising that commercial companies aren’t yet positioning to bid for the multi-billion-pound super contracts, as they pose a considerable business risk. They are both complex and untested in the NHS context. The record of businesses trying to make money out of large NHS contracts has so far been very poor. Some big players like Serco retreated from the clinical market altogether, after it failed to guarantee profits from its deals to provide community health services.
Commercial Opportunities in Sub-contracting
The advent of the large ACO/MCP contracts does still provide huge commercial opportunities, in the form of multiple sub-contracts. And perhaps more importantly, the integration of health and social care under these ACO/MCP contracts could provide the way for the private companies that have been active in social care for many years to move over to cover health care as well.
In certain areas of the country community care services are well on the way to being privatised. Any company already geared up to provide these large contracts would be in a prime position to extend their control of the supply of services yet further as time goes on.For example, in Bath and North East Somerset, Virgin Care holds a seven year contract worth around £700 million with an option to extend for three years, to coordinate over 200 health and social care services. With such a powerful stake in the local health economy, it is not difficult to see that Virgin Care, as the incumbent provider, would be perfectly positioned to design and ultimately win an ACO contract. Virgin Care is also in a similar position in Essex, where in November 2016, Essex County Council awarded the company a seven year contract to run its Pre-Birth to 19 Health, Wellbeing and Family Support Service across Essex, which covers both health and social care.