An increase in cost-cutting

A major issue with private companies being awarded contracts for the NHS is that private companies need to make a profit. The companies have owners and shareholders that demand a return on their investment. So its hardly surprising that if a private company can, it will cut costs to increase its profit on the contract.


One of the best examples of a private company cutting costs and ultimately making a mess of a contract is Capita and the primary care support contract.

Capita took over the coordination of primary care support services in September 2015. The contract with 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 immediately began centralising support services to three national hubs and implementing a single online ‘portal’ for practices to order supplies and ‘track’ the movement of patient records.

However, since the contract began there has been an never-ending series of problems – ranging from things as mundane as surgeries running out of prescription pads and syringes to far more serious problems with the secure transfer of patient notes around the country, with notes going missing or delivered to the wrong surgery, and women being dropped from the cervical cancer screening programme. The problems encompassed GPs, dentists, opticians and pharmacists. The most recent issue, which surfaced in mid 2018, was that Capita had failed to send out nearly 50,000 letters as part of the cervical cancer screening programme and although the company discovered this issue in August 2018, it neglected to inform NHS England of the issue for two months.

Finally, in May 2018 the National Audit Office (NAO)  produced a report on the contract noting that patients had been “put at serious risk of harm” due to Capita’s failures. The report  noted how both parties grossly underestimated the size and complexity of the task and the risks involved. The NAO report was particularly critical of NHS England and its inability to control Capita’s “aggressive” programme of office closures and redundancies, even when it became clear “it was having a harmful impact on service delivery”. In response NHS England highlighted the £60 million the contract had saved; the NAO report noted that the extent of harm to patients will not be known for some time to come.

In an excellent analysis of the contract by Richard Vize in The Guardian, he notes that the contract was “a textbook example of how to set up an outsourcing contract to fail. Pretty much everything that could have gone wrong went wrong.”

Under the contract Capita was expected to make massive losses in the first two years in return for later riches. Vize notes that “With a big upfront loss, Capita had a massive incentive to cut costs quickly, so by the end of 2016 it had shut virtually all the local offices it had inherited and halved the staff. Vital local knowledge was lost.”

Problems are still ongoing with the contract, the NAO notes that “users continue to experience poor delivery with seven severe service failures in February 2018.” In mid-2018 the issue of Capita’s failure to send letters as part of the cervical cancer screening programme came to light.

Serco in Cornwall

The scandal of Serco’s OOH provision in Cornwall a few years ago was due in part to cost-cutting by the company.

In April 2006 Serco was awarded a five year contract to provide out-of-hours service in Cornwall and the Scilly Isles valued at £6.1 million. In 2011 the contract was renewed for a further five years valued at £6.4 million. Serco’s bid was considerably cheaper than rivals. However, the contract did not run smoothly and by 2013 Serco was trying to extricate itself from the contract. The company eventually left the contract in May 2015, almost eighteen months early. Following information received from whistleblowers and investigations by the Care Quality Commission (CQC) Serco’s OOH service in Cornwall is now known to have been badly managed and frequently under-staffed, and was a contributory factor in the deaths of two children.

A major problem was the introduction of a new cost-saving NHS IT system to the out-of-hours service in 2011, enabling it to replace skilled clinicians with call-handlers without medical training who follow a computer-generated script to assess patients. The move triggered a fourfold increase in ambulance call-outs.

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