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An increase in bureaucracy and litigation

One consequence of awarding NHS contracts to non-NHS organisations is the appearance of litigation over contracts. Prior to the Health & Social Care Act 2012, litigation occasionally took place between the NHS and its suppliers, but since the act there have been several high profile cases of private companies taking the NHS to court over contract awards and vice versa: all these cases take time and cost money, money that could be better spent on services.

As well as litigation, an increase in non-NHS organisations being awarded contracts has led to an increase in bureaucracy. The bureaucracy comes in at many different levels: the entire tender process, particularly for the larger complicated contracts can take months of paperwork and staff time; the start of a contract with a new provider brings with it new bureaucracy in the shape of new IT and new ways of working; then there’s the changes to staffing and who employs them; and finally some contracts also involve the tendering and signing of sub-contracts, which adds yet more layers of bureaucracy. Recent examples include:

Virgin Care litigation in Surrey

A prime example of just how the involvement of non-NHS organisations in NHS contracts can increase the amount of litigation and bureaucracy involved in services is that of Virgin Care. Virgin Care has been involved in legal proceedings in Surrey, Lancashire and North Kent, although in its defence Virgin only instigated the legal challenge in Surrey.

In 2016 the end of Virgin Care’s Surrey-wide community health contract loomed and the whole process of tendering began again. The CCGs in Surrey decided to split the large contract that had been run by Virgin Care, into smaller contracts.

Virgin Care bid for but did not win the Surrey-wide children’s community care contract; this was awarded to an alliance between Surrey and Borders Partnership Foundation Trust and two social enterprises, CSH Surrey and First Community Health. Previously Virgin Care had run these services together with CSH Surrey and First Community Health.

As a result of losing the tender bidding process, in November 2016 Virgin Care launched legal proceedings against all eight commissioning organisations involved in the contract. A spokesperson for Virgin Care told HSJ that concerns about “serious flaws in the procurement process” prompted the company to launch proceedings.

In October 2017, the legal case was settled with a payout to Virgin Care. The full amount of the payout was undisclosed, however the Surrey Downs CCG noted in governing board papers that it had paid Virgin Care £328,000. Payment was made by the six CCGs and one council involved and an August 2018 article in the Guardian puts the overall figure paid to Virgin as approximately £2 million.

NHS trusts instigate court proceedings

In December 2017, Virgin Care was awarded a five year contract for the 0-19 year healthy child programme by Lancashire County Council. However, following a legal challenge by the NHS trusts’ who were currently carrying out the work a judge overturned the decision in June 2018 stating that the scoring process by the council was flawed. The NHS trusts’ were allowed to run the service until April 2019 whilst the council re-evaluated the bids. However, by October 2018, the council had reevaluated the bids, and re-awarded the contract to Virgin Care.

In January 2016, Virgin won a bid to run adult community services across Dartford, Gravesham, Swanley and Swale region of North Kent. This seven year contract is worth £18 million per year and could be extended for an extra three years. Virgin Care took the contract from Kent Community Health Foundation Trust, which reported that it lost out to Virgin Care in the area of price. Kent Community Health Foundation Trust, said it scored ”slightly higher” on quality in the assessment process.

In February 2016 Kent Community Health Foundation Trust questioned the commissioning CCGs (Swale and Dartford, Gravesham and Swanley) over their methodology in the selection procedure and began legal proceedings at the High Court challenging Dartford, Gravesham and Swanley CCG and Swale CCG. This challenge triggers an automatic suspension of the awarding of the contract until the case is settled or discontinued. In June 2016, however, the contract suspension was lifted and the contract could then be transferred to Virgin Care.

Care UK in North London legal dispute

Other companies have resorted to litigation, in July 2015, Care UK complained to Monitor (now NHS Improvement) about the loss of its contract to run the North East London Treatment Centre; Care UK had run it for three years since 2011. In 2015 the new £55 million five year contract for the centre was awarded to Barking, Havering and Redbridge Hospital Trust. Care UK questioned the procurement process and asked Monitor to investigate. At the end of January 2016, Monitor found in favour of Care UK in the first part of the competition case; Monitor reported that it had identified “potential issues” with the procurement process.  As a result, the CCGs extended Care UK’s contract by 15 months, then retendered the contract. Eventually, in September 2017, Care UK won the contract again.

Social Enterprise resorts to litigation

Central Surrey Health (CSH), a social enterprise providing community services in the county, was awarded a £100 million contract in February 2018 as one of five members of the Integrated Dorking, Epsom and East Elmbridge Alliance, which comprised CSH, three GP federations and Epsom and St Helier University Hospitals Trust. Since being awarded the contract the parties in the alliance have fallen out: the hospital trust is the formal holder of the contract, but CSH has said that it has been “marginalised” out of the agreement.

CSH is now taking Surrey Downs CCG (the contract commissioners) to court, claiming it breached a contract by continuing with an integration project in which the partners had fallen out. As a result the new contract has been delayed by four months.

Complications for Virgin Care in East Staffordshire

A good example of the bureaucracy and complications that a contract won by a non-NHS organisation can involve, is that of Virgin Care’s win in March 2015 of the contract to provide services for the frail and elderly in East Staffordshire. The seven year contract placed Virgin Care as a prime provider, which meant that the company could sub-contract the work to other organisations. There then followed a series of delays due to contractual and financial issues.

In March 2017, CCG board papers seen by the HSJ revealed that Virgin Care and East Staffordshire CCG were in dispute over contractual arrangements. This dispute impacted on Burton Hospitals Foundation Trust as the trust was unable to agree a sub-contract with Virgin Care under the prime provider model due to the CCG dispute. The delay to the sub-contract could have a major impact on the Burton Hospitals Foundation Trust’s finances.

It was revealed in October 2017 by HSJ that Virgin Care was demanding more money from the CCGs for the contract (the contract was a fixed-price contract). No amount was officially confirmed, but HSJ noted “that sources have told HSJ the private provider has asked for nearly £5m extra.” The dispute dragged on until according to HSJ in October 2018, Virgin Care terminated parts of the contract as the CCGs would not provide an extra £5 million. Virgin Care will no longer act as a prime provider commissioning services such as hospital-based services, 111 and out-of-hours services, but Virgin Care will continue to provide the community services, which it has direct responsibility for, including specialist nursing, community nursing, care coordination and care navigation. The CCGs involved told HSJ that they will contract directly with the services beginning May/June 2019, instead of Virgin sub-contracting.

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