New models of care: Effect on the NHS Market

future enhanced

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, primarily focused on integrated 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 focus on integrated care continued in the NHS ten year long-term plan published in January 2019. The plan set out an aim for all of England to be organised as integrated care systems (ICS) by April 2021.

Effect on the market

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 were 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 referring to Integrated Care Systems (ICS) and presumably Integrated Care Organisations (ICO).

In the January 2019 long-term plan, NHS England refers only to ICS development, but states that these will evolve from the STP areas. Any model of integrated care developed from the STP documents will be moved to an integrated care system in some form.

From the STPs it was clear that the new models of care will change 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 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.

In 2018, NHS England developed an integrated care provider (ICP) contract, to be used to enable the integration of a large number of services (including primary care). An ICP contract will be held by a single organisation. There is nothing in the contract to prevent it being held by a private company or a not-for-profit organisation.

The long-term plan acknowledged that current legislation on contracts and tendering are a barrier to integrated care. The plan called upon the Government to amend legislation in the 2012 Health and Social Care Act to allow providers, such as trusts and other organisations, to be able to collaborate and to remove the requirement to tender for contracts. However, there is still no bar to a private company holding contracts for NHS services.

Super contracts

Two super-contracts emerged in 2017 that give an idea of how integrated care provider (ICP) contracts might work.

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.

Other areas have opted to develop alliances and partnerships to form MCPs and ICOs, 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.

Under the long-term plan, Integrated Care Systems will be developed across England in the next two years; each ICS could potentially be led by a single organisation as an integrated care provider (ICP) holding an ICP contract. This announcement by NHS England will lead to an acceleration in ICS development and more huge contracts are expected to appear.

Despite the low level of involvement of the private sector in the new models of care, so far, there is plenty of scope for them to expand their interests. The ICP contract developed by NHS England in 2018 can be held by NHS organisations, private companies and the not-for-profit sector. In the long-term plan, NHS England notes that it expects ICP contracts to be held by NHS organisations; this however is no guarantee that a private company wouldn't be awarded an ICP contract. Furthermore, it is likely that these huge ICP contracts will lead to large numbers of sub-contracts and there is no barrier to private sector involvement in sub-contracting.

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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, now known as the ICP contract, 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 ICP contract.

Any organisation holding an ICP 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 ICP 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.


The advent of the large ICP 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 ICP 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 ICP 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.

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