What can primary care networks learn from past service reorganisations?

Accountant Laurence Slavin looks at two high-profile contract failures in the NHS and assesses what new primary care networks can learn from their mistakes.

(Photo: Universal Images Group/Getty Images
(Photo: Universal Images Group/Getty Images

The creation of primary care networks (PCNs) will place some GPs into organisations with which they may be unfamiliar. My own experience so far is that many PCNs are looking to work with their local federations, and that may well involve some reorganisation to meet the various legal, accounting and tax requirements.

PCNs have a lot of issues that they need to consider, but this article is written from a different perspective - to look at two well-known failures from the past and to see what can be learned from them.

Hinchingbrooke Health Care NHS Trust

In March 2015, the House of Commons public accounts committee published an update on the failure of Circle’s management of Hinchingbrooke Health Care Trust.

The report explains that in February 2012 Circle took operational control of Hinchingbrooke Health Care NHS Trust. In 2013, the committee reported their concerns that Circle’s bid had not been properly risk-assessed and was based on overly optimistic and unachievable savings. In the event, Circle was unable to make the trust sustainable and in January 2015 Circle announced its intention to withdraw from the contract just three years into a ten-year franchise.

According to the public accounts committee:

  • The savings expected in Circle’s bid were unprecedented and the high risk involved played down.
  • Oversight by various parties who had a role in the organisation was poor and inadequate and no one was held accountable for the consequences.

The committee said that public bodies will not achieve value for money from their contracts until they become commercially skilled.

UnitingCare Partnership

The second case is the collapse of the UnitingCare Partnership contract in Cambridgeshire and Peterborough. In July 2016 the National Audit Office produced their investigation into the collapse.

According to the investigation, Cambridgeshire and Peterborough CCG commissioned an innovative integrated contract from UnitingCare Partnership, a limited liability partnership (LLP) formed from two local NHS foundation trusts. The five-year contract was terminated after just eight months because it ran into financial difficulties.

On a positive note the general consensus from the investigation was that the contract design was innovative and ambitious and popular with patients, staff and providers. However:

  • The VAT implications of using an LLP had not been properly considered and the VAT that was expected to be reclaimed could not be, adding significant costs to the contract.
  • There was confusion over who would fund the transformation funding, the CCG expected the provider to invest their own funds while UnitingCare disagreed with this expectation.
  • The 10% cost reduction over the term of the contract was optimistic.
  • There were important gaps in the specialist advice given.
  • There were limitations in the data available which meant that it was difficult to price the bid accurately.
  • The timings were too tight, the contract started on 1 April 2015 even though the CCG knew that the contract price would change.
  • Within a month of starting the contract, UnitingCare Partnership requested £34m of extra funding and by December 2015 UnitingCare was forced to terminate the contract when the CCG informed it that no further advanced funding was available.

What can we learn from these cases?

There are a number of lessons from these two cases:

  • Getting good advice early, especially about the structure, would have clarified the VAT issue.
  • Being rushed into unrealistic deadlines can prove to be expensive and potentially catastrophic if it means that the full extent of risk has not been assessed.
  • While it is reassuring to make plans with an over-optimistic mindset, it does not help if it proves to be unrealistic.
  • Clarity over responsibilities, not just between the commissioner and the provider, but between members in the provider team is essential, effective delegation does require properly allocated responsibility.

There is much to be excited about with the changes in primary care and learning the lessons from the past can help avoid mistakes in the future.

  • This article was written by Laurence Slavin, a partner at Ramsay Brown, which specialises in the finances of Primary Care and GPs. He can be contacted at laurence@ramsaybrown.com or 020 8370 7710.

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