The Provider Selection Regime

The Department of Health & Social Care on 21 February 2022 commenced a further consultation on the plans for the new NHS Provider Selection Regime (“PSR”). The PSR is intended to provide a regulatory framework for the award of healthcare contracts by NHS commissioners and local authorities that sits outside the formal public procurement regime and means that those contracts will not need to be procured in accordance with the rules in the Public Contracts Regulations 2015 or their successor legislation. The consultation is intended to seek views on specific details of the plans in order to facilitate the drafting of the new regulations rather than re-open the original consultation which looked at the proposed structure of the regime in high level terms. Our article of February 2021 explains the proposed structure of the PSR as set out in the initial consultation. 

What do we know now? 

There were two very key aspects of the PSR that were unclear based on the original consultation: the date it was due to be implemented and its scope. These have now been clarified (although the former only to a degree).

The consultation confirms that the PSR will be introduced via a new set of regulations made under the Health and Care Bill and that, while it will not be in place at the point Integrated Care Boards are due to come into effect in July 2022, the intention is that it will be established as soon as possible after that point. Health commissioners are, however, expressly encouraged not to make future commissioning plans on the assumption that the PSR will come into effect by any particular date.

The consultation also helpfully provides for the first time some clarity on the scope of healthcare services intended to be covered by the PSR. The proposal is that the PSR will apply to those services which are:

1. A service for the purpose of the health service in England (as defined in s.1(1) of the NHS Act 2006)[1];
2. A healthcare service which is provided directly to individuals or has an outcome directly for an individual (for example, a diagnostic service)[2]; and
3. Arranged by:

• a. ICBs when commissioning healthcare services for the purposes of the health services (whether NHS or public health);
• b. NHS England when commissioning healthcare for the purposes of the health service (whether NHS or public health);
• c. local authorities and/or combined authorities when arranging healthcare services as part of their public health functions;
• d. local authorities and/or combined authorities when arranging NHS healthcare services as part of section 75 partnership arrangements with the NHS; or
• e. NHS trusts and foundation trusts when arranging the provision of healthcare services by other providers.

“Health adjacent” services such as cleaning, catering or business consultancy contracts are expressly excluded. Similarly, the procurement of goods and pharmaceuticals is not included. Mixed contracts are dealt with below.

Additional clarity on specific changes

We also now have more detail on some of the specific proposals under the PSR, as summarised below. 

Categorisation of decision-making: The different circumstances pursuant to which a commissioner of healthcare services would need to make a decision about the approach to arranging those services have been named as follows:

Continuation of an existing arrangement
Category 1A	The type of service means there is no realistic alternative to the current provider or group of providers.
Category 1B	A range of accredited alternative providers are already available to patients (for example, where patient choice arrangements allow patients to choose accredited providers).
Category 1C	The incumbent is assessed to be doing a good job (in relation to the key decision-making criteria) and the contract is not changing considerably.
Identifying the most suitable provider without a tender process
Category 2	When the decision-maker wants to use a new provider or for new/substantially changed arrangements.
Competitive procurement
Category 3	Where the decision-making body cannot identify a single provider or group of providers that is most suitable without running a competitive process or wants to test the market.

 

Application of key criteria: The consultation documents confirm that the intention is that decision-making bodies will need to consider all of the key criteria in the PSR when deciding on the appropriate approach to arranging services, and must be able to justify their decisions in relation to these criteria. The key criteria are:

• Quality and innovation
• Value
• Integration, collaboration, and service sustainability
• Access, inequalities and disparities, and choice
• Social value

Transparency and standstill: We have additional clarity on the publication of notices and standstill provisions. Whereas the initial proposals suggested a period of 4 to 6 weeks following a decision to allow representations to be made by providers, the updated proposals confirm the following:

• When an authority is using decision-making category 1C or 2, they must publish a notice confirming this in advance (“notice of the intended approach”).
• Once an award decision has been taken under category 1C or 2, the authority must publish a notice stating an intention to award the contract (“notice of intention to award”). This is similar to the debrief or standstill letter in regulated procurement and must include details of the new provider and of the contract.
• Under categories 1C, 2 or 3, once an award decision is communicated, the authority will have to run a 30-day standstill period before it can sign the contract.
• If a provider wishes to challenge a decision, it must make representations to the authority within 10 days of the initiation of the standstill period.
• There is no reference to judicial review within the consultation, but we understand that the route of challenge from disgruntled providers will be an application for judicial review in the Administrative Court. Unless the court rules are changed to deal specifically with PSR challenges, an application for judicial review would have to be brought promptly but in any event within 3 months of the decision. There is no provision for an automatic suspension under the PSR or judicial review.

In addition, authorities will be required to publish a summary of their application of the PSR annually, to confirm the number of contracts re-awarded or let under each of the categories and the number of representations from providers received.

Mixed procurement: The updated proposals confirm that where a contract covers more than just healthcare services, it will fall under the PSR where:

• the main subject matter of the contract is the delivery of healthcare services to individuals; and
• procuring these services under separate regimes in separate contracts would adversely impact care quality, lead to overall contract aims remaining unfulfilled, or would not be in the best interests of patients, taxpayers, and the population.

The key question here is what does the “main subject matter of the contract” mean? Under the Public Contracts Regulations 2015 where there is a mixed contract for supplies and services, the appropriate threshold is determined by which is the “main subject matter of the contract”, and under that regime this is determined by which element has a higher value. However, the PSR consultation confirms that provided the primary aim of the contract as a whole is to deliver a healthcare service, the fact that the non-healthcare element may be of a higher value than the healthcare element should not prevent the contract from falling within the PSR. It gives an example of immunisation services which requires trained clinicians to deliver vaccinations, but will also require a significant number of administrative staff and services to manage the programme. Even where the administrative aspect of the contract might have a higher value, given that the contract is de facto a health service delivered to individuals, it should be covered by the PSR.

The consultation also deals with social care services. These are not intended to be covered by the PSR unless they are required to be procured alongside healthcare services that would fall under the PSR. The consultation gives examples of when this might arise, including prison healthcare services, packages arranged under the Better Care Fund, and NHS continuing healthcare services. Respondents’ views are sought on whether other contracts may fall within this category of mixed procurement of health and social care services, and so further clarity on this aspect of the regime may be forthcoming.

Threshold for “considerable change”: As noted above, authorities will be able to roll over a contract with an existing provider where the service is not changing considerably and the provider is doing a good job (category 1C). The question will then become whether any changes proposed to a contract are “considerable” such as to bring the situation within category 2.

The consultation therefore proposes a series of “permitted changes” which would keep the contract within category 1C, whether made during the life of the contract or at the point of contract roll-over/handover. These are where:

• the variation is clearly and unambiguously set out in the original contract and published in the original process carried out under the PSR;
• the variation is merely a change to the identity of the provider (for example as a result of a corporate takeover or merger); or
• the variation is required because of external causes beyond the control of the authority, including changes in contract value driven by patient volumes or uplifts in prices published in the national tariff.

Outside those permitted changes, the change will be considerable if it materially alters the nature of the contract or where it is initiated by the decision-making body and is of a value of more than 25% of the original lifetime value of the contract and above £500,000.

Contract variations: The consultation confirms that there will be situations where changes to a contract during its term will be sufficiently significant as to trigger the application of the PSR afresh. However, the three “permitted changes” that will prevent a category 1C situation from becoming a category 2 situation set out above will apply to PSR contracts during their term and therefore not trigger a need to reconsider the PSR. In addition, a further permitted change to in-term contracts is proposed, being where the (cumulative) changes do not considerably alter the nature of the contract and are of a value of less than 25% of the original lifetime value and below £500,000.

Patient choice: A proposal is put forward that where commissioners wish to set up lists of providers for non-legal right to choice services (i.e. outside AQP lists) and wishes to restrict the number of providers on the list, circumstances 2 or 3 of the PSR should be used. Respondents’ views on this proposal are sought.

Comment

Now that there is more clarity about the services covered by the PSR, providers of healthcare services will be able to consider and prepare for the impact of the new regime on their businesses. Those who already hold contracts for healthcare services will be able to have those rolled on at the end of their term provided the commissioner is justifiably satisfied that the provider is doing a good job and that the service will continue to deliver against the key criteria. The counterpoint to this is that it is likely to be harder to win contracts from new customers where competitive tendering is only an option rather than a requirement.

If you would like to know more, or you need our advice on how these proposed changes may impact you, the highly experienced team at Bevan Brittan are happy to assist.

 

 

 

[1]               a “comprehensive health service designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness”

[2]               A list of CPV codes for the healthcare services covered is provided with the consultation documents. This includes services such as medical hospital services, in vitro fertilisation services, hospital dialysis services, GP services, and cardiology services.