Community Services: Transferring for Real?

In this article we look at the issues surrounding the Department of Health's decision to implement a national standards system prioritising local patient needs above legislature.


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David Owens


The Operating Framework for 2010/11 published at the end of 2009 says that the Department “will set demanding national standards for provider reform which leave PCTs to innovate locally to create a system that best meets local needs but that has sufficient challenge to ensure patients and taxpayers come before administrative convenience”

Accordingly, and without prescribing the outcome, the Department of Health has re-imposed a hard deadline of 31 March 2010 for PCTs to have agreed with SHAs their proposals for the future of their provider arms.  It has now issued further guidance on the options confirming the range of options available and the approval assurance and engagement processes. It is now clear that Community Foundation Trusts are a very limited option (no more than 10 including the current pilots) and continued direct provision will only be permissible in exceptional circumstances. There is a clear emphasis on quality improvement, including integration of services, contributing to efficiency and sustainability in the assurance framework. 

The options

What, then, are the options?

  • Integration with an acute or mental health provider; 
  • Integration with another community provider - either local authority or private or independent sector (including GP ventures); 
  • Transfer to a social enterprise under the staff’s “right to request”;
  • Becoming a Community Foundation Trust (limited cases);
  • Genuine separation as an arm's length body within the PCT - provided it meets the Department's tests and is partnered by strong commissioning (limited cases);
  • provider arm within a care trust (limited cases).

Each PCT will need to decide whether it wishes to see the provider arm more as a single unit or broken up, and how it wishes to orchestrate a  transfer: either by open competition for a community services contract with a business transfer annexed or by a more limited and informal selection process. In the case of a transfer to a social enterprise under the right to request or to a Community Foundation Trust, a competition or selection process would not normally be relevant.

Key issues which PCTs will need to consider in making their decision will be how these align with the assurance tests for proposals set out in the guidance. These are not narrowly prescriptive but identify areas where the SHA will be critically reviewing the proposals. It is clear from the current drive towards integration of services to deliver more personalised care that relationships with other parts of the relevant care pathways will be important, but all of this will have to be delivered against the requirement for significant savings to deliver the NHS efficiency target. The questions PCTs should be asking themselves are:

  • What model of provision will deliver the best long term services for patients?  These may include integrated care options, horizontal and vertical integration;
  • Which option will deliver best value, taking into account the background of less money in the future;
  • What local integration options are available?
  • What are the staff views, particularly if a social enterprise is being considered?
  • How will we deal with procurement issues and the role that the CCP will have (see below)?
  • What impact will the election have on the process? 

Procurement cannot be ignored as although the Department has indicated a green light for transfers to social enterprise, with an initial 5 year contract, the Commissioners will need to be able to justify any uncompetitive award of contracts both in terms of European law and their own commissioning policies.

It is also to be noted that the guidance contemplates streamlining rather than avoiding the referrals to the Cooperation and Competition Panel, which raises questions about the role and criteria to be adopted by the CCP in evaluating these proposals and the realtionship between the different reviewers.

Implementation issues

Detailed issues at implementation will include the following:

  • property arrangements, which will require leases or licences for occupation and arrangements properly documented to deal with shared use, maintenance and  support services;
  • assets used in the provider service will need to be identified and the basis on which they are to be used by the new entity will need to be defined. This may create issues for the new body as to how it is to fund the acquisition of any assets;
  • staff issues will be important as the nature of the successor body will determine the extent to which current and future staff will retain access to the NHS pension scheme and may have an impact on the level of staff support for the enterprise;
  • clinical governance and assurance of standards: these are crucial for all healthcare providers and care needs to be taken to ensure that the organisational change does not adversely affect standards of care, and that where there is a merger that the standards are coordinated and levelled up not down. CQC registration will also be a factor for the new organisation;
  • which contracts will be transferred and how will any services which are common to the PCT and the provider operations pre-transfer be dealt with post-transfer?
  • the approval process for sign off of the transaction both from the PCT and the new provider’s perspective;
  • the scope of the due diligence to be carried out by the new provider and the extent to which warranties and indemnities will be provided (if at all) by the PCT.

One significant area which does not seem to have received the attention it deserves is the development of a new board where the transfer is to be to an FT or new social enterprise, and the abilities of the organisation to stand alone. We have considerable experience in supporting Trusts moving to FT status and the discipline of that regime will to a large degree need to be adopted by new independent enterprises. 

At BB we have a dedicated team who have been advising both PCTs and acquirers on the issues raised by the transfer of provider arms.  For an early discussion of the options in the new landscape or the carrying out of your plans, see below.

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