18/02/2021

On 11 February 2021 the Department of Health & Social Care published its legislative proposals for a Health and Care Bill: Integration and innovation: working together to improve health and social care for all (web version)

Over the next few weeks we will be publishing a series of articles covering the contents of the white paper.  In the first of these articles, we consider the proposals for procurement and competition. 

  • What will change for NHS commissioners regarding what has to be put out to tender?
  • What will change for the NHS regarding merger control?

One of the stated aims of the proposals is to enable the NHS and local authorities to arrange healthcare services without “needless bureaucracy”.  Picking up on the themes already articulated in the Long Term Plan. The Executive Summary (paragraph 1.15) envisages that this will entail change to existing competition and procurement law as it applies to the NHS.    

What laws would be changed?

The existing rules which specifically apply to the commissioning of healthcare services are contained in two separate sets of regulations:

1. The NHS (Procurement, Patient Choice and Competition)(No. 2) Regulations 2013

a. These are the regulations occasionally referred to as the “Section 75” regulations after the provision in the Health and Social Care Act 2012 which enabled them. 
b. They provide that commissioners of healthcare services must, amongst other things, procure the services from the provider(s) which provide the best value for money.
c. At the time they were introduced, these regulations were widely interpreted to mandate competitive tendering, even for healthcare services, at a time when a large volume of healthcare services were instead “arranged” intra-NHS, between commissioners and providers under Service Level Agreements.

2. The Public Contracts Regulations 2015

a. These provide that “above threshold” contracts for healthcare and social care services must be advertised and awarded following a process which affords equal treatment and transparency to those bidders competing to deliver the contract.

What does the white paper propose?

Procurement

In terms of procurement, the white paper proposes revoking the NHS (Procurement, Patient Choice and Competition)(No. 2) Regulations 2013 and amending the Public Contracts Regulations 2015 to remove healthcare and public health services from their application. 

Is this permitted under the Trade and Cooperation Agreement (the “Christmas Eve” agreement)

Yes, the Trade and Cooperation Agreement excludes healthcare services from its application.  Whilst the Trade and Cooperation Agreement requires tendering for “covered procurement”, it does not require this for human healthcare services, administrative healthcare services, supply services of nursing and medical personnel.  This is because these services (as listed by reference to CPC codes in Note 3, Annex PPROC-1) are specifically excluded from the application of Title VI: Public Procurement provisions of the Trade and Cooperation Agreement).

What flexibility would a commissioner have over when it chooses to run a competition?

The white paper aims to achieve a pragmatic outcome where a commissioner can choose whether to go out to tender for provision of a service where it considers to do so would result in better outcomes or value for money. 

What does this mean for the voluntary and independent sector providers?

The white paper expressly anticipates a continued important role for voluntary and independent sector providers. 

What does this mean for non-clinical services and consumables?

These will continue to be procured via an advertised process under the public procurement regime. 

Next steps

The white paper recognises that there is further detail to be worked out, and it has committed to a process of consultation regarding these proposals.  Issues are likely to include:

  • Whether the freedom to avoid tendering extends to where the commissioner wants to contract directly with an independent sector provider, or whether it just applies to public to public provision.
  • How wide the definition of healthcare services extends – a wide range of clinical services are currently delivered with extensive independent sector provision and capacity, including elective surgery and diagnostic procedures.

Competition

The big focus in terms of competition is

  • the repeal of s75 of the 2012 Act and the removal of the obligations of NHSEI (as Monitor) to promote competition, and
  • the removal of NHS Provider mergers from the CMA

There are some other changes to take certain appeals away from the CMA, and it is anticipated that Monitor’s remit in supporting patient choice and policing NHS commissioning will re-emerge in the new NHS England remit.

The removal of the CMA from having a role in mergers is sensible; it was an expensive and potentially time consuming process which did little to improve services, although it may have had an effect in making trust managers focus on what the benefits of a merger would be and when they would be achieved, and how.  It is to be hoped that the new regime will not lose this.

More interestingly there is no explicit mention of whether the intention is to take NHS providers out of the jurisdiction of the CMA in connection with core competition law – rules against anti-competitive agreements and abuse of a dominant position. While this may only affect Trust’s elective care, it still leaves scope for intervention, particularly around the collaborative process in ICSs if that is seen to be freezing out the private sector.  This may come back to the strength and enforcement of the patient choice rules.

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