ISTCs: Phase 1
13. In December 2002, eight months after announcing
its programme of NHS Treatment Centres, the Department of Health
published Growing Capacity: Independent Sector Diagnosis and
Treatment Centres, which launched a procurement exercise to
acquire from the independent sector additional capacity beyond
that provided by the NHS.[9]
The total cost of Phase 1 will be £1.7 billion. The Department
has referred to two main and distinct purposes, which have often
and misleadingly been conflated: to increase the surgical capacity
available to the NHS; and to involve the independent sector in
an increasingly mixed health economy with all the benefits the
Department claims this will bring.[10]
14. In its memorandum to the Committee, the Department
claimed that the exercise was undertaken in response to local
capacity analyses.[11]
This claim was much disputed (see paragraph 34 below). We were
told that the analyses were conducted by Strategic Health Authorities
(SHAs), in consultation with their Primary Care Trusts (PCTs),
in which the SHAs had identified any anticipated gaps in their
capacity required to achieve the waiting time targets laid down
for 2005.[12]
15. We asked the Secretary of State for Health, the
Rt Hon Patricia Hewitt MP, why the additional capacity which SHAs
had identified as being required could not be provided by further
investment in the NHS Treatment Centre programme and NHS services
more generally. She told us:
We needed very rapidly to bring new capacity into
the NHS, and my predecessors, I think quite rightly, made the
decision to do that, first of all, by expanding capacity within
the NHS itself, secondly to expand capacity through the ISTC programme.[13]
16. The Secretary of State continued:
It was […] through the ISTC programme that we
challenged the exceptionally high prices of the private sector
in the United Kingdom, got those prices down, brought the prices
down for the spot purchasing (thus increasing value for money)
[…] challenging the incumbents (uncomfortably for them, perhaps)
within the UK private sector and introduced a new element of dynamism
into the NHS but, more broadly, into the health care system.
The precise objectives behind the introduction of
the ISTC programme, and the way in which they developed and changed
over time, are dealt with in greater detail in Chapter 3.
17. The Department informed us that once local studies
had established the need for new capacity, it followed the process
described below. The programme was advertised in December 2002,
attracting expressions of interest from 147 companies, to whom
Pre-Qualification Questionnaires (PQQs) and Memoranda of Information
(MOIs) were then issued. The responses to the PQQs were received
by the Department in February 2003 and pre-qualification was decided
by assessing the technical and financial capability and capacity
of potential bidders. A short-list was then drawn up and those
companies were issued with Invitations to Negotiate (ITNs) in
April 2003, to be returned during the following two months.[14]
18. Once the responses to the ITNs had been received
by the Department of Health, the Bid Evaluation Phase began, consisting
of six stages:
- Stage 1: Bid Receipt;
- Stage 2: Evaluation;
- Stage 3: Clarification;
- Stage 4: Bidder Convergence;
- Stage 5: Final Evaluation, and
- Stage 6: Preferred Bidder Selection.
After the Preferred Bidder (and, where appropriate,
a Reserve Bidder) had been selected, negotiations began to finalise
the details of the contract.[15]
19. The preferred bidders for most of the ISTC contracts
were announced in September 2003. The Department of Health's memorandum
to the Committee stated that the bidders had to "meet the
core clinical standards required by the NHS, provide high standards
of patient care […] and provide good value for money to NHS
commissioners".[16]
The contracts had a number of noteworthy features, including the
'additionality' provision and the 'take or pay' elements.[17]
There was no requirement to train staff.
20. The table below lists the 29 Phase 1 ISTCs which
are currently or will shortly be operating:
