House of Commons - Health

Select Committee on Health Fourth Report

4 Phase 2

109. By June 2006, the situation with regard to Phase 2 was as set out below:

Invitations to Negotiate (ITNs) have been issued for 12 schemes:

Northumberland, Tyne and Wear;
Cumbria and Lancashire (two schemes);
Cheshire and Merseyside;
Essex;
West Midland South;
Avon, Gloucestershire and Wiltshire;
Greater Manchester (two schemes);
South London;
Hampshire and the Isle of Wight;
Norfolk, Suffolk and Cambridgeshire.[145]

The following seven schemes will not be proceeded with:

West Yorkshire elective scheme;
West Yorkshire plastic surgery scheme;
South West Peninsula multi-specialty;
South Yorkshire general surgery;
South Yorkshire cardiology;
County Durham and Tees Valley multi-speciality;
Birmingham and Black Country.

In addition, five further elective schemes are likely to go ahead but we were told that no decisions had been made yet as to where they will be located.

Negotiations are underway with bidders for seven regional diagnostic schemes, in the following areas:

London;
The North East;
The West Midlands;
The North West;
The South East;
The South West;
The East.

110. In the first evidence session of the inquiry, the Department announced that Phase 2 contracts would differ in a number of ways to take account of the concerns raised about Phase 1. The first section of this chapter considers those proposed changes. The second section considers the assessment of Phase 2 bids. Finally, we examine alternatives to ISTCs including the use of 'Redwood' model and NHS Treatment Centres.

Improvements in Phase 2

111. The Department has agreed that in Phase 2 there should be improvements in respect of:

Integration of ISTCs with the local NHS, including a curtailment of additionality, and

Training.

INTEGRATION

112. As we have seen, the failure to integrate satisfactorily a number of the ISTC schemes with the local NHS has caused difficulties for patients and the ISTCs. The Department has made a number of proposals to improve the situation, including:

Better co-operation between ISTCs and the NHS;

Locating ISTCs in or next to NHS hospitals;

A curtailment of additionality;

The use of NHS consultants in ISTCs, and

Changes in respect of clinical appointments in ISTCs.

In addition, the provision of training in Phase 2 ISTCs will improve integration (see below).

113. The Department agrees that some SHAs, PCTs and ISTCs have failed to engage GPs and hospital consultants in the work of ISTCs, but it notes that where real efforts were made to involve local PCTs and NHS clinicians in the ISTC programme, as at Shepton Mallet, there were few problems of integration. Here, through widespread consultation, clear care pathways and co-ordinate referrals a high degree of integration between local PCTs, NHS staff and ISTCs can be achieved.[146] The Department proposes to build on best practice established here.

114. In addition to the Department's proposals to improve integration, other witnesses put forward other recommendations. The Healthcare Commission proposed that account be taken in locating new ISTCs of their proximity to local NHS providers and the "suitability of a 'host' site with a range of shared facilities".[147] The Royal College of Surgeons agreed that there was a need for ISTCs to be located close to larger facilities, though argued that "Second Wave ISTCs are best located in private hospitals which are readily accessible to consultants in neighbouring NHS hospitals".[148] As a general principle, however, witnesses thought it important that ISTCs were physically close to facilities which could provide both integration in terms of NHS staff and a full range of medical support.

115. Several witnesses who had supported additionality in Phase 1 thought that it should not be part of Phase 2. Capio Healthcare UK told us that the additionality principle had served an important purpose in bringing new clinicians into the NHS sphere, but that it should be relaxed for Phase 2 "to allow free movement of staff between providers, as is allowed in any other area of work".[149] This view was supported by Netcare UK.[150] The Royal College of Radiologists also suggested that the relaxation of the policy of additionality "would resolve the important issues related to clinical governance and allow integration of the independent sector provision with NHS services thus providing a seamless service for patients".[151]

116. The Department of Health, while believing that the additionality principle was useful for Phase 1, agreed that it had led to an over-reliance on overseas doctors and hindered integration. We were initially told that additionality would therefore be somewhat curtailed in Phase 2 and would only apply in certain limited circumstances where there are shortages of NHS staff.[152] However, the Department subsequently told us that the curtailment of additionality would only apply to NHS staff's non-contracted hours—in effect, they will be free to work in ISTCs only over and above their NHS work, and will not be able simply to move from a position in the NHS to one with an independent provider.[153]

117. Even in specialities where there are severe shortages of staff such as radiology, the disadvantages of additionality were thought by some witnesses to outweigh the advantages; for example, Professor Janet Husband, President of the Royal College of Radiologists, advocated the scrapping of additionality for Phase 2.[154]

118. Secondments by NHS staff to ISTCs could also improve integration. At the Redwood Treatment Centre there is a mix of seconded staff and dedicated BUPA employees which has proved very effective.[155]

119. The HCC thought that improvements could be brought about by changing procedures for appointing staff to ISTCs. It suggested that the recruitment procedures could be aligned with those in the NHS, including the introduction of an equivalent to the advisory appointment committee system.[156] The Royal College of Anaesthetists agreed with this proposal, arguing that it would add "an additional layer of discernment" to appointment procedures.[157]

120. The Department has proposed a number of changes to ensure that Phase 2 ISTCs are better integrated into the NHS than those in Phase 1. We welcome the proposals to ensure better clinical engagement in all ISTCs. In addition, we recommend that Phase 2 ISTC facilities be sited in or near NHS hospitals.

121. The Department has recognised that the additionality principle has hindered integration and proposes to restrict its application. It proposes to allow NHS consultants to work non-contracted hours in ISTCs. We welcome this and recommend that, in addition, the Department should ensure that Phase 2 contracts encourage NHS staff to be seconded to treatment centres. We also recommend that consultants be allowed to hold sessions of NHS planned activities in ISTCs where this would be thought appropriate for local service needs and to aid integration. Consultants working non-contracted hours in ISTCs should do so at NHS contract rates.

122. If ISTCs are to be fully integrated into the NHS, the Department will need to address concerns about pay and conditions. Lower salaries and poorer pension provision in ISTCs are unlikely to assist integration.

TRAINING

123. Most witnesses agreed that it was essential for Phase 2 to provide training and the Department has agreed that Phase 2 schemes will be required to make training available to the Deans if they wish to commission it. Officials from the Department of Health explained that they had consulted with the professional medical bodies to establish what sort of training was required. The Deans were informed of Phase 2 contract volumes and case mix and have been left to decide what training they would wish to procure from ISTCs. The Department went on to tell us that bidders for Phase 2 schemes had been required to submit bid prices with and without training, and that a generic training schedule is being developed which will be incorporated into the final contracts.[158]

124. We also heard assurances from the Department of Health that any training conducted in Phase 2 ISTCs would be in accordance with NHS requirements and standards and would be approved by the Deans. There has also been consultation with the Royal Colleges. An official told us that "those are the safeguards that ensure the training will be of the appropriate standard".[159]

125. The medical professional and regulatory bodies also stressed the need for training to be to the same standard as that provided by the NHS. It should be subject to rigorous regulation and inspection by the Postgraduate Medical Education and Training Board (PMETB), in order to protect and ensure the progress of trainees, guarantee appropriate levels of supervision and assessment and maintain patient safety.[160]

126. We support the Department's decision to include the provision of training as a contractual obligation for Phase 2 of the ISTC programme. This will greatly help to break down barriers between ISTCs and the NHS. The standard of training in ISTCs should be of the same standard as in the NHS.

Assessment of Phase 2 bids

127. There are two main aspects to the assessment of Phase 2:

the decision about where to locate the ISTCs: the extent to which decisions will be genuinely taken locally; the criteria to be used, including the need for new capacity and the use of ISTC to 'reconfigure' local services, and

once the decision about location has been taken in principle, how the Department assesses whether the bids are competitive.

LOCAL PLANS

128. The Department informed us that Phase 2 ISTCs are to be established where there are capacity needs and, we heard for the first time at our final evidence in June, where they are part of local 'reconfiguration' plans.

129. The Department claims that decisions about whether to establish Phase 2 ISTCs are made by 'local health economies'. Mr Ken Anderson described the process of consultation with local health providers. The NHS submitted Local Delivery Plans (LDPs) to the Department of Health, following which "we [the Department] map across what we feel the private sector component would look like".[161] If the consultation revealed that there was no need for additional capacity from the independent sector, the ISTC scheme would not go ahead, and it was after such consultation that some of the proposed schemes were withdrawn.[162] Mr Anderson stressed that the consultations with local NHS providers had a significant role in shaping the sort of independent provision which was finally procured. The fact that seven Phase 2 Schemes have been withdrawn suggests that there is a degree of local influence.[163]

130. He added that ISTCs could also be used as part of reconfiguration plans where local health economies considered this appropriate:

Health Economies used the independent sector treatment centre programme as a reconfiguration tool as well. There is capacity in the NHS that we pay for that is not necessarily applicable to today's type of health care […] it takes a detailed conversation with the health economy around what does reconfiguration look like and what does 21^st century healthcare look like.[164]

131. However, others emphasised the pressure the Department exerts to get the right decision. There is evidence that this happened in Oxfordshire in Phase 1. It is clear that some local trusts do not want the proposed Phase 2 ISTCs and are very concerned about the consequences. Dr C, a PEC chair, informed us:

As it [Phase 2] does not come on stream until December 2007 we will have to do much of the work getting the waits down before we can actually use the solution. In the meantime we cannot afford to do that at National Tariff and in a rational world we would be hoping to redesign pathways and provide many services in the community, utilising the brand new and extensive LIFT [Local Improvement Finance Trust] facilities that are currently coming on stream (another major financial drain on our resources if they are not used to their maximum) […] then all of a sudden over 2008-09 we will find ourselves increasingly committed to paying for the same work to be done at the new ISTC, at National Tariff.[165]

132. In West Hertfordshire, the proposals for reconfiguration are causing considerable concern. The West Hertfordshire Hospitals NHS Trust currently has an accumulated deficit of around £43 million, has four separate sites and currently deals with four relatively small PCTs.[166] In addition, it suffers from a low capitation rate, and needs considerable investment. We were told that these problems have been exacerbated by proposals to site an ISTC in the area at Hemel Hempstead. The Chief Executive of the Trust, Mr David Law, told us that the introduction of the ISTC would cost the local NHS around £15 million in income and would necessitate the closure of its facility in St Albans, as it would become redundant.[167]

133. If decisions are genuinely a local matter, it is hard to see why the Department is adamant that it will spend almost £3 billion over the next five years on private sector provision. The commitment to "replace the activity withdrawn […] with alternative schemes" is similarly difficult to understand. If the schemes which have been withdrawn were cancelled because there was no need for additional capacity, it seems prima facie a peculiar decision to make a commitment to replace the schemes with further independent sector capacity. Mr Anderson also noted:

We cancelled schemes in wave 1 which came back to the health economy but in a different guise with a different case mix. Maybe, instead of being a stand-alone scheme, it then became something that we did on a JV [joint venture] basis with another National Health Service Trust, or maybe it was a completely different package, where it was attached to a more community-based provision package.[168]

134. The Department seems to be maintaining that, on the one hand, Phase 2 has been designed sympathetically to local capacity needs in the NHS, but that, on the other hand, the total value of Phase 2 schemes will remain the same, irrespective of local consultations.

THE DEPARTMENT'S ASSESSMENT OF PHASE 2

135. According to the Department, once the local health economy has decided on its needs, the Department will assess Phase 2 bids in much the same way that it used for Phase 1; for example, it will employ the same VfM methodology. However, it expects to receive more competitive bids. In addition, the 'take or pay' element of the contract is to be amended. In Phase 2 'take or pay' will be 'tapered' (see Glossary).[169]

136. Despite the changes, the Department will continue to pay more than the NHS Equivalent Cost for Phase 2 ISTCs. NHS providers stressed in their evidence that this was unacceptable. Bids should not be accepted unless they provided services more cheaply than the NHS equivalent. They wanted fair competition.[170] The supposed benefits of Phase 1 ISTCs in improving efficiency in the NHS were not sufficiently proven to continue to pay a substantial premium.

137. While the concept of fair competition seems sensible in principle, there is some difficulty in establishing what it means. Some witnesses argued that ISTC bids should be compared with the NHS tariff price. On the other hand, the Department argued that 'tariff' was not a fair comparison.[171] The NHS Equivalent Cost would seem to be a fairer comparison, but the Department stated that there were factors of which even that did not take account.

138. An added difficulty is how to treat pensions and salaries. Should NHS costs take account of higher pension costs? Some ISTCs currently compete by paying lower salaries. If bids are compared including NHS pension costs, it is possible that, in future, independent providers will seem to be good value. In this case, the main effect of increasing the level of independent provision will be to 'increase efficiency' through lower salary and associated costs.

139. It is difficult at present, therefore, to assess the current state of Phase 2 of the ISTC programme, or the rationale behind it. The Department of Health and the Secretary of State have, over the course of our inquiry, given answers which have shifted in both fact and emphasis as time has gone by, and the statement of the current position by the Secretary of State leaves several important questions unanswered. The decision to maintain the commitment to spend £550 million per year despite changing circumstances has not been explained, and seems to sit uncomfortably with the Secretary of State's admission that "in other [areas] it has become clear that the level of capacity required by the local NHS does not justify new ISTC schemes". It is not clear whether this represents simply a failure coherently to articulate the situation or a more profound incoherence in terms of policy as opposed to presentation.

140. There are real concerns that the expansion of the ISTC programme will destabilise local NHS trusts, especially those with financial deficits. ISTCs should only be built where there is a local need and after consultation with the local health community.

Other models of care

141. While the Government has focused on the independent sector and the benefits which it has brought to NHS patients, witnesses claimed that here was a strong argument for the use of other mechanisms for providing more elective and diagnostic procedures. We were told that, while facilities dedicated to elective procedures were a valuable tool for improving efficiency, they would work best within the NHS, and linked closely to acute facilities in order to deal with complications as well as to foster greater integration and engagement.[172]

142. The principal options are to establish:

new NHS Treatment Centres;
greater utilisation of existing NHS facilities out of hours, and
local arrangements to involve the private sector in treatment centres on the model of Redwood.

Any of these options would provide better integration than ISTCs.

143. We questioned the Department of Health about these options. Mr Ricketts argued that there had indeed been some use of out of hours capacity, especially in terms of diagnostics.[173]

144. In the subject of joint ventures on the model of BUPA Redwood, the Secretary of State said that "there is no reason why there should not be more joint ventures in the future".[174] However, she implied that these were not a high priority for the Department of Health. She noted that many foundation trusts had expressed interest in developing joint ventures, but stressed that one of the driving forces behind the ISTC programme had been "diversity and an element of competition and challenge".[175] Sir Ian Carruthers went on to explain that joint ventures had not been more fully utilised because:

Sometimes you have to go through this difficult phase of creating the infrastructure before you can then reintegrate, because if you start from the point of integrating, you quite often end up with replicas of the same organisation […] once you have got an infrastructure in place, you can reposition how you do some of that for the common good.[176]

145. There are major benefits from separating elective and emergency care in treatment centres. Such centres should continue to be built where there is a need and where the decision to build the centre has been agreed with the local health community following Section 11 consultation. We are not convinced that ISTCs provide better value for money than other options such as more NHS Treatment Centres, greater use of NHS facilities out-of-hours or partnership arrangements such as those at Redwood. All these options would more readily secure integration and may be cheaper.

145 HC Deb, 13 June 2006, col 1163W Back

146 Qq 391, 394, 399, 410-13 Back

147 Ev 86 Volume II Back

148 Ev 139 Volume II Back

149 Ev 74 Volume II Back

150 Q 142 Back

151 Ev 182 Volume III Back

152 Qq 12-15 Back

153 Q 658 Back

154 Qq 95 and 140 Back

155 Ev 66 Volume II Back

156 Ev 85 Volume II Back