Select Committee on Health Written Evidence

Evidence submitted by the Department of Health (ISTC 1)


  1.  In April 2002, the Government announced unprecedented investment in the NHS in England in order to refocus health services on the needs of the patient and dramatically reduce the time that patients wait for treatment. [1]

  2.  One of the ways in which these objectives are being met is through new Treatment Centres, some run by the NHS and some by the independent sector. One treatment centre at Redhill is a joint-venture between the NHS and BUPA. This centre opened in January 2003 and predates the national procurement of treatment centres run and managed by the independent sector.

  3.  In October 2002, the Department conducted an extensive forward planning exercise, during which all Strategic Health Authorities (SHAs) were asked to identify, in conjunction with their respective Primary Care Trusts, any anticipated gaps in their capacity needed to meet the 2005 waiting time targets.

  4.  The result of this exercise led to the identification of capacity gaps across the country, particularly in specialities such as cataract removal and orthopaedic procedures, where additional capacity was needed beyond the increased capacity planned by existing NHS providers. As a consequence, a procurement exercise was launched.

  5.  In December 2002, the Department invited expressions of interest from the independent sector to run a series of Treatment Centres, in order to enable yet more NHS patients to benefit from faster access to surgery. [2]

  6.  In September 2003, the Department announced preferred bidders for the majority of the Independent Sector Treatment Centres (ISTCs). Contracts were subsequently awarded on the basis that bidders meet the core clinical standards required by the NHS, provided high standards of patient care, offered additional staffing capacity and provided good value for money to NHS commissioners. The first contracts were signed in September 2003 and the first ISTC commenced services in October 2003 at Daventry.

  7.  As of 31 December 2005, 10 contracts have reached full service commencement and 20 schemes are open (excluding an interim facility at Brighton). They have performed over 44,000 elective procedures and over 9,000 diagnostic procedures for NHS patients. We expect there to be a total of 15 contracts for the provision of 30 ISTC facilities from this first wave of procurement, with the remainder being fully operational during 2006 and 2007. The programme is expected to provide an average of over 170,000 Finished Consultants Episodes (FCEs) a year over five years and represents an investment of approximately £1.6 billion.

  8.  In addition to the procurement for the provision of treatment centres, the Department has also let two additional one-year contracts (for years 2004-05 and 2005-06) for the provision of supplementary activity to NHS commissioners from existing capacity available in the independent sector, and a five-year contract for the provision of the MRI scans to NHS commissioners.

  9.  Given the terms of reference of the Committee's enquiry, this Memorandum of Evidence covers the procurement of ISTCs and not other aspects of the IS procurement programme (such as the supplementary procurements, the MRI procurement, or other pathfinder projects (eg Commuter Walk-in Centres and chlamydia screening)) in England.

  10.  A further, substantial procurement of additional capacity from the independent sector (known as "phase two") was launched in March 2005. The next wave of procurements are well advanced and comprises two main areas—elective procedures and diagnostic procedures:

    —  phase 2 Electives is expected to deliver up to 250,000 procedures per year and create an Extended Choice Network (ECN) of Independent Sector Providers who will deliver up to an additional 150,000 procedures per year, on an ad hoc basis. Overall, this represents an investment of approximately £3 billion over five years. The additional capacity will be provided through a variety of facilities, such as existing ISTCs, new build centres, refurbishments and existing NHS facilities, and will collectively contribute towards the provision of patient choice; and

    —  phase 2 Diagnostics is expected to deliver approximately two million additional diagnostic procedures per year for NHS patients, and represents an investment of over £1 billion over five years. The additional capacity will help cut "hidden waits" brought about by patients waiting for diagnostic tests ahead of any further treatment required. It will also help the NHS to meet the Government's target that by 2008 all NHS patients should be treated within 18 weeks of their GP referral.


Q.1  What is the main function of ISTCs?

  11.  The ISTC programme is intended to be an efficient and cost-effective use of independent sector capacity and capability to reduce waiting times and offer more choice to NHS patients. ISTCs provide elective surgical activity for a range of conditions, including orthopaedics and cataract removal.

  12.  The capacity offered by the independent sector is an important part of the strategy to reduce waiting times. As dedicated and streamlined facilities, ISTCs are able to offer patients scheduled procedures at pre-booked times with many procedures being completed during the day, allowing patients to return home quickly without the need for prolonged hospital admission. ISTCs are generally separate units and so are unaffected by emergency or seasonal demands that can affect other non-treatment centre providers in the NHS.

  13.  The programme will increase patient choice. Since 1 January 2006, patients have had a choice of at least four providers for their first consultant-led appointment. As well as NHS providers, patients are able to choose to have their treatment provided from the independent sector. Some of the PCT choice options will already include independent sector providers and this number will increase as additional capacity is made available. Choice of elective treatment will both improve the patient experience and encourage providers to develop more responsive, patient-centred services.

  14.  The aims of the treatment centre programme are to:

    —  help provide extra capacity needed to deliver swift access to treatment for NHS patients;

    —  support the implementation of patient choice;

    —  stimulate innovative models of service delivery and drive up productivity; and

    —  introduce contestability between providers of healthcare services for NHS patients.

  15.  The defining characteristics of treatment centres are that they:

    —  exemplify best practice and forward thinking in the design and delivery of the services provided, with services that are streamlined and modern, using defined patient pathways;

    —  deliver high volumes of activity in a pre-defined range of routine treatments and/or diagnostics, adding to the capacity of the NHS to treat its patients successfully;

    —  deliver scheduled care that is not affected by demand for, or provision of, unscheduled care either on the same site or elsewhere;

    —  have services that are planned and booked, with an emphasis on patient choice and convenience together with organisational ability to deliver; and

    —  provide a high quality, positive patient experience.

Q.2  What role have ISTCs played in increasing capacity and choice, and stimulating innovation?

  16.  As of December 2005, 10 ISTC contracts have reached full service commencement, which is being delivered through 20 facilities. They have treated and provided diagnostic services to over 50,000 NHS patients. In total, we expect there to be a further 11 ISTCs open during 2006 and 2007 treating an average of 170,000 patients per annum in total. In addition, the second phase of procurements from the independent sector will further increase this number.

  17.  The wave 1 ISTC Programme was designed to provide additional elective surgery to help meet waiting time targets as well as contribute to the policy aims of choice and contestability. These three outcomes required a genuine increase in capacity, including workforce capacity. The Additionality policy was designed to prevent a draining of NHS human resource capacity. In addition, on some schemes (which involve a transfer of activity from the NHS to the provider), the Retention of Employment Model has been deployed as the mechanism to ensure that there is no unintentional transfer of NHS staff to the provider.

  18.  One particular example is in ophthalmology where mobile ISTC units have created additional capacity. Nationally, the mobile units have visited 25 sites in nine Strategic Health Authorities to provide day case cataract surgery. The total amount of operations performed to the end of January 2006 is over 20,000, all by staff who are additional to those already working in the NHS.

  19.  Some of the activity that is planed for this first wave of ISTCs has been transferred at the request of the local NHS to free up capacity in existing facilities for other important clinical activity. In these cases, existing NHS staff can operate in the units on a structured secondment basis or a Retention of Employment arrangement to ensure there is no dilution of existing NHS staff and resources. This enables the NHS to learn from innovative approaches from the independent sector whilst retaining and transferring the strengths of the NHS and protecting the high standards of care that have been developed in NHS hospitals.

  20.  The ISTC programme will play an important role in implementing patient choice. Patient choice is being introduced in stages. Since 1 January 2006, eligible patients are offered a choice of at least four providers, where clinically appropriate where they need a referral for elective care. PCTs are responsible for commissioning the choice options for their local communities and may include NHS Trusts, NHS Foundation Trusts, NHS or independent sector treatment centres and other independent sector providers. Currently around a third of PCTs' choice options include the independent sector (ISTCs and other IS providers). Choice at referral will benefit some 9.4 million patients by meeting their needs and preferences.

  21.  During 2006, choice will extend to include NHS Foundation Trusts, all centrally procured ISTCs and other subsequently centrally procured independent sector providers. By 2008, patients will be able to choose to be treated by any healthcare provider that meets NHS standards and can provide care within the price the NHS is prepared to pay.

  22.  The ISTC programme is not intended to offer a "one size fits all" solution to the aims of increasing capacity, reducing waiting times and improving patient choice. Rather, the procurement has been designed to allow the independent sector to work in partnership with local healthcare economies to provide solutions which reflect and cater to local requirements. The ISTCs are being set up and run by leading international independent sector healthcare companies, which have extensive experience of running elective surgical centres and diagnostic facilities. The procurement encourages the IS to utilise its experience to offer innovative solutions to local requirements.

  23.  Innovation exists in many parts of the NHS. It is important to find means by which it can be shared. The NHS is not an homogenous organisation; pockets of innovation exist in both service delivery and facility design within the NHS as they do in the independent sector and other health economies. The ISTCs have been able to build on the best practice in the NHS. They are being run by leading international independent sector healthcare companies, which have extensive experience of running elective surgical centres and diagnostic facilities and have leveraged this experience, along with that of a broad range of international clinical staff, to combine the best of the NHS model with best-practice from abroad, and have delivered various innovative high-quality, patient-centric solutions.

  24.  Innovations range from the physical layout of facilities to elements of administration and clinical practice, and examples include:

    —  mobile solutions where the provider supplies clinical services from mobile units which can be set up on agreed sites to improve access to healthcare services for patients in remote areas;

    —  construction of new facilities designed around the clinical flow of patients, thus increasing productivity;

    —  process design, to improve the patient's experience by increasing throughput without compromising patient safety or clinical quality. This is apparent in the mobile ophthalmology units capable of delivering 20-23 cases per day due to the streamlined process enabling efficient use of theatre space and surgical resource;

    —  taking extraneous administrative processes off-line so that surgery is not delayed and can commence at the start of the working day;

    —  stocking smaller ranges of prostheses allowing theatre staff to become more proficient and productive;

    —  administering local anaesthetic instead of general anaesthetic for primary joint replacements reduces the anaesthetic risk as well as the period of stay by the patient to an average of 5.3 days from 8 days experienced in the NHS;

    —  introducing blood conservancy and recycling techniques that reduce the need for transfusions (an NHS trust that copied these protocols lowered transfusion rates from 30% to 7%);

    —  the double reading of post operative x-rays for orthopaedic patients, thereby introducing a greater level of peer review and integration between the independent sector and NHS; and

    —  using effective pain management techniques to allow post-operative physiotherapy to commence earlier thus reducing the length of stay.

Q.3  What contribution have ISTCs made to the reduction of waiting times and waiting lists?

  25.  There has been a considerable reduction in waiting times and waiting lists over the last three years across a wide range of specialties. In the period from April 2002 to March 2005 the headline waiting list numbers have fallen from roughly 970,000 to 744,000. It is, however, difficult to attribute these reductions to a single cause. Targets, investment leading to a surge activity in the NHS and the introduction of ISTCs have all had an impact. ISTCs have treated over 44,000 patients over the past three years thereby contributing to the fall in waiting lists by 226,000 since 2002.

  26.  ISTCs have been particularly helpful in areas where the local NHS was having difficulty in meetings targets. For example, the ISTC facility at Southampton provided additional capacity to ensure that NHS patients approaching the six month waiting time limit could be transferred to this new facility for treatment.

Q.4  Are ISTCs providing value for money?

  27.  The NHS has always made use of the independent sector. Historically, however, it has been conducted on an ad hoc basis at a local level. The ISTC programme has systemised much of this activity, and through bulk procurement has cut significantly the cost of doing business with the IS. Traditionally the NHS has paid incumbent IS providers a premium upwards of 40% over reference costs. [3]By managing a national, high-volume procurement, the Department has secured substantial savings on these amounts which we estimate to be £500m once wave one is completed. [4]In addition, based on recent years' spot purchase data, there appears to be a downward trend where spot purchasing continues. [5]

  28.  Value for Money (VfM) in the ISTC programme comprises two key components: the cost of the programme compared to the "NHS equivalent cost"; and the value of the additional benefits brought by the IS programmes.

  29.  During the conception of wave one of the ISTC programme, the need to pay a premium to NHS equivalent cost was recognised for the purpose of seeding a new market. The average premium to NHS equivalent cost for 2004-05 was 11.2% above equivalent NHS costs for operational wave one schemes. It is worth noting that the variation around the average NHS cost is not unique to the independent sector. NHS trusts themselves display a considerable variation of costs.

  30.  Phase two of the ISTC procurement is currently under way and we do not expect the same premium as in wave one.

  31.  The cost of the additional capacity is only one component of the VfM assessment. The delivery of policy aims and quality benefits, the value elements of VfM, are also important factors in the assessment.

  32.  The ISTC programme aims not only to deliver extra capacity to publicly funded healthcare but also to deliver greater patient choice and contestability through improving access to elective healthcare and to different providers. This provides benefits to those patients directly using ISTC services through reducing waiting times and allowing them to select care most appropriate to their individual needs and preferences.

  33.  Furthermore, a recent report by the healthcare market analysts Laing & Buisson asserts that the introduction of ISTCs is already exerting a downward pressure on specialists' fees and forcing a restructuring of private sector provision. [6]

  34.  Studies of the cost comparisons between wave 1 ISTC and NHS equivalent costs demonstrate that there are some structural considerations that can be used to drive further efficiencies in ISTC contracts and offer improved VfM. These include:

    —  larger contract packages;

    —  a narrower range of specialities in a single location;

    —  a narrower casemix within individual specialities; and

    —  greater additional activity, which allows the IS more flexibility to design their clinical model and innovate.

  35.  These findings have been used to inform the second phase of elective procurement in the way schemes are packaged and put to the market in order to drive down contract costs and deliver best VfM.

Q.5  Does the operation of ISTCs have an adverse effect on NHS services in their areas?

  36.  ISTCs are one of a number of facilities available to NHS commissioners to treat NHS patients that include NHS Acute Trusts, Foundation Trusts, NHS treatment centres, and other IS providers: all providing services—free at the point of delivery—to NHS patients.

  37.  It is too early to judge whether or not there is any adverse effect on NHS services from ISTCs. The majority of wave 1 ISTCs have either recently commenced services or will be functioning from 2006-07 and we will evaluate their impact over time.

  38.  ISTCs provide a high volume of routine surgery: in doing so, they are also providing NHS patients with access to timely, high-quality care. Because ISTCs are generally separate units they are unaffected by emergency or seasonal demands that can affect other non-treatment centre providers in the NHS. This means that they are better able to offer patients scheduled procedures at pre-booked times and this is something that patients may well value when using choosing whether to attend an ISTC. Along with the introduction of patient choice and payment by results, ISTCs—which introduce contestability between providers of healthcare for NHS patients—are expected to drive up performance and standards of other providers. This may mean that poorly performing NHS services are affected if patients choose alternative service providers.

Q.6  What arrangements are made for patient follow-up and the management of complications?

  39.  Appropriate post-operative follow-up and management of complications are essential to delivering high quality patient care. Where applicable, ISTCs providers are contractually obliged to use NICE guidance. In the first wave of ISTC procurement each contract specifies the approach and quality of post-discharge patient care based on requirements of local NHS commissioners. Further information on the clinical governance arrangements that operate in ISTCs is given in the answer to question 9.

  40.  Each contract describes the "patient pathway" from the initial GP referral until the conclusion of their treatment and follow-up care that will involve interactions with both the NHS and the independent sector provider. This process should be seamless, in the same way that any referral from primary care to an NHS provider, and back again, should be seamless. Having agreed referral and discharge protocols, and a shared understanding by each provider of what comes before and after the care offered in an ISTC, and by the NHS parties of what takes place in the ISTC are ways we use to try and achieve seamless pathways. It is critical therefore that the points along the "patient pathway", where the patient enters and exits the care of the provider, are clearly understood by both providers (NHS and independent sector) and commissioners.

  41.  Individual contracts specify what is required from the independent sector detailing the terms of follow-up and treatment of complications.

  42.  The purpose of setting out patient pathways in the contracts is to:

    (a)  confirm the NHS commissioners' understanding of what they have commissioned;

    (b)  confirm to the provider's clinical staff clear expectations of care and treatment;

    (c)  define the key clinical steps along the entire patient pathway to allow the clinical model and assumptions to be evaluated and quality assured; and

    (d)  set out the points along the total patient pathways at which the patient is admitted to or is discharged from the ISTC so that it is clear whether the provider or an NHS party is primarily responsible for the patient's care and treatment at any given point.

  43.  The wave 1 Project Agreements place responsibility on providers for the management of follow-up care and complications within a defined post-operative period. NHS patients treated in an ISTC retain their status as NHS patients, regardless of the location of treatment.

  44.  The follow-up care details will be specified in the contract, outlining types of assessments or further treatments and the numbers of times these are expected to be performed before the patient is transferred back to the NHS. Where necessary, the need for community care and equipment after discharge will be assessed at the time the patient is seen in the pre-operative clinic. The patient's GP is informed of these arrangements through a letter that is sent after the patient has been discharged.

  45.  The contract will specify that a patient should be treated for post-operative/post discharge complications within the ISTC where possible and this will happen in the vast majority of cases. There are circumstances where ISTC treatment may not be clinically appropriate or possible and arrangements will be made to have the patient treated in a setting that meets their clinical needs. For example, a GP may decide to refer an ISTC patient to an NHS Accident and Emergency Department if he or she presents with symptoms compatible with a blood clot in their lung. There may be a need, in exceptional circumstances, to refer to a more specialist centre if there is complicated revision surgery required that is beyond the scope of capabilities of the ISTC provider. It may happen that a patient re-enters the NHS stream without the ISTC provider's knowledge (as in the case of an emergency). Providers are encouraged to develop strong relationships with their NHS colleagues to identify when patients are being treated outside their pathway and, if practicable, to make arrangements to transfer them back to the ISTC as soon as possible.

  46.  The guiding principle in treating patients with complications is to ensure that the patient's welfare and safety is paramount and that all other considerations are secondary.

  47.  Providers must provide detailed evidence of policies and procedures that support re-admission criteria, admission protocols out of hours, contact with the GP and patient post operatively and transportation arrangements to re-admit the patient.

  48.  Patients undergoing treatment in an ISTC receive a comprehensive patient information pack at their pre-operative visit and detailed discharge instructions when they are discharged home. The Provider is contractually obliged to provide this information to patients, with the exact requirements varying by case-mix. The pre-operative information packs include information on:

    —  the provider;

    —  the patient care pathway and any pre-assessment procedures that may need to be undertaken;

    —  the procedure and expectations about the surgery;

    —  the complaints procedures; and

    —  cancellation and travel arrangements.

    This information is explained at various points before the procedure is undertaken and forms part of the information required for the patient to give informed consent.

  49.  When patients are about to be discharged, they are provided with information, including:

    —  oral and written discharge instructions, detailing frequently asked questions about the patient's recuperative phase and when to seek further advice;

    —  a 24 hour telephone number staffed by senior clinical staff to contact in case of problems or emergency; and

    —  details of their follow-up appointment times.

Q.7  What role have ISTCs played and should they play in training medical staff?

  50.  Training will be offered where there is transferred activity and secondment. This will be expected in the following ISTCs located in Nottingham, Maidstone, north-east London, Hemel Hempstead, Stevenage, Brighton, York, Burton, Daventry, Somerset, Greater Manchester, and Portsmouth. Local training committees have been established or are about to be established with a view to developing training contracts. When fully established the contracts will include provision for junior doctor, nurse or allied health professional training. They will cover operative techniques appropriate to the case-mix, general nursing care of the surgical patient and clinical techniques for allied health professionals according to the case mix.

  51.  Many surgical anaesthetic and other activities that will be provided in ISTCs are part of the core training requirements of NHS staff. Through the provision of modern facilities and delivery of new ways of working, ISTCs can provide NHS staff with the opportunity to access new and innovative work practices in these areas. ISTCs will also provide the opportunity for training and transfer of knowledge in the following areas:

    —  innovative clinical techniques and new ways of working;

    —  management of patient flows and processes leading to greater clinical productivity; and

    —  management of clinical services, including outcome measurement.

  52.  Administratively, ISTCs offer an ideal training environment over more traditional NHS settings since they are based around:

    —  regular work flow, uninterrupted by priority cases; and

    —  high volume activity.

    These factors offer trainees a predictable training environment in which they can concentrate on appropriate cases in a time-efficient manner.

  53.  The training of NHS staff in ISTCs is particularly important in instances where clinical activity is transferred from traditional NHS settings to ISTCs. In such circumstances the training attached to the transferred activity is expected to be replicated in the ISTC setting.

  54.  NHS training in an ISTC setting will be directed and overseen as it is now in NHS settings. The Deaneries, the Higher Education Institutions, the Royal Colleges, professional regulatory bodies such as the Nursing & Midwifery Council and the Health Professions Council, Post-Graduate Medical Education and Training Board, the Faculties, Workforce Development Confederations or Directorates and NHS Trusts will all retain their existing roles in facilitating and overseeing NHS training when that training is transferred to an ISTC setting.

  55.  The organisation and direction of NHS training within ISTCs will be modified as NHS training policy and practice evolves and develops, in line with, amongst other things, Modernising Medical Careers.

  56.  Training in ISTCs will, in line with current NHS practice, be multi- and inter-professional. NHS consultant trainers who are seconded to independent sector providers will provide their NHS medical trainees with supervised training based in ISTCs. Similarly, NHS nurse and therapist mentors can provide training, guidance and support to pre- and post-registration clinicians. The provision of training for other professions in ISTC settings is being developed, for example radiologists, radiographers, pathologists and GP registrars, where appropriate.

  57.  The providers are contractually committed to the provision of continuing professional development and training for their own staff. This training will include induction and the training required to operate within the ISTC safely, and training for continuing professional development. Some providers have entered into formal agreements with overseas clinicians' home governments requiring training and development to be provided for those clinicians while based in the UK so that they can return to their country of origin with new skills.

  58.  ISTCs are part of the national independent healthcare sector and are regulated by the Healthcare Commission. NHS trainers carry forward their present training accreditation but the facilities/equipment/ techniques used may differ from where they have trained previously. NHS Trusts and their NHS trainers and trainees have to be accredited for training by the Postgraduate Medical Education and Training Board (PMETB) and its agents, the medical Royal Colleges (or professional bodies such as the Nursing and Midwifery Council (NMC) and Health Professional Council (HPC)). Trusts must apply for medical training accreditation to PMETB and are subject to inspection by appropriate Royal Colleges. Where such training is transferring to an ISTC, the Royal Colleges will report to PMETB as to whether they believe the ISTC is a suitable training facility. Medical training cannot take place in an ISTC until approval has been obtained from PMETB.

  59.  Local training requirements are to be confirmed by the DH in partnership with local stakeholder groups. The providers and the Trusts responsible for the trainees will aim to work together to programme NHS training, by session, case and procedure, well in advance. NHS trainers and trainees will have the opportunity to be involved in appropriate cases throughout the ISTC Patient Pathway.

  60.  The development and conduct of NHS training in ISTCs will be overseen at national and local levels. The National ISTC Training Steering Group is led by DH training leads and is integrated with local NHS workforce leads. It is a multi-professional and multi-agency group (including IS Providers) charged with monitoring and developing training policy and practice within ISTCs. Local ISTC Training Steering Groups have now been established for most schemes. Their role is to bring together all appropriate local training stakeholders to support NHS training at the local ISTCs, to assist in the local accreditation process and the confirmation of training requirements and programming for the scheme.

Q.8  Are the accreditation and appointment procedures for ISTC medical staff appropriate?


  61.  All providers of treatment services are subject to rigorous inspection arrangements as Independent Sector suppliers of healthcare. Providers are registrable under the Care Standards Act 2000, and subject to a mandatory inspection by the regulatory arm of the Healthcare Commission. The inspections are held a minimum of once a year and may be announced or unannounced.

  62.  All professional staff must appear on the appropriate register of their professional body. All doctors must appear on the specialist register for their speciality with the General Medical Council. Doctors working for providers in ISTCs do not work as consultants in the same sense as NHS doctors as they may not be required to carry out the full range of consultants responsibilities including administration and management, service development and research. Although they are specialists in their respective fields, they are not appointed through a consultant's appointment panel as is found in the NHS. Practice Privileges must be granted before any doctor can work in an ISTC. These should be granted after review by the Medical Advisory Committee, where doctors who may also work in the NHS would participate. The numbers of procedures that each doctor performs are checked during this process.

Q.9  Are ISTCs providing care of the same or higher standard as that provided by the NHS?

  63.  The clinical governance principles for the ISTC programme are rigorous and closely mirror those found in the NHS. Providers are obliged through their Healthcare Commission registration to have clear, workable clinical governance frameworks in place and they also have a contractual responsibility to ensure that these frameworks reflect good clinical practice. Although great efforts are made to prevent the occurrence of incidents, they have occurred within ISTCs. Providers have a responsibility to report and internally investigate incidents and to put measures in place to ensure that patients are not put in further danger as a result of any such incidents. Lessons are expected to be learned to prevent recurrence of such incidents and these lessons are expected to be extended locally and corporately in the provider organisation and may also be shared with other ISTCs and the wider NHS, if applicable. Some providers have been criticised for being too harsh in dealing with clinical staff who have been involved in incidents, by invoking immediate suspension of practice privileges before an investigation takes place and all of the facts have been considered.

  64.  All clinical programmes are subject to adverse events in which, on occasions, patients may be harmed. They are a feature of complex modern healthcare wherever carried out. The important thing is to ensure that incidents are properly investigated to discover the root cause (and deal with the less common issues of performance failure or incompetence) and that lessons are learnt and disseminated to prevent future occurrences. For example, in the ISTC in Daventry, concern about the condition of a small number of patients following general anaesthetic prompted the sponsor and the Contract Management Board to commission a review of the anaesthetic service, leading to a decision to suspend general anaesthetic activity while the provider's policies, procedures and processes were further investigated and reviewed. This suspension of activity was reported to the Healthcare Commission. A full Joint Service Investigation was carried out and recommendations have been made, including a second expert review of policies and procedures and a full audit of general anaesthetic activity once the service has been resumed. Considerable resources are being utilised to support the provider in developing and maintaining a safe and effective anaesthetic service.

  65.  Reporting of healthcare professionals to their professional bodies and submission of requests for alert letters to Regional Directors of Public Health are also part of the process, if warranted. The point of the alert letter system is to make it less likely that unsuitable or incompetent clinicians are appointed elsewhere. This process is currently under review and will greatly enhance communication with providers on where there is concern about a clinician's performance. Early reporting of incidents and investigations to the NHS Litigation Authority, where applicable, has been positively received.

  66.  The governance frameworks are in turn regularly monitored by the Department of Health through Performance Management Review Boards or Joint Service Reviews. They are also monitored at various intervals by the Healthcare Commission. Providers are obliged to report untoward Incidents to both the central contract management unit (CCMU) and the Healthcare Commission, and arrangements have been agreed that providers may use the CCMU form to report jointly to both organisations.

  67.  We were aware that the clinical governance arrangements and monitoring procedures undertaken by the Department of Health in the early days of the programme were not always well understood in some localities. There were isolated incidents where poor communication between providers, sponsors, CCMU and other stakeholders created confusion. This has been addressed and NHS sponsors are invited to attend and participate in all investigations. There has been considerable effort to involve sponsors and to ensure that other stakeholders are now part of the communication process which has been considerably improved. Lessons learnt from this have been incorporated in order to strength the working arrangements which are now robust.

  68.  The ISTC service agreements specify standards through:

    —  detailed clinical pathways;

    —  adherence to accepted best practice clinical guidelines;

    —  good clinical practice;

    —  investigation of any untoward incidents; and

    —  performance monitoring.


  69.  For ISTCs in the first phase of procurement, clinical pathways were determined in advance of service commencement and agreed between the provider and local NHS sponsors. In the future, pathways proposed by providers in the bid stage will be assessed against a framework drawn up by a panel of clinical experts in the Commercial Directorate (vetted by the relevant Royal Colleges). The framework is built on NICE recommendations and clinical standards drawn from UK and international best practice, and is reviewed and ratified by an independent Department of Health Clinical Reference panel. The clinical pathway sets the parameters within which the provider must operate, ensuring a given level of care.


  70.  Specific reference is made in the contract that obliges the providers to implement acknowledged best practice guidelines, particularly National Institute for Clinical Effectiveness guidelines.


  71.  Performance management of the contracts is designed to manage the delivery of service, good clinical practice and compliance with key Performance Indicators.

  72.  The Joint Service Review (JSR) is the body that provides a performance management mechanism that identifies that the provider is meeting its contractual obligations and is delivering continual quality improvement. There is one JSR for each ISTC that meets quarterly or more often as is deemed necessary. The JSR has equal representation of commissioners and providers and is chaired by the NHS Representative. The NHS Representative is appointed from the local NHS health economy that supports the ISTC contract. The JSR process also promotes a direct link with the local clinical governance structures and processes. Where the JSR finds that there is a potential breach of the contractual obligation or of a Key Performance Indicator (KPI) threshold, it may commission a Joint Service investigation (JSI) to obtain further information. Depending on the outcome of the JSI, the JSR can recommend that the provider follows a rectification plan. If the provider fails to comply with the rectification in the agreed timescale, it can recommend that sanctions are applied, which may include the award of financial penalties, or in the most extreme case, termination of the contract.


  73.  In addition to the local and national policies and procedures in place to ensure robust clinical governance, the contracts are also monitored in accordance with a "Serious Untoward Incident" (SUIs) procedure. The ISTC programme has contractual obligations for addressing adverse incidents and serious untoward incidents. Essentially, the protocol enables the SUIs to be graded, investigated and monitored. All independent sector providers are also bound by Regulation 28 to report SUIs to the Healthcare Commission.

  74.  NHS sponsors and the provider agree escalation procedures and processes so that all parties are in agreement ahead of any incident that might occur. Sponsors also take part in the investigation process following a JSI.


  75.  Twenty-six key performance indicators are used to evaluate the performance against pre-set thresholds in wave 1 contracts through the JSR process. These thresholds are designed with reference to NHS benchmarking (where possible) or international best practice. A preliminary report on four early ISTC schemes by the National Centre for Health Outcomes Development (NCHOD) concluded—recognising the constraints of assessing an emerging programme—that:

    "It is not appropriate to generalise across the whole ISTC programme given the differences between the types of service provided and KPIs reported. But we do make two key conclusions:

    —  there is a robust quality assurance system in place, more ambitious and demanding than that for National Health Service (NHS) organisations. The KPI data to be collected and provided by the ISTCs extends beyond that used by the NHS; and

    —  early results of quality monitoring are encouraging." [7]

  76.  A key principle reflected in the contract is that the standard of care delivered by the provider will be at least equivalent to that provided in the NHS. However, it is not the intention of the ISTC programme that providers should be required to adopt the same working, clinical or management practices used in the NHS. This principle is reflected in the contract in the following ways:

    —  the provider must provide the clinical services in accordance with agreed clinical standards;

    —  the contract sets out agreed patient pathways in relation to each surgical procedure;

    —  the provider can only begin to provide the Clinical Services once the facilities satisfy the required Healthcare Commission standards and it has received all other necessary registrations and permissions from the Healthcare Commission;

    —  all clinical staff employed by the provider must be registered with an appropriate professional body; and

    —  the contract allows the Patients' Forum of each PCT, which makes referrals to the provider, and the Local Health Authority Overview and Scrutiny Committee to access the Facilities and review the services.

  77.  The providers are contractually obliged to ensure that they have robust clinical governance arrangements in place. These arrangements are carefully scrutinised during the procurement process before contracts are awarded.

Q.10  What implications does commercial confidentiality have for access to information and public accountability with regard to ISTCs?

  78.  There are confidentiality requirements in relation to ISTCs resulting from:

    —  the requirements of the procurement process, which may vary at different stages in the procurement process, and receipt of commercially confidential information during that process;

    —  the contents of commercial agreements with bidders; and

    —  the need to maintain confidentiality of patient data and records.

  79.  Our approach is to release information regarding the ISTC programme in accordance with application of the Freedom of Information Act 2000. In relation to commercially sensitive information, sections 41 and 43 provide exemptions if the release of information would expose the Department to a claim for breach of confidence, or is likely to prejudice commercial interests of either the Department or the party supplying the information.

  80.  Whether or not information identified by a bidder as commercially confidential is involved, preservation of the confidentiality of certain information is generally necessary to ensure a fair and proper procurement process, in accordance with procurement law, regulations and guidelines. In these circumstances confidentiality is seen as necessary in order to ensure a fair and proper procurement process (and thus avoid prejudice to the commercial interests of the Department in a way which would harm the public interest).

  81.  At different stages in a procurement or series of procurements (where those procurements are related) different considerations may apply to a similar request for information. Therefore, each request must be considered in the context of the relevant procurement.

  82.  Examples of information which it may be necessary to keep confidential include:

    —  the identity of those expressing an interest in the procurement;

    —  the identity of bidders;

    —  information provided in response to pre-qualification questionnaires;

    —  information provided in response to invitations to tender; and

    —  reasons for selecting (or de-selecting) a preferred bidder.

  83.  A key advantage to maintaining fair procurement processes (aside from legal compliance) is to maximise the number of organisations which bid, to increase competition on quality, service delivery and price. This ultimately delivers better public services and value for money.

  84.  The contracts that the Department has negotiated with the independent sector providers of treatment centres contain normal confidentiality provisions to protect the commercial interests of the Department and the providers. Those provisions state that all information relating to the contract is confidential and cannot be released without the consent of all signatories, with limited exceptions.

  85.  There are circumstances in which such information may however be released. These are by exception, many of which are generally stated in the relevant contract. Examples include:

    —  information which is in the public domain;

    —  requests under the Freedom of Information Act, save to the extent that an exemption to disclosure applies—eg the s41 exemption for information which, if disclosed, would expose the Department to a claim for breach of confidence, or the s43 qualified exemption for trade secrets/information likely to prejudice commercial interests of either the Department or the party supplying the information; and

    —  certain information requirements of auditors appointed by the Audit Commission and examination of documents by the Comptroller and Auditor general.

  86.  In considering any decision as to whether to disclose confidential information relating to a contract, the commercial sensitivity of that information is assessed on a case-by-case basis at the time the request for disclosure is made, taking into account the stage any relevant procurement programme has then reached.

  87.  It is considered likely that, if the Department were to disclose commercially sensitive information, this would reduce the pool of potential bidders, thereby reducing competition and our ability to obtain best value for money. At contract close we release information on the number and type of procedures and the approximate, though not exact, cost. We will also release an annual report covering the clinical outcomes data of all operational ISTCs. Patients will also be provided with appropriate information as part of choice.

Q.11  What changes should the Government make to its policy towards ISTCs in the light of experience to date?

  88.  Following from the experiences of running the wave 1 procurement, the Department has made a number of changes for the next phase of procurements. These changes also reflect the developments to the NHS and the health economy since 2002 when the first wave of procurements were launched.

  89.  Integration with mainstream NHS services for choice—providers in the phase 2 programme will need to integrate their services with other NHS providers in the health economies they are based. They will need to provide services on a similar basis to other NHS providers in order to ensure that patients can make meaningful choices between service providers.

  90.  Full patient pathway and broader case mix—wave 1 was about helping the NHS reduce waiting times and therefore it concentrated on the treatment element of the patient pathway with referrals from existing waiting lists and from the specialties with the longest waits eg orthopaedics, general surgery and ophthalmology. The point at which the IS provider enters the patient care pathway varies on wave 1 contracts in accordance with the needs of the respective sponsor PCTs. Providers bidding for contracts under the phase two procurement will be expected to provide a full patient pathway for treatment from outpatients to inpatient treatment, rehabilitation and follow up.

  91.  Phasing out take or pay contracts—wave 1 contracts were based on volumes and values and PCTs signed off contracts on the basis of these. The terms of these contracts provided risk cover to the providers whereby if the level of referrals was not sufficient from the PCTs the provider would still be paid for the agreed level of contract. These contracts were appropriate at the time of the wave 1 procurement to enable the entry of new providers of healthcare to NHS patients but have been reviewed for the next phase of procurements.

  92.  Phase two contracts will be based only on indicative volumes of procedures in recognition of the introduction of patient choice. Providers have been asked to bid on the basis of tapering guarantees for contracts. PCTs will only pay tariff for the treatment patients in their areas receive and any risk guarantee or cost of agreed price over tariff will be handled centrally by DH. The intention being that IS providers should all be providing services at NHS tariff equivalent by the end of the initial guaranteed contract period in line with the level playing field and free choice.

  93.  Additionality—wave 1 contracts imposed strict additionality requirements on all IS providers. This meant that providers were not allowed to recruit healthcare professionals that were currently working in the NHS or had worked in it within the last six months. In a number of cases Wave 1 contracts resulted in the potential transfer of some NHS staff to IS providers but this was prevented with the use of Retention of Employment or Structured Secondment arrangements.

  94.  For phase 2 legal advice to the Department is that the retention of an additionality policy can only be justified where there are specific shortages of NHS clinical and professional staff. The Department following advice from the Workforce Review Team is publishing a list of workforce shortage areas where strict additionality will apply. In addition, the contracts will allow clinical and other professional staff to offer their non-contracted hours to IS providers engaged in phase 2 contracts subject to the approval of their employers and that the use of this non-contracted time is consistent with patient safety.

  95.  Training—wave 1 has focused on the provision of Junior Doctor Training within the ISTC for those schemes where there is transferred activity. Training pathways and facilities have been provided to replicate those which would have otherwise taken place in the local Trust, therefore ensuring that Junior Doctors are not disadvantaged. With phase 2 increasing the amount of training which will take place in ISTCs, providers will bid for phase 2 contracts on the basis that the productivity cost of the training provision is already included in the price of the contract, where training is necessary and makes sense.

Q.12  What criteria should be used in evaluating the bids for the Second Wave of ISTCs?

  96.  It is important to note that the phase 2 ISTC procurement is ongoing and therefore detailed information pertaining to the evaluation of bids is extremely commercially sensitive.


  97.  The objective of the selection process for the PQQ stage is to assess the capability and capacity of bidders to meet the requirements of the project/scheme and select bidders to proceed to the next stage of the procurement.

  98.  Selection criteria for the PQQ is a combination of clinical, financial and non-financial factors and considers:

    —  Capacity and capability—assessment of the totality of resources and core competences available to the bidder including, without limitation, clinical, technical, workforce, facilities and organisational elements and taking into account the ability of the bidder to manage simultaneously its bid for the electives schemes at the same time as managing other transactions, whether or not forming part of this procurement.

    —  Economic and financial standing—whether the bidder is in a sound financial position to participate in a procurement of this size as detailed in Regulation 15 of the Public Services Contracts Regulations 1993 (SI 1993 No 3228) (notwithstanding the non-application of Regulation 15). This may entail independent financial checks.

    —  Eligibility—whether the bidder or bidder members satisfy any of the conditions for which they may be deemed ineligible to be awarded a public contract, as detailed in Regulation 14 of the Public Services Contracts Regulations 1993 (SI 1993 No 3228) (notwithstanding the non-application of Regulation 14).

  99.  Those bidders that are short-listed based on their answers to the PQQ will be issued with an Invitation to Negotiate (ITN). Their response to the ITN is their bid.


  100.  The process for evaluation of bids for phase 2 is designed to identify the most economically advantageous offer, which meets the appropriate clinical standards for each scheme. Evaluation will assess the extent to which each bid meets the requirements of the scheme, as defined in each ITN/ITT, together with an assessment of price and affordability of each solution.

  101.  Selection decisions will be based on the following parameters:

    —  performance;

    —  price;

    —  risk; and

    —  timing.

    Indicative evaluation criteria is shown in Annex A.

Q.13  What factors have been and should be taken into account when deciding the location of ISTCs?

  102.  The locations of ISTCs are not in all cases decided upon by the Department of Health. In the first instance DH discusses potential locations for ISTCs with the local health economy (SHAs and PCTs) and the following factors are taken into account:

    —  accessibility for patients (often in terms of travel time);

    —  availability of NHS facilities (for some ISTC schemes, NHS facilities have been made available to providers), and

    —  opportunity for innovation by the provider (for example, leaving sufficient flexibility for the provider to propose solutions that meet the requirements of the scheme, whilst avoiding being prescriptive on the exact location).

  103.  Bids are subsequently evaluated on their ability to meet the requirements of the scheme, including proposed location.

Q.14  How many ISTCs should there be?

  104.  There is no formal target for the number of ISTCs. However, by 2008 patients will be able to choose to be treated by any healthcare provider (including the independent sector) that meets NHS standards and can provide care within the price the NHS is prepared to pay.

Department of Health

13 February 2006

1   Delivering the NHS Plan: next steps on investment, next steps on reform, DH, April 2002. Back

2   Growing Capacity: Independent Sector Diagnosis and Treatment Centres, DH, December 2002. Back

3   See N. Timmins, "Private hospitals paid 44% premium to carry out surgery on NHS patients", Financial Times, 5 February 2004. Back

4   Estimated by taking the difference between the amount paid under wave one contracts and the equivalent spot purchase price. Back

5   See N. Timmins, "Under the knife: why investment in the NHS means radical surgery for the private healthcare sector", Financial Times, 12 June 2004. Back

6   Laing's Healthcare Market Review 2005-06, Laing & Buisson, September 2005, section 2.7.5. Back

7   Preliminary Overview Report for Schemes GSUP1, OC123, LP4 and LP5: ISTC Performance and Analysis Service, National Centre for Health Outcomes Development, October 2005. Back

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