Commissioning - Health Committee Contents



Nearly twenty years ago the then Government introduced the purchaser/provider split whereby services were purchased or commissioned from provider bodies. The stated aim was a more efficient health service and one run more in the interests of patients than hospital doctors. The nature of commissioning systems have changed several times since 1998. It is now primarily undertaken by 152 PCTs.

Whatever the benefits of the purchaser/provider split, it has led to an increase in transaction costs, notably management and administration costs. Research commissioned by the DH but not published by it estimated these to be as high as 14% of total NHS costs. We are dismayed that the Department has not provided us with clear and consistent data on transaction costs; the suspicion must remain that the DH does not want the full story to be revealed. We were appalled that four of the most senior civil servants in the Department of Health were unable to give us accurate figures for staffing levels and costs dedicated to commissioning and billing in PCTs and provider NHS trusts. We recommend that this deficiency be addressed immediately. The Department must agree definitions of staff, such as management and administrative overheads, and stick to them so that comparisons can be made over time.

There are examples of good work being undertaken by PCTs. However, many PCTs believe they are working effectively although the evidence would suggest otherwise.

As the Government recognises, weaknesses remain 20 years after the introduction of the purchaser/provider split. Commissioners continue to be passive, when to do their work efficiently they must insist on quality and challenge the inefficiencies of providers, particularly unevidenced variations in clinical practice.

Weaknesses are due in large part to PCTs' lack of skills, notably poor analysis of data, lack of clinical knowledge and the poor quality of much PCT management. The situation has been made worse by the constant re-organisations and high turnover of staff.

Commissioners do not have adequate levers to enable them to motivate providers of hospital and other services. We recommend the Department commission a quantitative study of what levers should be introduced to enable PCTs to motivate providers of services better and a review of contracts to ensure that rigid, enforceable quality and efficiency measures are written into all contracts with providers of health care.

Particular arrangements are made for specialised commissioning for rare diseases and conditions. These were reviewed by Sir John Carter in 2006. The implementation of the Carter Review has made significant improvements. However, we are concerned that insufficient progress has been made, with significant local variations; and that some important issues remain outstanding.

Carter recommended the revision of the National Definitions Set; this does not appear to have gone far enough. The DH must indicate what it will do to ensure that the fourth edition commands wider confidence and support among commissioners.

Worryingly, the evidence which we received indicates that many PCTs are still disengaged from specialised commissioning. Furthermore, there is a danger that the low priority many PCTs give to it will mean that funding for specialised commissioning will be disproportionately cut in the coming period of financial restraint. In addition, specialised commissioning is weakened by the fact that, as a pooled responsibility between PCTs, it sits in a "limbo", where it is not properly regulated, performance managed, scrutinised or held to account. There is much to commend the Specialised Healthcare Alliance's proposal to bypass the PCTs altogether, making the National Commissioning Group and the Specialised Commissioning Groups into commissioners in their own right, although there is some risk that this could lead to a lack of co-ordination of, and disruption to, services. We recommend that the DH undertake a review of the problems we have highlighted, taking into account the Specialised Healthcare Alliance's proposal.

The Government has embarked on a series of sometimes contradictory reforms which have had significant effects on commissioning. In the first wave of reforms undertaken when the Rt Hon Frank Dobson was Secretary of State, NICE was created. This has led to threats and opportunities for PCTs. Potentially, PCTs could insist that hospitals use NICE guidelines to provide the best, cost effective care; unfortunately, they have done this less often than they should have. On the other hand, there is a tendency for NICE guidance to be "inflationary" in its effect on spending by PCTs, obliging them to pay for certain expensive treatments. We repeat our regular injunction that NICE should do more to specify where disinvestment should take place.

The next wave of reforms, made when the Rt Hon Alan Milburn was Secretary of State, sought to achieve a more market-oriented NHS; they included the introduction of PbR. We were informed that this has had a number of disadvantages for commissioners. PbR threatens to increase transaction costs and, in part because of the weakness of commissioning, provides hospitals with an incentive to generate more activity to increase their income.

More recently the DH has appeared to place less emphasis on the market-based approach. The present Secretary of State has stated that the NHS is the "preferred provider" and Integrated Care Pilots have been introduced. It is unclear how this policy relates to earlier measures such as PbR.

Although there has been slightly less emphasis on market reforms recently, the NHS remains characterised by tensions between purchasers and providers. The weakness of commissioners faced by powerful providers means that the reforms have threatened to undermine some of the Government's key aims, such as switching care from hospitals to the community.

The Government has sought to address the weaknesses of commissioners by its World Class Commissioning programme which seeks to improve commissioners' "competencies" and FESC which provides access to outside consultants to fill skill gaps. CQUIN, PROMs and Quality Accounts are intended to give commissioners better levers in relation to providers.

Ridiculous though the term is, much of the World Class Commissioning initiative is unexceptionable. It is clearly too early to judge the success of WCC but the Committee notes there are serious concerns about the capability of PCTs to make the huge step changes required. We recommend that the Care Quality Commission use the eleven competencies of World Class Commissioning to judge PCTs.

We are concerned that PCTs might be too complacent to make the necessary improvements. A survey we commissioned from the NAO revealed a remarkable degree of misplaced confidence on the part of PCTs about how well think they are doing.

It is not clear to us that WCC is going to address the lack of capacity and skills at PCT level and weak clinical knowledge. Furthermore there are concerns that WCC will be no more than a "box ticking" exercise whereby people expend a lot of energy merely demonstrating they have the right policies in place, rather than actually transforming patient outcomes and cost effectiveness.

The Government believes that CQUIN, PROMs, Quality Accounts and Never Events will improve commissioning, shifting power away from providers and enhancing the quality of care. However, we remain concerned that the Government is not piloting and rigorously evaluating these ideas before implementation, as we have previously said.

PCTs clearly do lack the skills that they need for commissioning and engaging consultants is one way of helping to address this situation. However, we are concerned that FESC is an expensive way of addressing PCTs' shortcomings. The Minister of State himself expressed concern about the extent to which consultants are being used. The Department must do more to determine whether or not the taxpayer is getting real value for money out of this costly exercise. Whatever the possible benefits of using consultants, we doubt the ability of PCTs to use consultants effectively.

The Government has announced a 30% reduction in management costs in PCTs and SHAs from 2010 to 2013. While some PCTs do a good job with low overheads, we are not convinced that taking money away from weaker PCTs will automatically encourage them to improve their performance. At a time when we are expecting so much of PCTs, it seems risky to be cutting their management costs by 30% when they need better skills and more talent. We note that the Minister indicated the potential to make savings from SHAs; we agree that they should bear the brunt of any cuts.

If we are to keep PCTs they need to strengthened. In particular, they require a more capable workforce, with people able to analyse and use data better to commission services. They also need to improve the quality of management, attracting and developing talent. As we have argued in previous reports, the NHS Graduate Management Training Scheme could play a major role in achieving this. However, commissioning cannot be improved in isolation from the rest of the health service. PCTs will need to have more power in dealing with providers. It needs to be able to offer more evidence-based financial incentives to providers to improve its relationship with providers. We trust our successors will follow the CQUIN initiative carefully. It must, however, be properly evaluated. If successful it should be expanded significantly. At the moment the Government has proposed some sort of qualitative analysis, which amounts to little more than asking participants how they feel about it. We recommend the Government institute a rigorous quantitative assessment.

In conclusion, a number of witnesses argued that we have had the disadvantages of an adversarial system without as yet seeing many benefits from the purchaser/provider split. If reliable figures for the costs of commissioning prove that it is uneconomic and if it does not begin to improve soon, after 20 years of costly failure, the purchaser/provider split may need to be abolished.

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