Commissioning: further issues - Health Committee Contents

9  Choice and Competition

148. Concern has been expressed to the Committee that the Government's objective of extending the scope of competition in the NHS, and the associated objective of broadening the range of choices available to patients, may have the effect of undermining the ability of commissioners to develop optimum solutions for healthcare delivery.

149. The Committee has made clear its view that voters will continue to regard the Government in the person of the Secretary of State as responsible for the development of the NHS.[121] It has also made clear its view that the most effective instrument available to the Secretary of State to deliver voters' objectives for the NHS is the development of effective commissioning. It believes it is important that this objective is not undermined by parallel policies on the development of choice and competition in the NHS.

150. The Government plans to go much further than its predecessor in the creation of what it calls a "social market"[122] in the NHS. A set of major reforms is intended to facilitate this. From April 2012, Foundation Trusts (FTs) will cease to be regulated by Monitor. By April 2014, all NHS Trusts must become FTs. The commercial freedoms of FTs will be significantly enhanced, with the lifting of restrictions on their ability to borrow from commercial lenders and to treat private patients.

151. From April 2012, the Government proposes that Monitor will become the independent economic regulator for the NHS. From April 2013, Monitor would operate a joint licensing regime for all providers of NHS services, along with the quality inspectorate, the Care Quality Commission (CQC). Licensing would facilitate the discharge by Monitor of its three core functions:

  • promoting competition;
  • setting or regulating prices; and
  • supporting the continuity of essential services (those "designated as subject to additional licence conditions") in the event of provider failure.

    152. The Government proposes that Monitor will have significant statutory powers to enforce competition and a "fair playing field". This will be partly by means of placing licensing conditions on providers; and partly by enforcing pre-existing competition law, as well as new regulations specific to the NHS.

    153. The Government has several times referred to its proposals in terms of the creation of a regulated market, akin to those in the privatised utilities (gas, electricity, water and sewerage) and railway and telecoms industries and has likened the future role of Monitor to that played in their respective industries by Ofcom, Ofgem and Ofwat.[123] So too, indeed, has the new Chair of Monitor, Dr David Bennett:

      We, in the UK, have done this in other sectors before. We did it in gas, we did it in power, we did it in telecoms […] We've done it in rail, we've done it in water, so there's actually 20 years of experience in taking monopolistic, monolithic markets and providers and exposing them to economic regulation.[124]

    154. Nigel Edwards, Acting Chief Executive of the NHS Confederation, commented that:

      because we have tended to spend so much time concentrating on GP commissioning, it is worth pointing out that this is a fundamental shift in how providers relate to the NHS […] This Bill takes providers out of the control of the state, which is a very fundamental shift. That is the first analogy with a regulated industry. Of course, there aren't customers in the way that there are for telecoms or other industries. You need a proxy for the customers and that is where the GPs come in.[125]

    155. The Committee does not find this comparison between healthcare and the privatised utilities either accurate or helpful. Competition in the privatised utilities helps to create a balanced relationship between individual customers and the utility; the government is not directly involved in the relationship. In the NHS, the position is fundamentally different because the government is directly involved as the commissioner.

    156. The Government said in the White Paper that it would "Create a presumption that all patients will have choice and control over their care and treatment, and choice of any willing provider wherever relevant".[126] It further explained that:

      Our aim is to free up provision of healthcare, so that in most sectors of care, any willing provider can provide services, giving patients greater choice and ensuring effective competition stimulates innovation and improvements, and increases productivity within a social market.[127]

    157. In a letter to all NHS Chief Executives dated 17 February 2011, Sir David Nicholson said that "Subject to the outcome of the consultation [on Greater choice and control], we would expect AWP to apply to many NHS-funded services in future".[128]

    His letter goes on to say, however:

    Where service integration and continuity of care is important to secure the best clinical outcomes, patient experience and value for money (for example, in end of life care), the intention is that commissioners will be able to go to competitive tender and offer the service to one provider or 'prime contractor'.[129]

    158. Dr Anna Dixon, Director of Policy at the King's Fund, told us that "At the moment, there is a lack of clarity about the scope for where an Any Willing Provider market will be […]". Dr Dixon presumed, following Sir David Nicholson's letter of 17 February 2011, that:

      It is going to be the Commissioning Board, perhaps, that will be determining this and then the question will be that Monitor will check whatever of those models is happening, that if it is competition for patients, there is competition and they are under competitive behaviour by providers, and if there is a tendering process, that the commissioners are tendering in line with procurement guidance set down by the Department which says that these are the rules by which you have to compete. The Commissioning Board is key.[130]

    159. Dr Bennett, of Monitor, agreed with Dr Dixon that "the intention is that the Commissioning Board will broaden the scope [of AWP]".[131] Mr Sobanja, of the NHS Alliance, told us:

      If "Any Willing Provider" is triggered by a commissioning desire, then it is satisfactory as an alternative to tendering […] But if "Any Willing Provider" is to operate at any time such that any provider can enter the market, with their licence from CQC and Monitor and must be given a contract and not in response to a commissioning trigger, then it undermines commissioning. What we have to do is put more weight behind commissioning, at both primary and secondary care, not undermine it.[132]

    160. Dr Bennett also said that, under AWP, providers "are not being commissioned by the GP consortia. They are providing a service under Any Willing Provider, accredited in some way."[133]

    161. In evidence, Sir David Nicholson told us:

      the whole thing about Any Willing Provider is that we are on a kind of journey with it. There is not going to be a switch flicked on 1 April 2012, 2013 or 2014, which will suddenly open up the whole of the NHS to Any Willing Provider. That is not how it is going to work at all. We are slowly but surely experimenting, working and understanding before we move on to the next issue.[134]

    162. The Committee believes that Commissioners should determine the shape of service provision. It follows the extent of choice, the extent of application of Any Willing Provider, and the method of determination of entry into the AWP market all have to be consistent with that core principle.

    163. Monitor told us that providers operating under Any Willing Provider "are not being commissioned by the GP consortia". The Department needs to explain how it will ensure that commissioners are not simply bill payers where Any Willing Provider applies.

    Is the model driven by patient choice or effective commissioning?

    164. Commissioning for patients (July 2010) states that:

      Within the scope of NHS services as defined by the Secretary of State, GP consortia will be free to decide commissioning priorities to reflect local needs, supported by the national framework of quality standards, tariffs and national contracts established by the NHS Commissioning Board. They will be able to adapt model contracts to include the quality dimensions that they judge will produce the best outcomes, subject to ensuring that patients have choice of any willing provider that can perform to these quality standards.[135]

    165. The DH's memorandum to this inquiry says:

      Giving patients this choice [of any willing provider] will not conflict with a consortium's clinical priorities, as it will still very much be for commissioners to decide on the services to which they want to be able to refer their patients to have access and to establish quality criteria for these services. Only providers that meet the commissioner's quality criteria will be eligible to provide these services.[136]

    166. Sir David Nicholson's letter of 17 February 2011 took the same line when he said:

      In essence, providers will need to be licensed (where this is required by CQC) and hold an appropriate NHS Standard Contract. They will be obliged to work within the standard business terms of that contract, including meeting specified national quality standards, where appropriate additional local standards and referral protocols, and the agreed price.[137]

    167. The Committee regards it as essential that NHS commissioners are able to choose the pattern of service delivery which reflects their clinical and financial priorities.

    168. As part of the process of strengthening NHS commissioning, the Committee welcomes the continued development (initiated by the previous government), firstly, of the culture of open-minded consideration by commissioners of all options to meet their objectives, and, secondly, of engagement with patients to reflect their individual needs and priorities.

    Commissioning integrated pathways

    169. A crucial part of effective commissioning is the ability to assemble stable and coherent pathways of care, with all their constituent elements seamlessly integrated. Such an approach is generally held to facilitate both the best outcomes for patients and value for money. It is particularly important where patients require complex, integrated packages of care, such as care for frail older people with multiple co-morbidities and end of life care.

    170. Concerns have been expressed that effective commissioning of integrated care pathways could be compromised in the new system. Mr Sobanja, of the NHS Alliance, told us:

      if the primary purpose of redesigning the service is about improving care to patients, improving integration, and so on, that, for me, would trump the issue of anticompetitive behaviour, recognising the statute to be complied with there. In that sense, to answer your question, Monitor ought to be a servant of good commissioning, not the determinant of good commissioning.

    171. The White Paper (July 2010) promised that the Government would "accelerate the development of pathway tariffs for use by commissioners" from April 2011.[138] Similarly, according to the tariff guidance for 2011-12, the Department is:

      committed to developing and implementing pathway and year of care tariffs in the future. In the meantime, commissioners and providers may wish to explore options for the local bundling of care into pathways, especially for patients with long term conditions and named patients with frequent admissions.[139]

    172. In discussing the issue of "fair playing field distortions", the Department has, however, identified the "bundling" of services as an obstacle to competition, against which Monitor may need to act. The consultation document Regulating healthcare providers (July 2010) and the Command Paper both refer to the possibility of licence conditions requiring providers to accept services (such as diagnostic tests) which have been commissioned from other providers, where clinically appropriate.[140] The Impact Assessments for the Bill state that "The bundling of tariffs makes it difficult for providers to compete for services within the bundle (e.g. diagnostics)",[141] indicating that a fair playing field must mean there is contestability for individual components of care, rather than for whole pathways.

    173. When the point was put to Dr Bennett of Monitor he said that Monitor had a "duty to promote and protect the interests of users of the system". It would be contrary to the aims of the Bill "if we finished up with arrangements that did not enable commissioners to commission the services that were in the best interests of their patients".[142] He also said that:

      If you are looking at services where it is most important that you get integrated care, then those are the services where you are more likely to see them outside than inside the scope [of AWP].

    In such a case, Monitor would only become involved if there were a complaint that a tendering exercise had not been truly open and competitive.[143]

    174. We asked the Secretary of State about Dr Bennett's statement that, were a provider to challenge a consortium's decision to commission a service as an integrated pathway (i.e. outside AWP), it would not be for Monitor to consider whether this was anti-competitive:

      That is right. To put it in a nutshell, Monitor's role is only to intervene in circumstances where commissioners are behaving in a way which is both anticompetitive and acts against the public interest.[144]

    He later said:

      If the commissioner sees it as being in the interests of the patients they look after to invite providers to provide a service in a particular way or to design a service in a particular way, bundling services together or securing services on a care pathway basis, that is their decision. I don't think there is any basis upon which a provider can go to anybody, be it the Commissioning Board, the consortia or anybody else, and say, "You're not allowed to do that." They are allowed to do that.[145]

    175. Although there has been much discussion of this issue during the passage of the Bill, the statements made to the Committee by the Secretary of State, the Chief Executive Designate, and the Chairman of Monitor have been consistent and clear, and bear only one interpretation: commissioners will have the power necessary to design, commission and monitor integrated pathways of care. We regard this as a vital commitment of principle which must not be prejudiced and which should be written into the Bill to avoid further ambiguity.

    121   See paragraph 8 above. Back

    122   Cm 7881, paras 4.26 and 4.28; Department of Health, Health and Social Care Bill 2011: Impact Assessments, January 2011, paras B14 and B70 Back

    123   See, for instance, Cm 7993 paras 6.57 and 6.84 Back

    124   "NHS reforms raise prospect of Tesco-style hospital chains", The Times, 25 February 2011 Back

    125   Q 96 Back

    126   Cm 7881, p 17 Back

    127   Ibid., para 4.26 Back

    128   Sir David Nicholson, Letter to NHS Chief Executives, 17 February 2011, Annex B, p. 14 Back

    129   Ibid. Back

    130   Q 127 Back

    131   Ibid. cf. Q 131 Back

    132   Q 65 Back

    133   Q 153 Back

    134   Q 297 Back

    135   Department of Health, Liberating the NHS: Commissioning for patients, July 2010, para 5.1 Back

    136   Ev 120 Back

    137   Sir David Nicholson, Letter to NHS Chief Executives, 17 February 2011, Annex B, p. 14 Back

    138   Cm 7881, para 3.18 and p 52 Back

    139   Department of Health, Payment by Results Guidance for 2011-12, February 2011 (revised March 2011), para 431; cf. paras 64 and 108 Back

    140   Department of Health, Liberating the NHS: Regulating healthcare providers, July 2010, para 6.8; Cm 7993 para 6.82 Back

    141   Department of Health, Health and Social Care Bill 2011: Impact Assessments, January 2011, Table B1, p 43 Back

    142   Q 125 Back

    143   Q 127 Back

    144   Q 435 Back

    145   Q 453 Back

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    Prepared 5 April 2011