2 Contract management
10. The Department has contracted with a sole
supplier for healthcare professionals since it first outsourced
medical service provision in August 1998.[22]
Although the Department now has ten potential suppliers on a medical
services framework contract,[23]
it awarded contracts to just two of those suppliers for the Personal
Independence Payment contract, and two of the three of these contracts
awarded to date have been allocated to Atos Healthcare. The Department
has had 14 years to develop a competitive market for healthcare
providers but continues to depend on a near monopoly supplier.[24]
11. Despite the risks associated in working with
a monopoly provider, the Department has been reluctant to intervene
to more actively manage the contract. It has adopted a light-touch
approach and placed too much reliance upon information provided
by the contractor. The absence of proper validation can create
a risk that the Department incurs inappropriate expenditure. In
response to our questions the Department revealed that in a typical
month it only checked 0.1% of the individual cases that it was
invoiced for (139 out of 128,000). The Department has a provider
assurance team model for its contracted employment programmes
but has yet to introduce an equivalent control for the medical
assessment contract.[25]
12. The contract with Atos Healthcare specifies
that the Department will apply service credits where the contractor
has failed to meet the specified service level. Service credits
are designed to identify the cost to the Department of Atos Healthcare's
non-performance against a particular target and to recompense
the Department where appropriate. The system allows for Atos Healthcare
to supply 'mitigation' where it considers factors outside of its
control have adversely affected performance.[26]
However, the Department has applied only 10% of service credits
due since the start of the contract in 2005. Moreover it suspended
the whole service credit regime between September 2009 and March
2010 and between June 2011 and December 2011,[27]
and has put in place an interim service regime since March 2012.[28]
The Department told us that the introduction of Employment and
Support Allowance was the primary reason for poor performance
rather than the actions of Atos Healthcare[29]
but has still appeared reluctant to rigorously apply service credits
to remedy poor performance or to penalise the contractor for inaccurate
medical assessments.[30]
13. Medical auditors from Atos Healthcare conduct
sample audits of medical assessments and provide an A-C grading.
A grading of 'C' is classified as "failing to meet professional
standards". The Department has set a target that no more
than 5% of all face to face medical assessments audited by Atos
Healthcare should fail professional standards but it was unable
to provide a rationale or professional evidence to support the
reasonableness of the target when we raised concerns about it.
This target does not seem particularly challenging given that
in the past year the contractor has, on occasion, performed at
a level of 3.5%, so we welcome the Department's commitment to
set more stretching targets in the future. [31]
14. We also expressed concern that the Department
appears over-dependent on ATOS for self-regulation. The Department
only validates a very small proportion of the medical assessments
invoiced by ATOS and the scope and scale of the work it does to
check the medical quality of the assessments is unclear.[32]
15. The Department agrees a service level for
how quickly Atos Healthcare processes medical assessments. We
found that a significant proportion of cases have been with the
contractor for more than 56 days at March 2012 (25% compared with
a target of 3%). We also found significant regional variations
in performance ranging from 1% or 2% of cases in the north to
28% in London and the Home Counties and 40% in the south east.[33]
16. Managing backlogs has been a longstanding
issue for the Department. Backlogs in completing medical assessments
have resulted from the Department introducing changes to the process
and from staff shortages within the contractor.[34]
This led the Department to suspend the service credit regime from
March 2012.[35] We understand
that the Department is in active discussions with Atos Healthcare
and is providing incentivised payments to the contractor to reduce
the backlogs.[36]
17. Accurate forecasting of referral volumes
is also critical to reducing backlogs. The contract includes estimates
of demand for medical services on which assumptions around fixed
overhead costs are based. Where total actual referral volumes
are more than 20% over or under these volumes for three consecutive
months or more, either party can renegotiate the contract.[37]
The Department provides detailed operational estimates each year
but these have not been particularly accurate. For example in
2008-09, actual referrals for all service lines were 68% of contract
forecasts.[38] More recently
the Department appears to have improved its overall forecasting
with a variance of around 3% between April and September, although
there are wide regional variations of up to 30% in any one month.[39]
18. The Department has an open-book accounting
arrangement with Atos Healthcare but it would not publicly provide
details of contract profitability on the grounds of commercial
sensitivity although it has agreed to brief the Committee privately
on this subject.[40]
Consequently, it is not clear how far the Department has successfully
passed risk to the contractor, or how the contractor's profits
reflect the risk that it actually bears. For example, the recent
award of a contract to Atos Healthcare for the Personal Independence
Payment includes an arrangement whereby Atos Healthcare sub-contracts
with NHS Lanarkshire which effectively passes the risk back to
the public sector, but at a profit to the contractor.[41]
19. The witnesses who spoke for people who have
undergone these medical assessments (Citizens Advice and Disability
Rights UK) and the Department had different interpretations on
the data and performance issues relating to the decision-making
process. Both Citizens Advice and Disability Rights UK were critical
of the Work Capability Assessment process and its impact on claimants.
Citizens Advice, in particular, reported alarming increases in
the number of people consulting them about appealing against the
Department's decisions.[42]
The Department, however, emphasised recent improvements in performance
and the better information it is collecting on why appeals succeed
on so many occasions.[43]
22 C&AG Report para 1.2 Back
23
Q 31 Back
24
Q 30 Back
25
Qq 51-58; Ev 31 Back
26
Q 146 Back
27
Q 152 Back
28
C&AG Report para 3.21 Back
29
Q 146 Back
30
Qq 4, 146 Back
31
Q 142 Back
32
Qq 58, 125-131; and Ev 31 Back
33
C&AG Report para 3.14; Qq 165-168, 173 Back
34
Qq 112, 149, 227 Back
35
Q 154 Back
36
Q 169 Back
37
Q 115 Back
38
Q 118 Back
39
Q 115 Back
40
Q 35; Ev 31 Back
41
Qq 65, 69 Back
42
Qq 6-8, 12, 13 Back
43
Qq 72, 115, 169 Back
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