1.By putting the contract for older people’s and adult community services out to tender, Cambridgeshire and Peterborough Clinical Commissioning Group (the CCG) tried to outsource its own responsibility to commission local health services. In an attempt to transform service delivery, the CCG signed a contract in November 2014 with UnitingCare Partnership, a limited liability partnership, to commission a more integrated approach to older people’s and adult community services in Cambridgeshire and Peterborough. But the contract collapsed after only eight months because it ran into financial difficulties. The CCG now accepts that it cannot outsource the difficult decisions that come with trying to integrate services in challenging financial circumstances. It acknowledges that it needs to manage future risks collectively with the trusts rather than trying to transfer them to providers. It recognises that shared management of risk, with a focus on good outcomes for patients, will be important if it is to succeed in implementing its sustainability and transformation plan.
Recommendation: Local commissioners should take responsibility for designing more integrated systems of healthcare themselves, drawing on skills from within the NHS. They must not abdicate commissioning responsibilities to a body which is not clearly accountable to the taxpayer.
2.There was a fundamental mismatch between what the CCG expected to pay for the contract and what UnitingCare Partnership expected to receive. At £726 million, UnitingCare Partnership’s bid was significantly lower than its competitors which helped it to win the contract. But the bid did not make clear that UnitingCare Partnership expected to negotiate a 20% funding increase from the CCG through contract variations as the project progressed. The lack of transparency meant that the CCG could not assess all the bids it received on a level playing field. The CCG was then naïve in failing to assess properly the viability of the UnitingCare Partnership bid or to challenge it on the costs and level of contingency it had built in. Instead, it accepted the lowest bid on the table. As part of its attempts to improve its oversight of complex local procurements, NHS England is preparing a checklist for CCGs to follow in future. Even without a checklist this lack of basic scrutiny is cause for concern.
Recommendation: NHS England’s new checklist for CCGs should set out the minimum steps that CCGs should take to assess the realism and viability of bids.
3.It was grossly irresponsible of the trusts and the CCG to rush ahead with the contract without sufficient clarity on the costs and the risks. Fearing that delays in the timetable would impact on staff and patients, the CCG and UnitingCare Partnership signed the contract before they had reached agreement on many important contractual issues. The CCG did not have a full understanding of the current cost of the services being provided, nor had it provided a complete list of the scope of services to be included in the contract. Notably, neither party was clear on who would pay some basic costs, such as any VAT liability incurred through the contract. As a limited liability partnership UnitingCare Partnership was outside NHS VAT arrangements. This meant that its subcontractors were no longer able to recover VAT on these services, as they had previously when providing services directly to the CCG. The Partnership had not factored these additional costs into its contract price, and nor was the CCG expecting to foot the bill. Despite these clear warning signs, both sides pressed ahead and signed the contract without resolving the outstanding issues.
Recommendation: NHS England and NHS Improvement need to introduce safeguards so that CCGs and trusts cannot start a contract unless they have agreed the cost and scope of the services to be provided.
4.Services for patients in Cambridgeshire are likely to suffer due to this failed contract. The contract’s failure worsened the finances of an already struggling local health economy, leaving unfunded costs of £16 million to be shared between local trusts and the CCG. The CCG is now in deficit, and has not been able to afford to bring in all of the service improvements it had planned. It is costing the CCG more to commission services than it expected to have been paying UnitingCare Partnership, and it cannot afford to commission all of the services that were promised under the contract. Furthermore, the contract collapse meant that £178 million of expected efficiency savings have not materialised, leaving even less money available for other health care services. Through its sustainability and transformation plans, the CCG is trying to work out what services it can afford from its reduced resources, and it is considering closures or reorganisations of other health services such as the minor injuries unit in South East Cambridgeshire.
Recommendation: In its sustainability and transformation plan the CCG should be clear about the impact of this contract failure on its ability to deliver health care services to the people of Cambridgeshire and Peterborough.
5.This contract collapse is yet another case of the NHS lacking the commercial skills to procure patient services effectively. The astonishing array of errors in this contract shows that the health sector is still not getting the commercial basics right. The procurement adviser on this contract, the NHS Strategic Projects Team, proved not to be fit for purpose and NHS England has since abolished it. NHS England told us that one of the seven key lessons arising from this contract is that it needs to improve its commercial expertise, which is currently spread too thinly. In the meantime the CCG is still relying on consultants and is about to sign a £800,000 contract with McKinsey for advice on how to improve its financial position. We are concerned that the health sector has still not improved its commercial skills, as we recommended in our session on the failure of the Hinchingbrooke franchise more than 18 months ago. If it does not do so urgently then more money will be wasted.
Recommendation: By April 2017, NHS England should report back to us on what specifically it has done to improve the quality of commercial skills available to local NHS bodies, as identified in its seven key lessons for the future.
6.The elaborate contract set-up exposed gaps in regulatory and oversight arrangements which, if not addressed, may reoccur in local initiatives proposed as part of sustainability and transformation plans. Cambridge University Hospitals NHS Foundation Trust and Cambridgeshire and Peterborough NHS Foundation Trust chose to form a limited liability partnership to hold the contract with the CCG. This arrangement reduced the risk to the two shareholder trusts. But it also meant that there was a new private sector body which did not fall within existing health sector oversight arrangements and for which accountability to the public and to Parliament was not clear. NHS England and NHS Improvement accept that there were gaps in their oversight of this contract but it is worrying that such fundamental mistakes are still being made. Sustainability and transformation plans will encourage more innovative and integrated ways of providing health care so we are concerned that NHS England still plans to allow CCGs to use novel contracting arrangements in future, given the failings of this contract.
Recommendation: Before local areas start to implement their sustainability and transformation plans from April 2017, NHS England should report back to us on how it plans to ensure that any innovative arrangements for providing services can be scrutinised by the full range of health oversight bodies.
14 November 2016