1.On the basis of a report by the Comptroller and Auditor General, we took evidence from NHS England and Capita Business Services Ltd (Capita) on NHS England’s management of the primary care support services contract with Capita.
2.Primary care support services provide a range of administrative and back-office functions to around 39,000 GPs, dentists, opticians and pharmacists. When NHS England took responsibility for these services in 2013 they were being delivered by 1,650 staff from 47 local offices, managed under separate local arrangements, with no common standards in service specification or operating processes, and with limited data on performance. Services were supported by a 20-year old IT system that NHS England considered was unsustainable and in urgent need of replacement, and many processes relied on the manual processing of paper-based documentations. In 2014–15, these services cost £90 million.
3.In August 2015, NHS England entered into a seven-year, £330 million contract with Capita to deliver nine primary care support services, with the option of extending it by an additional three years. The services, known as Primary Care Support England, are: administering payments to GP practices, opticians and pharmacies; administering the pensions of GPs; administering entry and changes to national performers lists that provide the public with reassurance that GPs, dentists and opticians in the NHS are suitably qualified and have passed other relevant checks; moving patient medical records between practices and into storage; sending out letters for those eligible for cervical screening; processing patient registrations and de-registrations; providing NHS stationary and some other supplies; validating and processing pharmacy market entry applications; and a customer support centre for all telephone queries relating to these services.
4.NHS England aimed to reduce its costs by 35% from the first year of the contract, and create better-quality support services that were more efficient, and easy to use. NHS England told us that urgency was a factor in contracting out these services as a delay of a year would have sacrificed £30 million in administrative savings. Stakeholders told us that they challenged NHS England on its ambitious timetable, which to them seemed more about making savings than providing services.
5.NHS England told us that there was a trade-off between the level of efficiency savings it could achieve and minimising any downsides for service users. The performance indicators set by NHS England to measure Capita’s performance were focused on speed and efficiency, rather than the quality of service. For example, the performance measure for payments to GPs measures whether Capita is making payments on time not whether the payments are accurate. The performance indicators also did not cover all the services that Capita was required to deliver and were not agreed from the start of the contract. For example, of the 78 key activities that Capita was contracted to carry out, 23 were not captured by performance measures and therefore NHS England was unsighted on this activity.
6.Capita told us that prior to the entire service being outsourced, there should have been a pilot to assess any potential issues with the outsourced service. However, it could not answer why Capita had not proposed a pilot. NHS England disagreed with this assessment, highlighting that this would have exposed it to a different set of risks, such as the previous service falling over.
7.This was complex service being outsourced for the first time. Neither NHS England nor Capita fully understood the service being outsourced, including the volume and scope of services, and the ways in which services were being delivered differently across the country. Capita told us that when it took over the service, there was no national data on the service and that it was running blind for a period of time. Capita acknowledged that it did not carry out sufficient due diligence or assess what the issues were before it signed the contract to deliver these services. It also accepted that it should have done more to ensure that it had access to all the data it needed. Despite this lack of data, NHS England’s assessment of the contract risk focused on the likelihood of it failing to achieve its financial savings target and did not adequately assess the risk of Capita failing to provide the service to a good standard.
8.Capita aimed to develop national data over the first three months of the contact (transition period) but acknowledged that it took longer than that to produce the national data that was needed to set the performance indicators. NHS England acknowledged that the transition period unearthed many problems and that a longer transition period would have been beneficial before Capita began to make service changes.
9.Capita’s bid depended on it closing local primary care support offices and delivering a major transformation of services to meet NHS England’s objective to reduce its costs. Capita expected to make losses of £64 million in the first two years of the contract, in order that NHS England could meet its objective to reduce its costs. Capita, therefore, had a financial incentive to close support offices and reduce staff as quickly as possible, in order to minimise its losses over the first two years of the contract. Between December 2015 and November 2016, Capita closed 35 of the 38 support offices it inherited and cut staff numbers from 1,300 to 660.
10.Stakeholders told us that the site closures resulted in the loss of local expertise and meant that Capita did not have the resources needed to deliver the service. Capita acknowledged that it was a mistake to carry on closing offices, once it started receiving complaints about the service, and that in continuing to do so “we just made the problem worse as we went along … we should have stopped.” It accepted that it would have been better to have developed and applied national operating procedures at each office before starting to close them. However, it told us that this would have taken up to two years to achieve and would have resulted in a higher contract price and a delay in delivering efficiency savings for NHS England. NHS England raised concerns about the office closures in May 2016, but had not included contractual mechanisms to stop Capita from going ahead with its plans as it would have had to pay more for this flexibility.
11.Capita told us that over the first two years of the contract it has made a loss of £125 million, and that if you add the loss of margin on the contract, it is closer to £140 million. It also acknowledged that it was unlikely to make a profit over the remainder of the contract. However, it told us that it was committed to continuing to invest to ensure that it delivers the key performance indicators associated with the contract. Capita also said that it and NHS England had made a commitment to reset their working relationship and ensure they bring the requisite resources and attention to any outstanding elements of contract execution. It emphasised that, working in partnership with NHS England, “we are committed to delivering against the contract.” In the first two years of the contract, NHS England achieved savings of £60 million compared to expected savings of £64 million.
1 Report by the Comptroller and Auditor General, , Session 2017–19, HC 632, 17 May 2018
2 Qq 79, 95; , paras 1, 5
3 Qq 1, 113; , paras 1.2, 1.8, figure 3
4 Q 79; Optical Confederation and the Local Optical Committee Support Unit (); British Medical Association ()
5 Qq 102, 108
6 Qq 48–52; para 3.8
7 Q 39; , para 13
8 Qq 96, 137–140
9 Qq 97–98
10 Qq 30–32, 34, 39, 78–79 81–83, 90–94, 96, 137; , para 7
11 Qq 31, 34, 39, 94, 96
12 , para 14
13 Qq 39–40
14 Qq 82, 99–100
15 , para 1.9
16 Q 140; , paras 9, 15
17 Optical Confederation and the Local Optical Committee Support Unit ()
18 Qq 32–38
19 Qq 101–103, 127; , para 15
20 Qq 42, 56, 136
21 Qq 78, 100; para 19
Published: 25 July 2018