There is general agreement that the Health & Social Care Act 2012 is problematic, says Richard Bourne, but there is little agreement about replacing it.

The NHS is going through major changes with experiments around the country into new approaches to care delivery, particularly through devolution schemes, STPs and Vanguards. These are basically collaborative developments and ignore the competition requirements in the Act. Other large scale change using complex procurements as expected under the Act, have collapsed and further major schemes are on hold. But no attempt is being made to look at the legislation, apart from the NHS related parts within the Cities and Devolution Bill.

The Background

There is a very wide consensus that the era of competition as a strategic force for change in our NHS is over. There is ample evidence to show that where competition has been tried it has had limited or no impact.

There is a widespread belief that the policies based on markets and competition have led to fragmentation – making service improvements, especially around integration, harder and making effective collaboration impossible. There is suspicion of additional cost due to market transactions but little actual evidence; Wales and Scotland without competition structures have broadly the same level of management and administration costs.

In social care there has been a long term shift into a market structure with almost all provision being through private providers. This does not serve as any model of success by any analysis – social care is currently a disgrace.

But there is also a wide consensus that the era of organisational change, or redisorganisation, as a solution is also over. Making the whole care system more efficient and effective and more importantly making it work better for patients and service users is about local personal relationships, about leadership and about culture. Big projects like mergers, acquisitions, competitions, failure regimes, and even financial incentives do not appear to work. The really wicked issues facing the care system, around variation, levels of funding, workforce and the silo mentality need addressing directly and imaginatively – reorganisation in itself won’t make anything better.

However, there is a clear ideological divide behind some of the discussion. There are those who believe that all the changes made to the NHS since the 1990’s, when a split was introduced between “purchasers” and “providers”, were part of a neo-liberal agenda which must be reversed – a belief held with almost religious fervour.

There are genuine fears that without changes in legislation decisions about how care services are organised and funded will be unduly influenced by requirements from domestic law, EU law and even from treaties – which could “liberalise” the provision of healthcare and even require competitive tendering for all health care services. In shorthand, external requirements could limit the scope for future governments to limit or reverse the privatisation of care services; effectively limiting the policy options for government.

The Background of EU Law

Lurking behind the discussion is EU Procurement Law. In simplistic terms we have incorporated into our law through the Public Contracts Regulations 2015 the requirements from the 2014 EU Public Procurement Directive. Contracts for the provision of public services must be subject to open competition unless an exemption applies. The most significant exemption is in S12 of the Regulations which exempts arrangements made between connected public bodies.

It is worth noting that the Directive itself makes the point that “it should be recalled that nothing in this Directive obliges Member States to contract out or externalise the provision of services that they wish to provide themselves or to organise by means other than public contracts within the meaning of this Directive”.

The Two Solutions

So we have legislation which is wholly discredited and which could pose problems. The first solution, the “NHS Bill”, reverses the NHS organisational changes since 1990. It abolishes the CCGs which commission services and Trusts which provide services. These are replaced by Health Boards which both plan and deliver NHS services for one or more local authority areas. It takes away any idea of separate commissioning bodies. It follows similar place based approaches taken in Wales and Scotland.

The other approach, the “Efford Bill”, keeps the same organisations but changes the rules under which they must operate and interact. This approach is in tune with the reality of change being undertaken through the Vanguards which allow collaborative working across organisations, which is intrinsically anti-competitive.

Both Bills aim to restore the NHS to being a single integrated system providing universal, comprehensive healthcare, free at point of need with a Secretary of State clearly accountable and with powers to intervene.

Both aim to remove any external requirement for healthcare services to be subject to competition and to remove the market structures brought in by the H&SC Act 2012. The basis of both is that the NHS can be regarded as one system with various organisational components within it having varying degrees of autonomy but subject to unified overall control. If so then the exemptions from enforced competition under S12 will apply. In addition, both contain specific references to exemption from the Public Contracts Regulations.

Advocates of the NHS Bill are sceptical that the changes in the Efford Bill give enough protection from privatisation. They argue that only the complete elimination of any split between “commissioning” and “providing” will be enough to prevent challenges under procurement laws. The legal advice disagrees. There was a long period during which there was this split but no legal challenge ever took place. Arrangements made by local authorities have for decades split functions but avoided competition.

Advocates of the Efford Bill argue that there is always a functional split between those who make decisions about how services are funded and configured and those responsible for delivery. There must be performance management around the provision of services. There has to be some openness and transparency around major decision making and controls to prevent undue influence from vested interests. None of this prevent collaborative working. However, the functions which might be termed planning or commissioning always exist. It does not matter if these functions are located in a separate organisation or just a separate part of the same organisation – so long as it is all part of the NHS then services can be planned and delivered without threats from competition law.

Whilst the NHS Bill sets out to give additional safeguards the major drawback is that it requires by far the biggest reorganisation of the NHS in its history. It abolishes hundreds of organisation and transfers hundreds of thousands of staff into new jobs in new bodies which have to be set up. Additionally there are major issues about how assets and liabilities are parcelled up and transferred and about how contracts are moved or renegotiated.

It also has major impact on local authorities and on systems for Regulation and Inspection. This is far beyond the capability and capacity of the NHS to implement especially at a time the NHS is under huge pressures over delivery.

So the question is whether the benefits of removing competition and markets can be achieved without a wholesale reorganisation.

In reality there is far more to debate about just how far ideas around place based systems can be extended in England; about the role of local authorities alongside any separate care commissioning bodies; about the best configuration for some acute (and other) services which have no obvious geographical bas; about the value of democratic accountability and so on. These arguments are being played out already for real through the various Vanguards and other experiments.

The Private Provider Issue

A separate but connected issue arises around the role of the private sector. NHS funding flows not just to NHS bodies like Trusts but also to local authorities, voluntary organisations, GPs, and providers of pharmacy, ophthalmology and dentistry. What raises most concern for some is that at present around 6% of NHS spend is on secondary care provided by private for profit organisations.

Whatever the views on this issue, neither Bill addresses the matter directly. Both allow for a policy of reducing the use of private providers over time without external interference.

The Efford Bill approach accepts some services could be subject to competitive tender. This accepts the reality that most insiders will say that it is impossible to remove all need for private provision in all circumstances, even if it was desirable.

There are claims that the NHS Bill removes all private provision and “reinstates” a public NHS, however the Bill uses the phrase “provide or secure the effective provision of services”. The Bill does not address private contracts currently in force. Neither does it change the situation in respect of primary care services which are in effect franchised. 1

The NHS Bill sets out that the Public Contracts Regulations do not apply to arrangements made by Health Boards and that they do not give rise to contractual rights. But it still appears to be possible that Health Boards might decide to find ways to offer services for tender.

They might outsource or sub contract some functions and they might be directed to do so by the all-powerful Secretary of State.

In short the issue of the role of the private sector cannot effectively be addressed by either Bill. The only effective protection against “privatisation” is to elect a government that does not do it.

Other Issues

The NHS Bill makes a number of further changes which also have significant organisational impact. The duties placed on CCGs and Trusts in relation to public and patient involvement (PPI) are removed and replaced by forming new bodies – Community Health Councils (CHCs). There would no longer be any direct PPI, although this is required under the NHS Constitution. The role of Healthwatch is not changed by the NHS Bill but would conflict with role of CHCs.

The current duties placed on local authorities about public health, needs assessment, overview and scrutiny and health and wellbeing strategy are transferred to Health Boards. The role of Health and Wellbeing Boards which sit within local authorities is removed. The current systems for Regulation and Inspection are geared around current organisations and so would all be invalidated by the NHS Bill changes. These changes, if they were actually developed into something workable, would mark a further very significant degree of organisational change and upheaval.

Footnote on TTIP/PFI

There are some arguments that say a trade treaty (like TTIP) could impose liberalisation of services, and so inexorably open up the further privatisation of care services even if the government was against this. There are also those who say even if this is not entirely true there could be a chilling effect risk – which intimidates decision makers to open the doors to private providers to avoid nastiness.

Whether this is true or not both Bills address it to reinforce exemption for NHS services.

The NHS Bill also addresses PFI but only to the extent of moving the problem, it does not prevent future PFI deals nor does it remove existing ones.

Both TTIP and PFI are in reality issues far broader than just the NHS and could be left out.

Convergence?

The NHS Bill requires a great deal more thought and work to get it into any kind of final state. Confusion and false claims have to be addressed. If the intention of the NHS Bill is to eliminate all private provision and to remove planning/commissioning as separate functions then it is not clear at all how this could be done either legally or practically. There also has to be at least some rudimentary attempt to identify the impact of implementing the reorganisation in terms of cost, time and risk. The issues around impact on local authorities have so far been ignored. The legitimacy of huge changes moving to a new system with less accountability and no democratic involvement would have to be justified.

Given the problems with the NHS Bill itself and the fact that it requires reorganisation on such a large scale means it will never gain broad support. The best approach has to be to modify the Efford Bill to address any weaknesses.

Many agree that the long term direction of travel for care services is towards integrated solutions with a strong locality focus – as with the Health Boards. Mandating an enforced reorganisation is problematic but permitting such changes to be agreed locally and setting out the powers and duties in such a situation could be a valuable import into the Efford Bill.

There might also be some strengthening to limit the preconditions to be met before a service was put out to competitive tender, and stronger requirements around the management and reporting around existing contracts. There could be restrictions of private contracts to include FoI requirements and full disclosure and enhanced public consultation requiring open book.

Community Health Councils may be an idea to develop but huge care is required not to destabilise current PPI arrangements and winding up Healthwatch nationally and locally would be problematic.

The scope for some convergence is there, but the likelihood of any moves to do this is very limited. The support for the NHS Bill is generally accepted to be emotional rather than forensic; perhaps it was never intended to be more than a device to stimulate discussion.

1 These are GPs, dentistry, pharmacy and ophthalmology and except in one small area are not restricted under the NHS Bill.