Care UK chief hits out at renewal process as ITC contracts expire

Posted on January 21, 2010. Filed under: ISTC, News stories, Providers | Tags: , , , , |

Health Service Journal | 21 JANUARY 2010 | BY ALISON MOORE

The process for renewing contracts for the first independent treatment centres has been described as a “pig’s ear” by the chief executive of the largest independent provider in that sector.

Ten of the “first wave” contracts are due to expire in the next six months – with the general election expected midway through that period – and the future of many of the centres is uncertain.

At least one, the Kidderminster treatment centre in Worcestershire, is likely to close its doors. The centre will return to NHS use from next month, although the team running it plans to continue doing NHS work at a local independent hospital.

The future of the Greater Manchester surgical centre hangs on whether owner Trafford Healthcare Trust decides to use the site itself or to rent it out.

Many of the others are likely to continue but will offer treatment at tariff through patient choice, rather than through a block contract.

The firms running the centres have been told they have to go through a tender process to rent the buildings from the NHS – leading to uncertainty for staff and patients.

Mike Parish, chief executive of Care UK, which operates two sites coming up for renewal, said this had led to a “pig’s ear of a process”, with firms being offered short term contract extensions at the last minute because primary care trusts still had the contracts out to tender.

At the Barlborough centre in Chesterfield, run by Care UK, staff had to be formally told they were at risk of redundancy – only for managers to hear the next day that its contract had been extended.

“We have gone absolutely to the precipice with Barlborough,” said Mr Parish. “We have now agreed a short term tenancy with the PCT to give them an extra three or six months to sort out the lease.”

Several PCTs are at an early stage in inviting tenders for their sites. Lincolnshire PCT does not expect a new contract to come into force at its Gainsborough site until next year, according to tender documents. Many new leases will be for only three years, so PCTs and centre operators may have to repeat the process in 2013.

Mr Parish said independent centre operators had expected to switch to payment at tariff for any patients they could attract at the end of the original five year contracts, which offered guaranteed payments regardless of the number of patients treated.

But they learnt a few months ago that if their premises were owned by the NHS, as most are, they would have to go through a tendering process in order to continue to use them. Operators will pay market rent for the sites in future.

“The Department of Health, in its wisdom, decided that there would be some sort of procurement process for the leases,” he said. “It does seem odd that we have to go through a tender process to continue operating hospitals that we have operated for the last five years while NHS hospitals don’t.”

Care UK hit the headlines last week after reports its chairman had made a £21,000 donation to shadow health secretary Andrew Lansley’s office.

Health secretary Andy Burnham wrote to Mr Lansley questioning whether it was acceptable for a shadow minister

to “accept private donations from companies that have a vested interest in their policy areas”.

A Conservative spokesman said the donation was “fully within the rules”.

Independent provider Ramsay said it “understands the need” for a tendering process but some contracts may have extensions to allow this to be concluded.

The Department of Health said it announced in July that there would be a competitive tendering process where the NHS had identified a continuing need for services. It added there has been “an ongoing dialogue” between providers, the local NHS and the DH in each area.

Care UK and Ramsay may apply to run centres they do not operate at present, and Netcare – which runs the Greater Manchester centre – says it will consider case-by-case bidding.

NHS Partners Network director David Worskett was critical of the delay in resolving the contracts.

In some cases, operators will be paid at tariff but are being given “activity plans” by PCTs – an indication of the level of work they will be doing, which should help manage cash flow.

In others, PCTs say they now have sufficient capacity in the local healthcare system but they are willing to lease premises if the independent contractors take the risk of attracting sufficient patients.

The centres will also no longer be bound by “additionality” rules, which prevented NHS clinicians working in them and often forced them to recruit clinical staff from abroad.

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Lib Dems and Tories turn both barrels on Burnham over private sector block

Posted on January 18, 2010. Filed under: News stories, Providers | Tags: , |

Pulse | By Gareth Iacobucci | 18 January 2010

The Liberal Democrats have joined the Tories in condemning health secretary Andy Burnham’s pledge to treat the NHS as the ‘preferred provider’.

Speaking at private firm Circle Health’s conference in Bath last week, Liberal Democrat health spokesman Norman Lamb said the move to give NHS providers at least two chances to improve before allowing alternative providers to run services would severely hamper attempts to ramp up productivity in the NHS.

Mr Lamb said providers should be judged on quality, not on their status, and accused Labour of being in the pockets of the unions.

The move aligns the Lib Dems with the Conservatives, who have vowed to open up the market to more providers if elected, and, as Pulse revealed last week, have already begun talks with a host of private firms.

Mr Lamb said: ‘I strongly disagree with the secretary of state’s provider pledge; it is a stitch up with the unions. It will set back the task of improving productivity; you need that challenge to existing providers.’

He added: ‘You need that insurgency [from new providers]. It’s never the traditional providers coming up with the innovative ideas. The test should be quality.’

Shadow health secretary Andrew Lansley, also speaking at the event, accused Labour of back-peddling on its reform agenda, but said his party would push ahead with stimulating competition.

He said: ‘Not only was wave 2 of ISTCs abandoned, but Andy Burnham’s pledge is being interpreted as abandonment of any willing provider. The reform process hasn’t been pursued, and isn’t coherent. I will pursue any willing provider. As far as we can we should create a level playing field, and realise the benefits of competition.’

The views of both opposition parties were backed by Ali Parsa, chief executive of Circle, who urged the next Government to lower the drawbridge to all potential market entrants, and not waste time protecting existing providers.

He said: ‘We have a fundamental challenge. We now have to focus relentlessly on improving quality while reducing cost. Do we gamble on incumbents to make these changes? I don’t think they will be successful.’

‘My appeal to politicians is to bring down the barriers to entry. Do not waste your time and energy backing the British Leylands of this world. Let the talent come through. We have wasted billions of pounds supporting incumbents. Create the policies that lower the barrier to entry. It costs us nothing.’

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John Lewis checked out in NHS productivity drive

Posted on December 3, 2009. Filed under: News stories | Tags: , |

Health Service Journal | Alison Moore | 3 December 2009

Politicians of all hues are talking about public services being owned by staff – like John Lewis – to increase productivity. Alison Moore examines how this might work and, where staff cannot hold shares, whether just a sense of ownership is enough

John Lewis has suddenly become the politicians’ darling, with all three major parties talking of the role a “John Lewis approach” could have in improving public services.

The eponymous store has been held up as an example of employee participation and ownership, leading to high standards of service and staff engagement. And a key question for an incoming government will be how a partnership or mutual model could drive productivity in the public services.

How could this work in the NHS? An article in The Guardian recently said that “nurses and patients” could be involved in the way hospitals are governed. Cabinet Office minister Tessa Jowell said: “We think mutuals have a much broader potential across the public sector, especially now where they can become an expression of the new national soul post-credit crunch.”

Shadow health secretary Andrew Lansley has talked of “employee partnerships” running NHS organisations, with social enterprises as an alternative to the foundation trust model. And Liberal Democrat health spokesman Norman Lamb has said they would “turn every NHS hospital into an employee owned trust”.

But what is this likely to mean for the NHS? The politicians are not talking about giving employees a transferable share in their organisation which can be bought or sold, in the way that some large companies give staff shares as part of a bonus. DGH plc won’t be hitting the Stock Exchange any day soon.

And, despite the frequent use of the John Lewis tag, they don’t seem to be talking about employee ownership where profits are distributed to the staff. John Lewis staff get a yearly bonus which has been as high as 24 per cent of salary, plus a host of other benefits.

What is likely to be promoted is more a watered down version of employee ownership where the financial benefits to staff are far less but the organisations can, in theory, harness the energy and innovation of staff.

In other sectors staff ownership has been linked with a substantial increase in productivity. As the NHS faces years of financial stringency, this is enormously attractive to politicians wondering how to satisfy increasing demands for services with less or the same cash.

Staff would be “co-owners” – either by themselves or with other stakeholders – but this would be ownership “in trust”, with the aim of improving services to the community.

In policy terms, this marks a shift from challenging traditional NHS providers through competition to looking at how they can morph into organisations that are both businesslike and accountable.

Julia Manning, chief executive of Think tank 2020health, says the NHS could move away from the present model towards something more akin to what was intended in 1948: “We would be getting back to the original vision of the NHS with reduced political interferences.”

But would this pseudo ownership lead to the boost in productivity everyone wants to see? Or are the financial incentives of providing good service seen in real ownership models the driver of this?

There is some evidence that pseudo ownership can deliver some of the benefits of real ownership – and that feeling “a sense of ownership” can produce some of the effects of actually owning an organisation.

Staff participation

NHS Mutual, a study for the Nuffield Trust, looked at the relationship between employee ownership and the benefits seen in many co-owned companies. The authors concluded that for benefits to be delivered two further factors were necessary – HR management practices that foster staff participation, and a culture of ownership.

But do these factors also deliver benefits in the absence of real ownership? The answer seems to be yes but only up to a point.

The authors suggest a number of employee owned models for general practice and community health services. At the very least, greater staff participation is urged.

Circle, a private healthcare company that provides services to the NHS, has seen stunning productivity improvements in its Nottingham treatment centre since it opened in the middle of last year – in some areas, of over 20 per cent. This has been associated with very high levels of customer satisfaction, with 99.6 per cent of patients saying they would recommend the centre to families and friends.

Circle’s business model involves a high level of employee ownership but that has not been possible in the Nottingham case because many of its staff are seconded from the NHS.

Managing partner Ali Parsa believes staff engagement and a sense of ownership have been crucial in this productivity improvement. Actual ownership, he says, is “not such a big deal. What is important is a sense of ownership… that’s often about allowing people to do something”.

While that does not rule out NHS organisations developing this sense of ownership, he says the hierarchical culture is an issue: “I don’t think the challenge in the NHS will be structural – it will be cultural.”

He points out that innovations in other industries – such as IT – have come from incomers rather than incumbent organisations and have been associated with a drop in the barriers to entry. Would many of today’s technologycompanies have developed if the founders had had to buy a mainframe rather than a cheap personal computer?

But what sort of structure could give NHS staff that sense of ownership? The most talked about model is some form of social enterprise, a not-for-profit organisation where surpluses are reinvested in services but it is typically run by staff. Although there are some successful social enterprises in the NHS, their numbers are few and their establishment has been difficult.

Working for a social enterprise and competing for contracts may be more risky than working for an NHS organisation: enterprises can fail and staff can end up without a job.

Former King’s Fund senior fellow Richard Lewis, who is now a director at Ernst & Young, says staff may be making a trade-off between the empowerment such organisations can offer and the risks they may entail.

Social enterprises may also be short of capital – the assets of the NHS organisation may not follow them – and may depend on the revenue from contracts. “It seems to me that if social enterprises are going to survive in health, they need a sort of heroism – it is not for the faint-hearted,” says Mr Lewis.

Then there are questions of governance and propriety. Is it right to hand over NHS bodies to staff? What about the public voice? Can it be assumed that staff will always run an organisation for the public good and the structure will resolve conflicts between their interests and those of the patients?

This question is often unresolved in other parts of the NHS, such as primary care. GP practices are often owned by employees – but do they act in the best interests of patients in every way?

Peter Hunt, chief executive of Mutuo, which promotes mutual organisations, points out: “GPs are a fantastic example of producer capture. We would not want to replicate that.”

Partly, the answer lies in commissioning and monitoring contracts – and the public accountability of commissioners.

But partly, it is about what bit of the market an organisation is working within. A social enterprise run by staff could compete against other providers on a level playing field and with its accountability delivered through the contracting system.

But that might not be appropriate where a monopoly exists. Mr Hunt says different governance may be needed in these cases, with some form of public representation. This, of course, amounts to a foundation trust model with multiple stakeholders and members as stewards of the assets of the organisation.

Foundation Trust Network director Sue Slipman sees the cross-party interest in mutualism as being about extending the model into other public services rather than changing the foundation trust model.

“The appeal for politicians is around a localism agenda,” she says, adding that politicians may not have realisedfoundation trusts are run on the mutualism lines they are talking about.

Can this multiple stakeholder model deliver the sense of staff ownership that seems to drive productivity? Foundation trusts have often been criticised for not doing enough with their staff governors. Ms Slipman argues they are still a work in progress.

“Some have done more than others with this different group of stakeholders but all of them are trying hard to engage their staff,” she says. “Most people think the model works and they want to continue with it.”

She says foundation trusts have realised improvements in productivity and generated surpluses to reinvest in patient services. However, she warns the demands for taking money out of the system will be so large over the next few years that even the most efficient organisations may not be able to do enough to satisfy them.

Increasing staff representation among governors would be one way of boosting staff engagement and sense of ownership, although this would mean diluting the power of other stakeholders and could be seen as reducing public power.

As Mr Hunt points out, once power and rights are granted to a group, it is very difficult to take them away.

It is more likely that foundation trusts will have to look even harder at their staff engagement and motivation without changing their structure – and that could involve some form of financial incentive, although not at John Lewis levels. And it will require visionary chief executives who are prepared to cede power to groups of staff.

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