Greater integration between NHS providers challenges EU public procurement rules

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Greater integration between NHS providers challenges EU public procurement rules

Published On: 8 June 2016

The EU directive on public procurement was approved in January 2014 and was brought into force by the Public Contracts Regulations in 2015, but NHS commissioners were given a year to prepare for the changes.

From April, health service contracts worth over £589,148 – small change in healthcare terms – are subject to the 2015 Regulations, which are intended to make the process of purchasing goods and services by public bodies faster, more flexible and more effective. The 2015 Regulations will run in parallel to the NHS (Procurement, Patient Choice and Competition) Regulations 2013, which already applies when NHS commissioners award healthcare contracts. The result is two sets of Regulations governing how healthcare contracts are procured.

Like any regime that has not yet bedded in, it is hard to predict what impact it will have, says Anne Crofts, Partner at DAC Beachcroft.

“Clinical commissioning groups [CCGs] have had some wriggle room under the NHS Regulations to directly award to a single entity that has been identified as the only capable provider. Clearly CCGs need to have gone about their market assessment in the right way,” she says.

“But with the full force of the EU regulations coming into play this April, it is thought that that wriggle room is going to be much harder to justify. If CCGs are going to contract in a new way in response to the call for new models of care, it may be difficult to justify avoiding a procurement exercise as there could be a few capable providers or combinations of capable providers in the market,” she adds.

A report on EU procurement regulations by think tank the King’s Fund last year, pointed to a “growing sense” in the NHS that procurement and competition rules present a barrier to the new models set out in the NHS Five Year Forward View, which are intended to encourage collaboration and integration.

The report pointed out: “Those bidding to become vanguard sites for the new models are clamouring for support to ensure compliance.”

But while the vanguard sites – the pilots for NHS England’s new care models which will see providers come together to deliver care – are still in their infancy, commissioners are working out how they will respond to them, says Crofts.

“At some point commissioners are going to have to put out a contract while also ensuring they keep within the new EU regime. What we don’t want to see is a lot of sham procurement when the reality is that the only possible provider is the incumbent [provider],” she says.

“That doesn’t mean that there isn’t scope for fostering innovation and efficiency through market testing, but there’s clearly also a dilemma in terms of trying to implement integration and new models of care at scale and pace, without at the same time destabilising the local health economy,” she adds. Commissioners will need to undertake a risk assessment of the likelihood of falling foul of the EU regime before implementing their commissioning plans.

In parallel with the new models of care is the recent review on NHS productivity by Labour peer Patrick Carter. His final report – published in February – found that the NHS could make £5 billion worth of savings a year by 2020-21 if it got rid of “unwarranted variations”. And procurement is a key area for such efficiencies.

Crofts says the Carter report provides a “very clear steer” for trusts to consider outsourcing, shared services or finding joint venture partners.

“If trusts are looking to outsource, the market will have to be tested. There can be no argument about that. If you set up shared services in the right way you can do that without having to go out to market. There could be scope for contracts to be awarded using what was known as the "Teckal" exemption, as this has been codified in the 2015 Regulations.  The innovation partnerships route could also be used for truly innovative services or products. Therefore, there are ways to work within the EU procurement regime,” she says.

Of course, EU procurement laws may no longer apply in the same way if the UK votes for Brexit in June’s referendum. But that scenario raises far too many questions for the present.

“Who knows exactly what will happen if we opt to leave?” says Crofts.