A guide to contracting and corporate structures in healthcare - DAC Beachcroft

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A guide to contracting and corporate structures in healthcare

Published 3 November 2016

Contracting and corporate structures: at a glance

  • Form follows function. Consider what you wish to achieve and detail your aims and objectives
  • Do not underestimate the resource required to set up a new corporate vehicle to provide services
  • Commissioners should consider their current arrangements and explore whether it is possible to incentivise providers to integrate services by wrapping a contract around existing individual contracts, in a form of alliance agreement

Why this area is important

Integrating health and social care is like assembling a giant set of three-dimensional jigsaws across the country. Each area should have its own shapes and structures but they should all come together to deliver the national aims of the NHS Five Year Forward View (5YFV).

Agreeing clear parameters in contracts or as part of a corporate vehicle for how providers (and potentially commissioners) will work together can help local health systems to integrate.

Ideally, implementing Accountable Care Systems (ACS) in a local health system would remove some of the divide between commissioning and providing services – as providers would be given a capitated budget to provide and procure the provision of services for a population.

Implementing an ACS will therefore involve a risk transfer from commissioners to providers, so the latter must agree and document where that risk sits and how they will plan to collectively mitigate such risk. Contracting and corporate structures are the tools to help allocate those risks amongst the parties in a fair way.

Key issues

Commissioners will need to define the services they are seeking to commission in order that providers can respond accordingly. Where commissioners are seeking to integrate a range of services, such services may be subject to different regulatory regimes, under different types of contract and with different types of payment profiles. Providers that are seeking to collaborate will need to consider whether they wish to do so using contractual structures (i.e. no new legal entity is created) or whether they wish to set up a new corporate vehicle.

Where contracts are being used there is a spectrum of ways that these can be implemented, from a light touch memorandum of understanding (MoU) arrangement overlaying governance to a more commercial contractual joint venture where risk and reward is shared between parties.

If a new corporate vehicle is to be set up, providers should be clear on the scope and objectives of the vehicle. Examination of matters such as VAT for those within the collaboration, pensions, TUPE, insurance and regulatory obligations (e.g. CQC registration) should also be considered.

‘Form follows function’ is the rule when devising new models of care. Don’t start with the goal of setting up a new corporate entity. Rather think about what you want to achieve and how that will work to deliver those aims.

Potential solutions

Before plunging into contracting and corporate structures, build relationships by setting up governance structures, align ideas and share a vision amongst providers.

Where there is a clear opportunity outlined by commissioners for providers to respond to, consider the options for collaboration and carry out a due diligence assessment on the key areas of risk arising from the same.

Make sure that any corporate structures implemented are easy to engage with, and are not engineered largely for the purposes of overcoming regulatory obstacles.

More information

For advice on contracting and corporate structure issues, contact Hamza Drabu on +44 (0)20 7894 6411 or hdrabu@dacbeachcroft.com.


Hamza Drabu

Hamza Drabu

London - Walbrook

+44 (0)20 7894 6411

Key Contacts

Hamza Drabu

Hamza Drabu

London - Walbrook

+44 (0)20 7894 6411

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