By Oliver Crich & Sarah Foster

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Published 20 July 2023

Overview

The proposed Provider Selection Regime ("PSR") will be a new set of rules replacing the existing procurement rules for arranging healthcare services in England. The aim of the PSR is to move away from the expectation of tendering for healthcare services in all circumstances and towards collaboration across the health and care system. DHSC hopes that this will remove unnecessary tendering and barriers to integrating care, in addition to promoting the development of stable collaborations.

NHS England first consulted on the PSR in 2021. This was followed by DHSC's supplementary consultation in February 2022 - you can find our summary of the supplementary consultation here.

DHSC's response to the supplementary consultation states that DHSC is continuing to engage with the Cabinet Office as DHSC develops plans to implement the PSR so that it is clear to stakeholders whether the PSR or another regime (currently the Public Contracts Regulations 2015 until replaced by the Procurement Bill becoming an Act) will apply.

The supplementary consultation sought stakeholders' views on 6 areas (set out below). DHSC has now responded to the comments it received last year (a total of 124 responses, 68% of which were from organisations across the NHS, local authorities and independent providers and 32% of which were from individuals sharing their professional and personal views).

We have summarised DHSC's revised proposals, following the supplementary consultation, below:

1. CPV codes to define the scope of the PSR

The supplementary consultation sought views on the merits of including a list of Common Procurement Vocabulary ("CPV") codes in the PSR regulations (the "Regulations") to clarify the scope of services which can be procured under the PSR. DHSC also included a proposed list of CPV codes in the supplementary consultation document for comment. The majority of respondents agreed with DHSC's proposal to include CPV codes to clarify which services were in-scope, although only 35% agreed that the list of CPV proposed codes in the supplementary consultation document accurately represented DHSC's aims for defining healthcare services for the purpose of the PSR. 

Respondents fed back on additional CPV codes which were missing from the list and indicated where codes were broad or unclear. DHSC's response confirms that it intends to continue with its proposal to use CPV codes to clarify which services are in scope of the PSR. The response provides a full list of the updated CPV codes that DHSC intend to include in the Regulations. Further information to help decision-making bodies determine whether a service is in-scope of the PSR will be set out in guidance, in response to comments that further clarification is needed as the CPV categories may be interpreted differently by different decision-making bodies. The guidance will be a welcome addition to the Regulations - CPV codes are EU based and are not always directly compatible with the terminology and categories of NHS healthcare services delivered in England.

2. Mixed procurement under the PSR

Respondents were asked if there were other types of services (apart from social care) which, when arranged in a single contract with healthcare, should fall within the scope of the PSR (on the basis that such an arrangement may further promote the best interests of patients, the taxpayer and the population).

Respondents fed back on further examples of services that combine elements of health and social care such as homeless and rough sleeping services, domestic abuse support services and rehabilitation services. Respondents also gave examples of procurements that combine healthcare services with other services, such as IT and digital services and solutions.

Further to these comments, the breadth of mixed procurements will be extended so that the PSR can be used to procure in-scope healthcare services, alongside any goods and services that are out-of-scope, providing that the main subject matter is healthcare.  Further details on mixed procurements under the PSR will be set out in the Regulations and statutory guidance - again, this will be an interesting read and the devil will be in the detail. We are pleased to see that DHSC agrees that single contracts often necessarily cover a wide range of goods and services, alongside health, to offer economies of scale and integrated delivery at the point of care.

3. Defining a ‘considerable change’

Under the current proposals, where a service is not changing 'considerably' and the incumbent provider is doing a good job, the decision-making body can continue to use that provider (decision-making circumstance 1c).

DHSC sought views on using a combination threshold which includes both a fixed change in contract value (over £500,000) and percentage change in contract value (25%) as a threshold for a ‘considerable change.’ Once both of these thresholds are reached, decision-making bodies cannot continue with the incumbent under decision-making circumstance 1c and must select a provider either by identifying the single most suitable provider (decision-making circumstance 2) or running a competitive tender exercise (decision-making circumstance 3). The consultation document also set out a list of changes which DHSC proposed should not be deemed 'considerable', regardless of any resulting change in value, and irrespective of when they are made.

Respondents were generally less supportive of the threshold of £500,000, citing concerns this amount was too low and would mean minor changes to large contracts would necessitate a provider to be selected using other decision-making circumstances within the PSR. However, written responses suggested that respondents didn't appreciate that the considerable change threshold would only be triggered when there was also a change in more than 25% of the contract’s lifetime value.

DHSC therefore intend to continue with the threshold of £500,000 and more than 25% of the contract’s lifetime value.

4. Contract variations

The consultation also set out a list of contract variations that DHSC proposed should not warrant reapplication of the PSR. The majority of respondents agreed with DHSC's proposed list and no changes will be made as a result of the consultation. However, DHSC acknowledge requests for clear guidance to offer more clarity and examples of where the application of the PSR would not be required. This information will be included in statutory guidance.

5. Establishing lists of providers to offer voluntary patient choice

NHS England's 2021 consultation found broad consensus for the importance of preserving and strengthening patient choice. Patients will continue to have the legal right to a choice of the provider for the first consultant or mental healthcare professional led outpatient appointment. Consistent with current patient choice rules, decision-making bodies will continue to not be able to limit the number of providers that patients can choose from where patients have a legal right to choice.

DHSC proposed that where patients do not have a legal right to choice, and decision-making bodies wish to offer patients a choice of a limited number of providers, they must use decision-making circumstances 2 or 3 to select the provider(s) from which patients can choose. This will ensure decision-making processes are transparent and proportionate, and decisions are made in the best interests of patients, the taxpayer and the population.

Where decision-making bodies do not intend to limit the number of providers from which patients can choose, the decision-making body must offer a contract to any provider that meets the standard qualification criteria without a provider selection process.

6. Transparency requirements when arranging services under the PSR

In the supplementary consultation, DHSC sought views on further proposals for the 'intention to award' notice and the requirement for decision-making bodies to publish annual summaries outlining their application of the PSR.

DHSC has confirmed that the 'intention to award' notice will include a statement explaining the decision-making body’s rationale for choosing the selected provider with reference to the relevant key criteria.

While many respondents acknowledged the benefits of annual summaries for increasing public transparency, accountability and confidence in decisions made using the PSR, some were concerned about the administrative burden. DHSC intend that the summary will provide high-level data to allow for better understanding of commissioning activity and trends, aiming to ensure that this is done in the least burdensome way. Decision-making bodies will need to consider how they incorporate the annual summary requirement into their contract lifecycles and annual reporting.

Independent review of decisions made under the PSR

Linked to this, although DHSC did not ask for views on the independent security of decisions and available recourse for providers seeking to challenge, respondents voiced some concerns on this topic.

DHSC consider that the current proposals for scrutiny provide an avenue for engagement and discussion with providers, and for local resolution of disagreements which should in most cases obviate the need for further escalation. Ultimately, of course, there will still be the option open to a provider that deems the decision-making body to have acted unlawfully to challenge a decision through judicial review.

In response to consultation comments, DHSC and NHS England intend to establish a panel which is chaired by an independent person who can look at and advise on both issues relating to patient choice regulations (that will be made under new patient choice provisions inserted by the Health and Care Act 2022) and the PSR regulations. This will introduce a greater degree of independence into the review of decisions made under the PSR.

DHSC and NHS England will continue to work together to develop the details of this proposal ahead of bringing the PSR into force to ensure that the panel is well-equipped to review decisions made under the PSR.

DACB comments

We're pleased to see some further refinement to DHSC and NHS England's earlier proposals and it seems like stakeholders are generally supportive of the PSR aims and approach. We expect, however, that the detail and answers that providers and commissioners are looking for will be in the final Regulations and guidance, the latter of which we hope will offer case studies and examples to give decision-making bodies more clarity and practical support with the application of the Regulations.  

As always, our expert, market leading procurement team at DACB will continue to monitor developments and release further updates in due course. If you have any queries in the meantime, please do not hesitate to get in touch.

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