Provider Selection Regime: Starter for Ten on the Supplementary Consultation

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Provider Selection Regime: Starter for ten on the supplementary consultation

Published 15 marzo 2022

In our previous briefing, we considered the impact of both the NHS Provider Selection Regime (“PSR”) (part of the Health and Care Bill) and the Government’s response to consultation on its 2020 Green Paper ‘Transforming Public Procurement’, on procurement in the health and social care sector. Since our last briefing, the Department of Health and Social Care (“DHSC”) has published the “Provider Selection Regime: supplementary consultation on the detail of proposals for regulations” for the procurement of healthcare services.

Subject to Parliamentary approval of the Health and Care Bill, DHSC is working towards implementing integrated care boards (“ICBs”) in July 2022 and intends to implement the PSR as soon as possible after this.

Primary legislation and regulations will set out the scope of the PSR. The following three criteria must all apply for the PSR to apply:

1. A health service as defined in section 1(1) of the National Health Service Act 2006: “comprehensive health service designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness”;

2. A healthcare service provided directly to individuals or has an outcome directly for an individual (the consultation gives the example of a diagnostic service). This intends to exclude “health adjacent” services such as cleaning and catering; and

3. It is arranged by:

a. ICBs when commissioning healthcare services for the purposes of healthcare services;

b. NHS England when commissioning healthcare services for the purposes of healthcare services;

c. Local authorities and/or combined authorities when arranging healthcare services as part of their public health functions or as part of section 75 partnership arrangements with the NHS; or

d. NHS trusts and foundation trusts when arranging the provision of healthcare services by other providers.

Scope of Services

When procuring healthcare services, decision-making bodies will first need to consider which of the following decision-making circumstances apply:

Circumstance 1 

Continuing existing arrangements without a competitive procurement process

Permitted in three circumstances:

1A: the type of service means that there is no realistic alternative to the current provider or group of providers.

1B: a range of accredited providers are already available to patients through patient choice mechanisms.

1C: the incumbent is doing a good job by reference to the key decision-making criteria and is likely to continue to do so and the service is not changing.

Circumstance 2 

Identify a suitable provider without running a competitive procurement process.

This is relevant where any of the following apply:

  • The existing arrangements are changing considerably;
  • A new service is needed;
  • The incumbent is no longer able to and/or no longer wants to provide the service; and/or
  • Decision-making body wants to use a different provider

Circumstance 3

Competitive procurement process

This is relevant where any of the following apply:

  • Decision-making body cannot identify a single provider or group of providers that is most suitable without running a competitive procurement process; and/or
  • Decision-making body wants to test the market

It is intended that all of the following key criteria will be used to make decisions about provider selection in respect of circumstances 1C, 2 and 3, with decision-makers able to decide if and how they prioritise and balance these criteria:

  • Quality and innovation
  • Value
  • Integration, collaboration and service sustainability
  • Access, inequalities, and disparities, and choice
  • Social value

CPV codes

While “health services” is defined in the National Health Service Act 2006, DHSC is inviting views on whether the use of a list of common procurement vocabulary (CPV) codes in the regulations will clarify the scope of services to which the PSR will apply and if so, whether the proposed list (as set out in the consultation) captures all healthcare services.

Mixed procurements

While it is the intention that social care services will principally be excluded from the PSR, the proposals recognise the value of the PSR applying to circumstances where different types of services are arranged under a single contract, either because it is essential in order to deliver healthcare services or because it is explicitly in the interests of patients, the taxpayer and the population to do so.

The proposals envisage that mixed procurements should be covered by the PSR where both of the following criteria are satisfied:

1. The main subject matter of the contract is the delivery of healthcare services to individuals; and

2. Procuring these services under separate regimes in separate contracts would adversely impact care quality, lead to overall contract aims remaining unfulfilled, or would not be in the best interests of patients, taxpayers and the population.

It is not yet clear what is considered “the main subject matter of the contract”. However, the example provided in the consultation makes clear that this does not require the healthcare services component to have a higher monetary value than the non-healthcare services.

The consultation invites views on services other than social care that should be arranged in a contract for which the main subject matter is healthcare.  The consultation also provides a list of social care CPV codes that may assist in clarifying services which may be arranged with healthcare services as part of a mixed procurement, and invites views on CPV codes that should be included or excluded from this list.

Threshold for considerable change

Under the proposals, decision-making bodies will be required to either make an assessment to identify the most suitable provider or run a competitive procurement process where extending the term of the contract constitutes a “considerable change”. Where extending the term would not be a “considerable change”, circumstance 1C will be relevant to continue the existing arrangements.

It is proposed that a change is not considerable where:

  • It is provided for clearly and unambiguously in the original contract and published as part of the original process carried out under the PSR;
  • It is solely due to the change in identity or the provider (e.g. corporate takeover or merger) where this does not affect the delivery of the service and there are no other considerable changes to the service; or
  • It is due to external causes outside of the decision-maker’s control.

It is proposed that a change is considerable where:

  • It is initiated by the decision-making body; and
  • The cumulative change in the lifetime value of the contract is above £500,000; and
  • The cumulative change in the lifetime value of the contract is above 25% of the original lifetime value of the contract.

The consultation seeks views on whether a considerable change should require both a change of set amount in contract value and percentage value in contract value, as well as views on whether the proposed thresholds are appropriate.

Contract variations

This is designed to address a scenario where a contract has varied so significantly that the PSR should be reapplied. It proposed a number of scenarios where a variation will not be deemed considerable, including where it is less than 25% of the original lifetime value or remains below £500,000. Views are invited on whether the list of variations and the thresholds are appropriate.

Patient choice

In line with current patient choice rules, it will not be possible for a decision-making body to limit the number of providers to deliver an elective service under the Any Qualified Provider (AQP) list where a patient has a statutory right to choose a provider to deliver that service. It is proposed that these contracts would be directly awarded to the provider(s).  

Transparency

Notices and standstill

  • DHSC is working towards notices being published on Find a Tender Service (“FTS”) and any potential successor to FTS.
  • Where a contract is direct awarded on the basis that the type of service means that there is no realistic alternative to the current provider or group of providers (circumstance 1A) or a range of accredited providers are already available to patients through patient choice mechanisms (circumstance 1B), decision-making bodies will be required to publish a contract award notice.
  • Where a contract is awarded on the basis of circumstance 1C or 2, they must publish a notice on the intended approach making it clear that this is their approach. Decision-making bodies are subsequently required to publish a notice of intention to award a contract.
  • In respect of circumstances 1C, 2 and 3, a 30 day standstill period (unless extended by mutual agreement) will apply following a decision to award a contract. If a provider has been impacted by a decision and has reasonable grounds to believe the decision-maker has failed or potentially failed to apply the PSR correctly, they will be able to make a representation to the decision-making body within 10 days of the initiation of the standstill period.
  • Once the standstill period is over, the decision-maker must update the previous notice to confirm the status of the award within 30 days of the last signatory.

Annual summaries

The consultation proposes that decision-making bodies will be required to publish an annual summary of their use of the PSR.

What next?

The consultation provides additional detail in several areas but there are a number of key issues that could be expanded upon in the legislation and guidance. For example:

  • Could the rules used by NHS England to mandate the use of the NHS Standard Contract for NHS-funded healthcare services be referenced in the legislation or guidance to clarify scope of services? Would guidance regarding services that require CQC registration as falling within the scope of the PSR be a sensible way to help commissioning bodies understand whether a service is within scope?
  • How will decision-makers determine whether an incumbent is doing a good job in respect of circumstance 1C? Are there key data sets or performance indicators that will inform those decisions?
  • How will decision-makers determine whether the primary aim of a service is to deliver a healthcare service?
  • In the absence of a requirement to respond to potential providers except where a competitive procurement process has been run, will there be additional transparency measures to inform the market of awarded opportunities?
  • What will the detail on remedies and managing conflicts of interest look like?
  • How will the proposed rules on whether an expiring contract has been considerably changed interface with the rules on contract variations?

We will be submitting a response to the consultation by the deadline of 28 March 2022 and welcome your views.

Authors

Emily Broad

Emily Broad

London - Walbrook

+44 (0) 20 7894 6029

Hamza Drabu

Hamza Drabu

London - Walbrook

+44 (0)20 7894 6411

Phoebe Baxter

Phoebe Baxter

London - Walbrook

+44 (0) 20 7894 6354

Victoria Fletcher

Victoria Fletcher

London - Walbrook

+44 (0)20 7894 6658

Katherine Calder

Katherine Calder

Newcastle

+44 (0)191 404 4060

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