driven out by dogma - oursourcing in health

Driven by Dogma?Outsourcing in the health service

An OPM research study for UNISON/December 2008

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Cover photo: Chris Taylor

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ForewordThis report is a timely contribution to the debate on outsourcing and the use of the private sector in delivering public services.

The current financial crisis has demonstrated the failure of light-touch regulation and the need for much greater control and transparency in the UK’s financial sector.

The NHS is increasingly facing similar issues as parts of the system have been outsourced and more private companies brought in to provide services.

OPM’s report usefully highlights a number of key concerns for UNISON around value for money, impact on staff terms and conditions, fragmentation of services, and a failure of accountability.

Too often the market approach to delivering healthcare has been driven by dogma rather than evidence, but this report also demonstrates that there are alternatives to this approach.

The current direction of healthcare policy remains firmly in favour of competition and a diversity of providers, running contrary to the NHS values of co-operation and collaboration across different healthcare settings.

This report illustrates powerfully the need to reassess the current orthodoxy and ensure that in its 60th year the NHS is protected from the boom-and-bust tendencies experienced elsewhere.

Dave Prentis UNISON General Secretary

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Contents1. Executive summary 6

2. Introduction 7

2.1 About OPM 7

2.2 Structure of the report 7

3. Methodology 8

3.1 Scoping stage 8

3.2 Primary research stage 8

3.3 Terminology and focus 9

4. Background and context 11

5. Accountability and governance 12

5.1 Complexity 12

5.2 Transparency 13

5.3 Mismatch in expectations 14

5.4 Governance 15

6. Workforce 16

6.1 Erosion of terms and conditions 17

6.2 Two-tier workforce 18

6.3 Uncertainty and the challenge of management 18

6.4 Erosion of the public sector ethos 19

6.5 Reduction in access to training 20

6.6 Internationalisation of services 20

7. The commissioning process 22

7.1 Tendering for contracts 22

7.2 Negotiation 24

7.3 Writing complex contracts 25

7.4 Performance management 26

7.5 Skills for commissioning 28

7.6 Involvement of the private sector in commissioning 29

8. Shared services 31

8.1 Performance monitoring and accountability 31

8.2 Cost benefits 32

8.3 Impact on quality 33

8.4 The future of the agreement 33

9. Conclusions 34

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Driven by Dogma?Outsourcing in the health service 1. Executive summary

This research is a qualitative investigation of some of the emerging and persistent challenges that exist when the private sector is involved in the tendering for, and delivery of, public services in the health sector. The research was conducted by the Office for Public Management (OPM), an independent public interest company, on behalf of UNISON, the largest public sector union in the United Kingdom.

The research involved two main stages:

l a scoping stage where evidence was collated from past research to identify key lines of enquiry regarding known challenges to outsourcing in the health service

l a primary research stage which involved a large number of interviews and other methods being used to ascertain the views of a cross-section of health service professionals from board level to floor level including directors, commissioners, managers of provider services and cleaners.

The research provides compelling evidence of the following:

l Those responsible for implementing outsourcing policy see it as being primarily driven by political will rather than evidence-based practice. The increase in ten-dering and use of the private sector is strongly driven by the compulsory nature of trust policies or outsourcing being the only option offered to trusts wishing to make service changes.

l Little hard evidence is available to suggest that outsourcing impacts positively on value for money or quality of care. Conversely there are several examples of outsourcing having a directly negative effect on the value for money and quality of care in services.

l Where improvements were identified through outsourcing, it was often felt that these could have been delivered through investment in expanded public provision or adaptation of current services. Marketisation is not a clear route to improving healthcare, for example health management professionals in Wales do not feel they are disadvantaged by the minimal use of outsourcing in their system.

l Outsourcing is seen by those working in the NHS as being the cause of a down-ward pressure on terms and conditions, fragmentation of services and a divisive effect on the ethos of the public sector and the NHS.

l Outsourcing is seen by scrutineers such as patient and public involvement repre-sentatives and overview and scrutiny committee members as a challenge to the lines of accountability due to the increasing complexity of outsourcing arrange-ments and diversity of approaches.

More specific messages relating to each of our key lines of enquiry are detailed in this report.

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2. IntroductionThis report outlines the findings of a research study that investigated the impact of outsourcing, in particular the process of delivering public services through private contractors, on the NHS. Outsourcing has economic, social and political effects and is undeniably a contentious and frequently discussed topic. This research study adds compelling insight from a range of perspectives to the debate. The study was commissioned by UNISON and conducted by OPM, an independent public interest company.

UNISON is the largest public sector union in the United Kingdom with over 1.3 million members, a significant number of whom work in the health sector. There has been a growing concern from UNISON members, corroborated by independent research, that outsourcing and involvement of the private sector in delivering health services is having an increasingly negative impact on the quality of care available. Much of the evidence available about the challenges caused by outsourcing focuses on specific aspects. A core purpose of this study was to provide a more wide-ranging examina-tion of the issues, and most importantly to look at them through the eyes of those involved in their application, both strategic and operational.

2.1 About OPM OPM is a not-for-profit public interest company that works with public and third sector organisations to help them achieve social results. It has a strong track record of working with trades union and health sector bodies, and experience in policy development, evaluation, research and public and stakeholder engagement. It is an organisation that approaches every project independently, regardless of the client. This project follows a long line of diverse work in the healthcare sector for organisa-tions across the health service. OPM is committed to adding to the understanding of healthcare modernisation from a wide range of perspectives and working with all stakeholders across the healthcare sector to help stimulate debate and inform deci-sion making with the view to improving social results.

2.2 Structure of the reportThe next chapter of the report outlines the methodology OPM adopted to conduct this research.

Chapter 4 describes the background and context for health sector outsourcing, as given by key legislation and previously conducted research.

Chapters 5, 6 and 7 present findings from the research focusing on, respectively, the impact of outsourcing on accountability and governance, the workforce, and the commissioning process.

Chapter 8 provides a worked example of the impact of outsourcing, by focusing on Shared Business Services (SBS) and other shared services.

Chapter 9 offers conclusions based on the research evidence.

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Driven by Dogma?Outsourcing in the health service 3. Methodology

3.1 Scoping stageThe scoping stage of our research identified the multiple ‘lines of enquiry’ for investigation in the main stage of primary research. These lines of enquiry are the areas where we felt the most challenging questions could be asked of those involved in outsourcing or in dealing with its effects.

Desk researchWe reviewed literature on the topic of outsourcing in the health sector and other relevant sectors. Sources included unions and related organisations, central government, local government, non-departmental public bodies, independent research bodies, academic journals and the media. We collated our documents and used these to establish our lines of enquiry. These provided us with a basis for the scoping interviews and further literature searches. Literature was collected and used in an ongoing way throughout the study to challenge our primary research findings.

Interviews with expertsWe conducted interviews with eight expert commentators who work across the field of healthcare delivery, workforce strategy, policy and research. These interviews provided a vital opportunity to test out the lines of enquiry emerging from the literature and enabled us to develop a much deeper understanding of what current concerns were held by those involved in the realities of this area. The interviews also widened our pool of literature. Relationships were maintained with many of these interviewees throughout the project and further interviews were conducted to test out findings from the main stage.

Choosing key lines of enquiryOutsourcing occurs across the health service and in a range of ways. In a study of this nature it would be unrealistic to try and cover every aspect of outsourcing in detail, and the scoping stage enabled us to narrow our focus. When deciding on our lines of enquiry to take forward to the primary research stage we sought to establish relevant issues and those that would impact on the widest range of stakeholders. Although we offered total anonymity, it was also important that our lines of enquiry were those that we could collect evidence for without putting participants in compromising professional positions.

3.2 Primary research stageEach line of enquiry required different information and contributions from participants. A detailed outline of the combined ‘case studies’ used to gather this evidence is outlined below.

The effect on the workforceTen in-depth interviews were conducted from across the healthcare workforce. Participants were primarily based within cleaning support services but evidence was drawn from all case studies to inform the workforce findings. The areas discussed included pay and conditions; the differences, perceived or otherwise, between working for the NHS and a private provider; management style impacts on working relationship and the public sector ethos.

Overview and scrutinyA focus group was held along with two in-depth interviews with members of overview and scrutiny committees (OSCs). Background research was also conducted with a representative from the Centre for Public Scrutiny. Desk research in this area included The anatomy of accountability: how the National Health Service answers to the people produced by the Centre for Public Scrutiny.1 Areas of discussion in this research included the following: what has been successful/less successful in relation to scrutiny; the preparedness of private sector providers and procurement officers in primary care trusts (PCTs) to release material to OSCs; usefulness of the information provided; and the use of expert advisors.

1The anatomy of accountability: how the National Health Service answers to the people, Centre for Public Scrutiny, 2007.

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Patient and public involvementTen interviews were conducted with patient and public involvement members and two patient and public involvement professionals. Interviewees were asked to talk about challenges associated with private involvement in the delivery of publicly funded care.

The commissioning functionEight in-depth interviews were completed with directors of commissioning and strategy from across England. The interviewees were asked a range of probing questions around the following: use of the private sector; challenges contestability brings to commissioning; concerns over the wider use of outsourcing to the private sector in the future; and skills required to ensure value for money from contracts.

Contract management Eight in-depth interviews were conducted with a mixture of commissioners and directors of NHS provider services to build a balanced picture of the difficulties associated with contract management and how these differed between the public and the private sector.

Shared servicesEight interviews were completed with directors of planning and managers of shared services. Background reading included the Public Accounts Committee report on shared services, Improving corporate functions using shared services2 and background interviews with UNISON representatives working in this area were undertaken. This section is presented as a stand-alone worked example of outsourcing to place some of the findings in a real-world setting.

Fragmentation of the health serviceSeven interviews were undertaken with general practitioners to better understand the impact outsourcing has in terms of fragmentation in the health service. Questions covered included the following: the flow of information regarding outsourcing developments, awareness of the basis for services used, and the extent to which dividing up the services provided for outsourcing purposes affects healthcare.

The Welsh healthcare systemEight interviews were conducted with local health board commissioners to gain a broader picture of the changing approach to marketisation in Wales. Contributors were asked to reflect on the policy coming from the Welsh Assembly Government and to contrast it with that of Westminster.

3.3 Terminology and focus The scope of this research study covers many different aspects of the government’s current reform agenda for the health sector, including outsourcing, privatisation, marketisation and other reforms that take management and delivery of health services out of the public realm. However for the sake of simplicity we generally use the single term ‘outsourcing’ to refer to this wide range of activity.

It is important to note the nature and implications of the research methodology adopted for this study. This piece of work is qualitative by nature and brings together the opinions of a number of targeted samples but with self-selection within that target sample. Target samples were chosen based on likelihood of expertise in the area we wished to discuss, ie when talking about commissioning we targeted directors of commissioning. The opinions expressed within, therefore, are the opinions of those who gave them, that is to say they are not organisational opinions. They are presumed however to be valid as those interviewed are in positions of understanding regarding the issues discussed.

We were conscious that by asking participants to question their roles and their employers the self-selection could mean a bias toward more critical feedback. We mitigated for this bias by spreading the net for participation as widely as possible within the targeted samples, ensuring that all who wished to contribute were allowed

2Improving corporate functions using shared services, House of Commons Committee of Public Accounts, 2007-8

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the opportunity to do so and by ensuring that questioning during interview was detailed enough to examine any critical statements made.

OPM does not take a corporate stance on the validity or otherwise of outsourcing. This research was conducted in line with its specific objectives: to research the practical concerns and challenges that are created by the contracting of the private sector to deliver publicly funded health services or related functions.

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4. Background and context Several key acts of Parliament paved the way for the establishment of an internal market in the public services. The policy of ‘commercialisation’ of services was most notable in the 1980s in local government. Legislation such as the Housing Act 1988, the Education Reform Act 1988, and the NHS & Community Care Act 1990 moved the UK public sector towards ‘an enabling state’ rather than a ‘providing state’.

By the end of the 1980s, the then environment secretary, Nicolas Ridley’s view that local authorities should be ‘little more than contract awarding bodies’3 began to be applied to the National Health Service (NHS). The introduction of compulsory competitive tendering in 1982 had introduced private contractors for secondary services like catering, cleaning, portering and estates maintenance in local government and the incremental adoption of this policy in the health sector followed shortly after.

When in opposition Labour criticised Conservative mishandling of the NHS arguing that for 18 years the health service had been insufficiently funded and undervalued. Health became a point of electoral weakness for the Conservatives and Tony Blair’s declaration on the eve of the election that there was 24 hours to save the NHS was a rallying cry for change in the way the NHS was being run.

Labour, however, ultimately adopted three key Conservative era reforms which further opened the door to private involvement in the health sector4:

l the separation between the planning (commissioning) and provision of hospital care

l the expansion of primary care’s budget holding responsibilities

l the decentralisation of responsibility of operational management to NHS trusts in co-operation with other agencies.

Labour encouraged the involvement of private and third sector organisations in the delivery of healthcare believing that this would deliver increasing efficiency, value for money and improved quality of care. Labour has “…argued strongly that public services should have no hang ups about using private or voluntary sector service providers where these can be shown to add value”.5

The first major foray into private organisations delivering healthcare rather than supportive functions came in 2000 when Labour signed a concordat with the private health industry to allow them access to NHS patients. In 2002, private healthcare companies were invited to compete for multimillion pound contracts to run the first wave of independent sector treatment centres (ISTCs). These fast turnaround surgical units were intended to shorten waiting lists for common operations, a key government target.

A number of organisations, including UNISON, other unions, professional bodies and patient groups are opposed to the establishment of an internal market place and the involvement of the private sector. Opposition focuses on both the patient and the workforce. Although it is only one instance of an outsourcing policy, in the example of ISTCs it is felt by UNISON6 that greater inequalities in patient care will ensue as private providers cherry-pick the most profitable patients and hospitals become winners or losers in the market. In addition, a reduction in the quality of NHS care will result as private sector providers seek to drive down costs. The cumulative effect is a weakened NHS with reduced capacity and capability.

Opposition to outsourcing is not confined to unions. In a letter to The Times in 2006 senior stakeholders within the NHS expressed concern over the direction of reform. A list of signatories including the chair of the British Medical Association and the general secretary of the Royal College of Nursing challenged the assertion that a diversity of providers was necessary to establish a high quality service and that “…international experience shows there is no necessary link between how systems perform and how they are funded.”7

This research report collates these, and other, existing concerns and examines them through the eyes of those involved in the design and delivery of our healthcare.

3Taylor, Ian, 2000, “New Labour and the enabling state”, Health and Social Care in the Community 8(6)

4Ibid

5Patricia Hewitt, New Health Network pamphlet quoted in Taylor, 2000

6UNISON, 2007, In the interests of patients? Also UNISON, 2003, Carving up the NHS: private sector diagnostic and treatment centres

7Letter, 27 April 2006, The Times

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Driven by Dogma?Outsourcing in the health service 5. Accountability and governance

Public services are accountable directly to the British public through a range of measures and ultimately answer to Parliament. Public providers differ fundamentally from private providers because there is no formal contract between the public services and the people of the UK and because the public services are governed on the basis of universality and equity of access rather than a legal requirement to satisfy a limited number of shareholders. Outsourcing public services to the private sector therefore presents potential challenges in terms of accountability and developing appropriate governance.

Our initial desk research provided evidence of significant concerns that private involvement in the delivery of services is limiting the ability of public bodies and individuals to scrutinise the outsourcing process. The wider effects of this were felt by interviewees to be an increased risk to the public and patients, of erosion of value for money in public services and a potential lack of responsiveness to local needs.

Through our reading and interviews we developed the following initial key lines of enquiry:

l lines of accountability are increasingly complex and harder to explain when the private sector is involved in delivery of public services

l the introduction of the private sector reduces transparency and therefore impedes accountability

l there is a mismatch between the expectations of the public and those of trusts as to the extent to which they should ‘involve’ when outsourcing services

l governance structures such as holding private organisations to account through contract are not ‘fit for purpose’.

We investigated these key lines of enquiry through our primary research. We wanted to develop the evidence base by ascertaining what the wider effects in each of these specific cases had been. We were particularly interested in how outsourcing affected the wider networks of stakeholders in the health service, in particular patients and service users. We involved patient representatives as well as health overview and scrutiny committee (OSC) members in our research. We have combined findings from these different groups here but highlight contrasting perspectives where appropriate.

5.1 ComplexityAs indicated by a number of contributors to the scoping phase of this research the organisation of public services is becoming increasingly complex. The plurality of providers and outsourcing of individual elements of a service means that the level of understanding as to who provides what may be beyond the majority of the public. This creates an inherent problem in relation to public involvement.

Even in an official capacity OSCs face difficulties that impede their ability to effectively scrutinise. Initial findings from our scoping showed that they are having little impact due to low awareness of the processes being used to make decisions and little knowledge of what ‘good commissioning’ looks like in the health sector. At the same time PCTs and commissioners are pushing ahead with changes unaware that the checks and balances provided by OSCs are not in place or fully operational.

Our primary research found that the complexity of the decisions and services being scrutinised mean that access to an ‘expert witness’ is, in many cases, a central component of effective scrutiny. Interviewees recognise the importance of this; OSC chairs and lead officers report taking all available opportunities to find such a witness. However, in the examples in question this is done on an ad hoc basis, using existing networks and contacts. There is little evidence of a systematic resource available to chairs or lead officers and in one case there is evidence that the process of scrutiny is being hampered because an expert witness has not yet been found.

Compounding the increased complexity is the requirement for the OSC to be involved in more decisions than before.

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Health OSCs were introduced with a narrow remit to look at health services. This remit has since been widened considerably to consider health and well-being and health inequalities, as well as acting as official consultees on health declarations for the Healthcare Commission’s Annual Health Check, the move to Local Involvement Networks (LINks) and other issues. As a result, “the amount of comprehensive, in-depth and intelligent reviews OSCs can conduct proactively is very limited.” This perspective was confirmed in discussion with one OSC, who noted that they only scrutinised a recent outsourcing decision in the region when pressurised to do so by patient groups and UNISON.

One OSC reported considerable pressure to shorten the period of consultation it undertook in order to scrutinise a decision to outsource services. The services were being introduced to help meet the 18 week target, and the committee members report shortening the period of consultation from the suggested 12 weeks to only eight weeks so as not to be responsible for the service missing the 18 week target. Such pressure may be seen to limit the effectiveness of scrutiny efforts.

An interviewee from an OSC also expressed a concern about the ability of a health OSC to scrutinise all health commissioning, not just in relation to outsourced services. The representative suggested that OSCs are a very early stage in the scrutiny of commissioned services and that “they can conduct broad-brush work but not scrutiny of specific services.”

Discussion with further OSC members supported this view; one lead member noted a concern that the complexity of commissioned services means that scrutinising a service often requires a time-consuming process of building and maintaining a relationship with a wide range of colleagues and that this increases the time required to effectively execute their scrutiny role.

Similarly, a lead officer noted that the nature of commissioned services means that OSCs are often required to scrutinise a service jointly because it has been commissioned across borough boundaries, further complicating the scrutiny process.

An additional complexity is the lexicon required to engage the public on outsourcing. The scoping paper found that the language used when discussing outsourcing is alienating people that have little or no knowledge of commissioning. This creates an obvious barrier to effective public involvement. As one contributor noted, the government has made little effort to make the terminology or processes clear or transparent:

“I understand it because of the work I have done in the past but the general public certainly don’t even understand the term outsourcing. It makes you think it is being provided outside the hospital.”

One contributor was concerned that these effects continued up the chain of accountability. It was proposed that there was a lack of understanding from MPs who may also struggle to grasp the complexities outlined above. The effect associated with this could be that the government and policy-makers are not being effectively held to account or scrutinised with the necessary rigour. There was a feeling, as with local government, that these changes were happening rapidly with too little effort put in to enabling potential scrutineers to understand the process.

5.2 TransparencyOur desk research revealed that transparency in commissioning decisions was vital to the effective scrutiny of healthcare. Experts from public involvement groups highlighted that tendering processes were often secretive and discussion of them was reserved for the private element of public trust board meetings. It was felt by interviewees that this would impact on the ability of private organisations, or those commissioning them, to truly consult with their users.

An OSC member stated during our primary research that there is no statutory requirement for private providers to release information for the purposes of scrutiny, unless it is built into the contract between a PCT and a provider. In practice this means that OSCs must rely on the PCT and/or the provider choosing to release the information that the committee needs in order to scrutinise decisions.

It is clear that the statutory role of an OSC in scrutinising health decisions could be undermined by their lack of statutory right to the information they need for such

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scrutiny. There is only limited evidence from our interviews to suggest that in the cases in question this has been a major problem; where OSCs have requested information for scrutiny purposes PCTs and private providers have obliged. In practice, however, information requests have been directed at the PCT, rather than the provider directly and interviewees’ principal concerns were that the PCT had been very slow to respond to such requests, delaying the process of scrutiny.

The decision-making process was not felt to be clear and obtaining existing contracts was at best challenging and at worst impossible. This lack of information in relation to certain bids or deals can, in some cases, be denied on the basis of commercial sensitivity, an issue which arises purely through the fact that these commissioning or budgeting decisions are being made between competing organisations.

UNISON Scotland found while researching their report At What Cost8 that gaining access to contracts for outsourcing arrangements such as PFI/PPP is not always possible. Even requests made under the Freedom of Information Act to trusts who held such contracts were often refused on the grounds of customer confidentiality. As a result of this research the Scottish Information Commissioner backed UNISON’s calls for private contractors working in the public sector to be covered by Freedom of Information regulations.

Access to the physical premises of private providers such as ISTCs was furthermore found to be problematic. One PPI Forum/LINk member stated “We don’t have any access to [the] ISTC – it is not a public space. The LINk is supposed to have access to view and comment on services in all places where publicly funded care is delivered. We have problems with that and the private sector are opposed to this – we will be setting up a visiting team and we will be visiting.”

5.3 Mismatch in expectationsOne scoping interviewee raised a question as to whether trusts feel that public involvement is even required when undertaking some forms of outsourcing. There was a contention that it may not be seen as a variation in service under Section 242 of the NHS Act 2006.

Primary research found that patient involvement representatives feel that outsourcing decisions are made without involvement. Points made by these research participants include:

“We are not made aware of [the outsourcing agreement] by the hospital. Some of the hospitals are very anti-engagement.”

“Particularly as there are more foundation trusts – people aren’t involved in the same way – they say the board meeting isn’t a public meeting and they say they don’t have to have public involvement at this level because they have membership.”

“In the ambulance service we had a particular problem with the ‘Taking healthcare to the patient’ policy – this policy stated that a number of services could be provided by paramedics in peoples’ homes rather than in hospital including phlebotomy – the service ran a pilot but the funding was stopped by the PCT counter to national policy. The PCT said they had stopped it because they wanted to tender for this service. It was difficult to get any information about the issue due to the fact that they were outsourcing. When the PCT decided that there was someone better than the ambulance service to do it – they didn’t want to engage about it and they didn’t want to offer up any rationale. They don’t accept [patient and public involvement] has any role to play in it.”

Some PPI/LINks members involved in the research reported being without the necessary information to be in a position to even begin to question the orthodoxies of choice, contestability and privatisation. Some saw this as almost outside the remit of their role: to make sure that, whoever provides the service, it is as good as it can be for patients. The decision about whether to commission a private provider is seen as a PCT management matter, not a public/patient matter.

8UNISON Scotland, 2007, At what cost? A UNISON report on the aggregate costs of PFI/PPP projects in Scotland

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5.4 GovernanceOur desk research found that the profit motive is likely to serve to confuse the relationship between a public sector commissioner and a private provider. Private organisations cannot operate in the same way as public bodies because, legally, their first priority is to their shareholders. The extent to which they could act on the wishes of their contractor or in their ‘customers’ best interests raises an interesting question regarding conflict of interest.

It is contested by some in the primary research that equivalent accountability through contract is possible - although challenging to achieve. As highlighted in the section of this report on commissioning it is difficult to word the implied contract between services and the public which would be necessary for the successful contractual accountability of private organisations. As found in the commissioning section, contracts can quickly become open to interpretation with contracted services wrangling over wording or nuances.

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Driven by Dogma?Outsourcing in the health service 6. Workforce

The NHS is the largest single employer in the UK and an important provider of employment to staff in lower paid and less well-protected positions. The publicly funded health service provides employment both directly and indirectly via contractors in outsourced services. With the growth in private sector involvement a healthcare ‘market-place’ has emerged which includes ‘thousands of organisations employing tens, possibly hundreds of thousands of people’9. Lethbridge (2004) echoes this highlighting that there is growing awareness that the NHS has a role to play in economic regeneration of deprived areas through offering secure employment.10

From our initial desk research it became apparent that there were significant concerns relating to the impact of outsourcing on the workforce of the health service. The impact can be thought of as operating on two inter-connected levels: those changes that affect the workforce directly and the impact indirectly felt on the ‘quality’ of the health service and further afield.

The ability of the mixed public-private model of service provision to ensure that the workforce is being treated fairly, equally or involved appropriately in decisions regarding working conditions, or the strategic direction of the services they provide, was called into question. Through our desk research and interviews we established that there were a number of purported effects of outsourcing which may cause a negative impact on quality of service. These are described below and formed the key lines of enquiry for our research:

l Erosion of terms and conditions – in some instances there may be worse pay or other terms and conditions on offer in the private sector for delivering the identical job as a public sector worker. This is a factor of the need to achieve competitive advantage in the tendering process and is seen as a way of cutting costs.

l Two-tier workforce – it was found that different terms and conditions can impact on working relationships and can create a two-tier structure of those employed by the NHS or protected under Transfer of Undertakings (Protection of Employment) regulations and those employed subsequently by the private provider.

l Uncertainty and the challenge of management – planning of the public sector workforce becomes increasingly difficult when contracts are shorter term and this in turn creates uncertainty and a sense of insecurity among employees.

l General erosion of the public service ethos – by fragmenting or moving a larger proportion of the workforce outside the NHS the ethos and values of the NHS would be eroded.

l Reduction of access to training – private providers do not demonstrate the same commitment to providing access to training as the NHS, weakening the health service in the long run. Another function of the need to create competitive advantage, an outsourced workforce may be asked to perform tasks that they would be unqualified to perform in the NHS.

l Internationalisation of the labour market – with services increasingly being run by multinational companies, employer regulation could vary, jobs could be moved out of the UK and there may be data protection issues with patient-related information leaving the UK.

Evidence to assess the validity of these lines of enquiry was gathered from a range of practitioners. These interviews were primarily targeted where the strongest evidence for outsourcing having impacted on quality existed, in particular on the cleaning services in hospitals. Our interviews centred on a trust where cleaning had been outsourced but had subsequently been brought back in-house. This enabled us to gain insight into the different working practices and any lasting effect outsourcing could have on the quality of a service. It should be noted, however, that findings from other case study interviews are included in this section, where relevant, to illustrate where the impact outsourcing has had on cleaning services is comparable to a wider range of healthcare professionals and services.

Cleaning is an absolutely crucial service for the delivery of safe, high quality healthcare. Our initial expert interviews identified cleaners as possibly the most

9Government News Network - Department for BERR, 2007, “Transforming public services is new growth industry – Hutton”

10Lethbridge, J, 2004, “Public health sector unions and deregulation in Europe”, International Journal of Health Services, Volume 34, Number 3, Pages 435-452

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important members of the infection control team. Infection control receives an ever increasing amount of media attention and although the link between cleaning and MRSA is not universally accepted, reports of rising hospital acquired infection rates provoke stronger focus on the ‘cleanliness’ of hospitals and other healthcare environments.

Cleaning has, since the 1980s been increasingly outsourced and it is reported in the media that around 40% of hospitals now use the private sector.11 In 2007 it was reported that 440 hospital sites were identified as having outsourced cleaning services.12

There is opposition to the use of outsourced cleaning and this has been growing in recent years. Much of this opposition can be linked to the downward pressure on pay and conditions but is also linked to the wider effects of decreasing quality of cleaning and the problems this brings. UNISON’s own Cleaners’ voices research was conducted in 200513 and brought to the fore, for the first time, the voice of those involved in delivering both privatised and publicly provided cleaning in the healthcare environment. This research found that the Matrons’ Charter, a 10-point plan made in consultation with nurses in 2004 and promising to deliver cleaner hospitals, was not being delivered through privatised approaches. Other prominent healthcare organisations have now come in line with this. An example comes from the 2008 Royal College of Nursing (RCN) conference which overwhelmingly voted (99% in favour) for a motion proposing an end to contracting out cleaning to private firms.14 This vote was supported by nurses voicing concerns over the reduced sense of ‘team’ between nurses and outsourced cleaners and a reduction in the quality of cleaning when services are contracted. In 2001 it was reported that 80% of the trusts put on special measures for failing Department of Health cleanliness standards employed private contractors.15

Proponents of outsourcing feel that costs could be cut and value for money raised through increased efficiency in cleaning. Investigation with cleaners and other healthcare professionals along the lines of our desk research found that the move toward outsourcing led to a number of challenges. These are explored below.

6.1 Erosion of terms and conditionsOur desk research found that wages, London weighting, sick pay, paid holiday and employer contribution towards a pension are weaker in outsourced services than the equivalent workers on NHS contracts.16 The Low Pay Commission (2007) reported that on average pay is lower in the private and not-for-profit sectors than in the public sector for outsourced services in social care roles.17 UNISON stated in their submission to this Commission that they believe that the outsourcing of public services has a downward pressure on pay levels and that this in turn has a negative impact on workforce morale, retention and consequently overall quality of care.18

Our primary research provides evidence to support this case. The cleaners transferred over unanimously reported a disparity in the pay and conditions on offer including pay, annual leave entitlement and the availability of overtime. One said “I would have liked to have left because of the pay and conditions. They were employing people on less money and only 10 days holiday a year.”

There was a concern expressed by cleaners over reductions in staffing numbers and what that meant for the working conditions under which the staff were expected to operate. One cleaning supervisor said: “… the supervisors had to go out on the wards, because they cut the staff. We have half the amount of people now working on the area as we did originally”. Another concurred stating that “There were only two cleaners on my ward, then the contractor took it down to one”. It was felt by interviewees that this reduction in staffing numbers impacted on how effectively cleaners were able to perform their role. It also had the effect of forcing people to perform roles they weren’t trained or qualified to perform. For example: “We were put in jobs that we had never done before.”

In another case a supervising cleaner felt there was a residual effect from the time when the service was outsourced. After returning in-house it was difficult to encourage a return to original levels due to the required increase in investment. One cleaner said “We are just starting to address major issues now, one of which is staffing levels.”

11End private cleaning in NHS call, BBC News Online, 29 April 2008

12DH FOI release DE6007685, 8 February 2007

13Cleaners’ voices, UNISON, January 2005

14Resolution 5, submitted by the RCN Greater Glasgow and Clyde Branch, RCN Congress 2008

15“Filthiest’ NHS hospitals cleaned by private contractors”, Society Guardian, 10 April 2001

16Howarth, C, 2007, “Working for patients – on unhealthy pay”, Health Matters, Issue 53

17National Minimum Wage, Low Pay Commission Report, 2007

18Ibid

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6.2 Two-tier workforceStaff transferring from the public sector to the private sector as part of an outsourcing move receive protection of their terms and conditions as a result of the Transfer of Undertakings (Protection of Employment) regulations (TUPE). If new staff are required in the outsourced organisation, be it to increase the number of staff or to replace transferred staff as they leave, these new employees can be offered a different employment package. This can include different levels of pay, pension, training and annual leave.

These disparities can result in a two-tier system in the provision of public services where two individuals doing the same work, and providing the same service to the public, can receive remuneration packages of a differing value. Our desk research found that this phenomenon can and does impact negatively on the ability of the staff from the different ‘tiers’ to work together effectively.

Our primary research supported this finding. The transferred staff we spoke to felt that the differing terms and conditions caused friction and that although the new staff were able to join unions they did not receive the same terms and conditions that transferred staff received. This caused wide ranging effects from a sense of ‘them and us’ to a lack of coherence in the ‘team’. This in turn was felt to lead to a reduced quality of cleaning. Relationships were also reported to suffer between the NHS and the private provider staff, even those who were previously NHS staff transferred under TUPE. The quotations below are typical:

“We had ours protected… but they brought the new staff in on different contracts. That caused friction which wasn’t our fault.”

“We tried to work alongside, but we felt they just classed us as those getting paid more than them. They wouldn’t work the overtime because we would get paid more for it than them.”

“People knew, it was like them and us. They didn’t think it was fair and said so. I think it meant they were less willing to help out… you felt a bit awkward.”

“There was a big ‘them and us’ because we had all the holiday, weekend double time.”

6.3 Uncertainty and the challenge of management Workforce management and planning becomes challenging for healthcare managers and staff once increased ‘flow’ of staff between organisations, or departments within an organisation, is introduced to the workforce. The relatively improved job security that comes from working in the public sector allows longer-term relationships with employees to be nurtured. The importance of these working relationships cannot be underestimated.

When discussing feelings of uncertainty for the workforce in our primary research we found that a sense of involvement in outsourcing decisions was vitally important to staff effected. We did not find in our cleaning case study, however, that staff had felt involved in the initial decision or in any ongoing way. This lack of consultation or even a flow of information contributed to feelings of uncertainty which, in turn, was reported to actively affect the morale, feelings of cohesion and ultimately the performance of staff. A number of interviewees mentioned ‘knowing where they were’ with NHS employers, for example:

“We weren’t ever asked about it, just told at a meeting… we were disappointed it had gone out [and we] felt we might not get the same support as under NHS management.”

“Not really asked, more or less told… I didn’t know until they told me on the Friday evening where I’d be - we were told it would be silly to move us, but they did, and I ended up somewhere else.”

“[we] had no say; no not communicated with once they were in charge, we had a meeting with our manager on the Friday afternoon, said nothing would change, but it did [and it was] a big shock.”

An ongoing concern was that under the private contractor staff views were not considered to be as important as under the NHS. Cleaners reported an increased

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turnover and a reduction in the sense of ‘team’ as meetings with management decreased.

NHS directors of commissioning interviewed also talked of a more fluid and fragmented workforce and that this could cause them concerns over deciding when and to which organisations to outsource services. The effect on workforce stability and security was a real concern, with one individual saying:

“Staff move from one organisation to another [within the private health sector] often for quite small increases in pay. Competitiveness can come down to just a few pence on an hourly rate.”

One element of this was highlighted by a director of commissioning who noted that once contracts are awarded the workforce can be subject to significant change on the provider side. This may include a shift in the quality of staff employed and hence a reduction in the quality of the work provided. As this individual put it: “How do I know they aren’t going to be [bringing in an external workforce] to deliver the work once they have won the beauty contest?”

6.4 Erosion of the public sector ethosA significant amount of evidence was found in the literature identified in our desk research on the question of outsourcing services and the impact it has. Less evidence was found on any impact it may have on the public sector ethos, which made this an important area to address as part of the primary research.

The notion of a public sector ethos is important to those involved in the delivery of services, and those involved in the management of them. The Public Administration Select Committee reported in 2002 that ‘a clearer and more explicit way of explaining its values is needed. The ethos needs to be nourished and cultivated. We recommend that the most important values should be set out in a Public Service Code, to be approved by Parliament and adopted by all bodies providing those services.”19

The idea of a ‘public service code’ had developed into the notion of ‘public service guarantees’ by 2008. 20 These guarantees would be statements of entitlement to minimum standards of public services. These would join existing commitments to provide minimum standards of provision and would eventually be joined by the NHS constitution, setting out the rights and responsibilities linked to entitlement to NHS care. These guarantees and the constitution are intended to go some way toward ensuring an ethos of public service remains within private sector workforces.

The importance of working for the NHS and being directly responsible to the government and the people, as opposed to a body contracted by the NHS responsible by law to a limited number of shareholders, came across in a number of interviews across the vastly diverse range of healthcare staff interviewed.

With staff transferred from the NHS this commitment remained. The quality and commitment of the transferred workforce is an element of outsourcing that will rarely be fully accounted for in contracts. For example:

“We came out at a set time, maybe sometimes a bit later. It is still a hospital ward and you’ve got to think of the patients not the company. If you’ve got an 87 year old waiting to come into a room, you want to get it ready for him. He could be my own relation couldn’t he?”

Our primary research found that when cleaners, for example, were transferred from the NHS to a private provider they felt that the change in overarching objectives of the organisation they were working for impacted on their morale. One cleaner said: “[we] worked on a money basis rather than a staff basis”, while another interviewee commented that in their opinion “…the profit motive is over-taking the balance of care required.”

When public sector providers are considered or able to bid for tendered contracts, which is not necessarily always the case, commissioners and providers talked of the difficulty of accounting for what the public sector ethos brings with it in terms of tangible benefits. While it was accepted that NHS providers bring with them an extra commitment that increases quality of care, saying how expensive or how beneficial that is can prove difficult. One provider manager stated: “People who don’t understand the ethos of community work don’t understand the costs associated with

19Public Administration Select Committee Seventh Report, 2002, The public service ethos

20Public Administration Select Committee, Twelfth Report, 2008, From citizen’s charter to public service guarantees: entitlements to public services

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it”. Another elaborated with a detailed example of NHS ethos, unquantifiable in a tender bid:

“I go out with our [community] nurses and we recently went to do a procedure. When we got there [additional personal care] was needed. Strictly contractually the nurse was in there for a dressing and another lady was coming in 20 minutes later to do the personal care but we just did what was required. You can’t just compartmentalise care like that. And these people want to stay in the NHS. Will we get a mass retirement? From talking to the staff here I believe they are fully committed to the NHS.”

6.5 Reduction in access to trainingThe cleaners interviewed raised instances where training for staff brought in by the private contractor was not sufficient for the job they were expected to do. Furthermore it was felt that once in role it was left up to the transferred staff to informally train the newer arrivals. One cleaner said “There wasn’t much level of training … it was cost and not quality” and another reflected that “We had been taught how to do it. The new ones were taught [but] they would come back to us to learn the proper way”.

Managers of provider services also talked of the commitment displayed by the NHS to training and the effect this has on staff retention in particular. One stated: “we have a very small turnover, we develop people. We develop healthcare assistants into senior managers… who retain that value. You could persuade [people to join an outsourced team] but how many would say – that is one step too far and [we would] lose that expertise from them”.

Our desk research uncovered evidence of the impact of an inconsistent approach to staffing and training between the public sector and the private sector. An expert interviewee highlighted the example of private walk-in clinics being staffed by nurse practitioners who had not been trained to deliver the role they were asked to by their private employers. The existence of these walk-in centres was felt to be an attempt to reduce the overall cost of healthcare through decreased referrals. In reality, however, the fact that nurse practitioners had not been trained to deliver the same care as publicly provided GPs meant that the majority of patients were ultimately referred onwards. This resulted in poor value for money rather than any time or cost saving. The removal of this link in the chain, it was felt, would provide better value for money.

It was asserted by the expert interviewees and commissioners interviewed that a notable effect of the existence of ISTCs was a proportionate increase in the number of complex procedures undertaken by NHS providers. Due to the over-provision of capacity required to offer choice and the predetermined case-mixes that ISTCs are contracted to provide, only the more complex, less profitable, procedures are performed within the NHS. An effect of this, and one that was felt to be hard to counter through contract, was that more junior surgeons have been unable to complete sufficient routine procedures to develop an appropriate skill base. This was corroborated by interviewees who felt that unless training requirements were clearly built into service level agreements or contracts with private providers then it would be overlooked.

6.6 Internationalisation of servicesExamples were found, and outlined by interviewees, of outsourced services moving functions overseas, and with them jobs previously filled by UK-based workers. A number of elements of this shift were of concern to interviewees.

One expert interviewee felt that multi-national bidders for outsourced contracts, such as first wave ISTCs, may bring with them differing views on workforce practices that could potentially damage the public sector ethos and working practices of the health service.

Furthermore the ability of an overseas workforce to deliver the same quality of work was called into question. In particular our research focusing on shared business services found that satisfaction with the international workforce employed to deliver previously UK-based roles was lower. This was not necessarily to do with the individual workers but rather a function of the difficulties involved in communicating

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over long distances. Examples were given of the use of group email addresses for overseas contactors, the lack of personal contact with individuals providing the services, and the increased risk of lost data.

One interviewee commented on the importance of accountability when discussing a move back to the UK: “They’re answerable to local policies now, more accountable due to the company base shift from [abroad] to [the UK]”.

An organisation’s workforce is the most important element of how well or poorly it performs, and how it is perceived by service users. As the evidence outlined above suggests, outsourcing in the health sector can and does have a considerable negative impact on the workforce. This includes lower morale, deterioration in working conditions and a loss of what it is to be a ‘public servant’. While these effects may vary from role to role, the fragmentation of the NHS into distinct units is necessary for outsourcing to occur and in turn this fragments the workforce.

One impact in particular that will not be fully understood for some time is what longer-term effect the transferring of staff between organisations has. Cleaners interviewed talked of the lasting damage done by the outsourcing of their service not only to the quality of cleaning but to the morale of the cleaning team. For example, one said “It was only once they came in that things started going wrong” and “I wouldn’t work for the private sector again. I don’t think it works in hospitals. It didn’t work last time and I’m sure most felt the same”.

The cleaners interviewed spoke powerfully about the impact of outsourcing not only with regard to eroded terms and conditions and other ‘direct effects’ of outsourcing, but also of a decline in quality and therefore an impact on patient care: “Standards slipped. There were less people to do the cleaning and not enough materials. I don’t think it improved anything” and “After three months of them being here it had all gone downhill after years of work”.

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Driven by Dogma?Outsourcing in the health service 7. The commissioning process

Commissioning services does not necessarily mean outsourcing to the private sector. Commissioning is one element of a process which is used to make decisions about how best to allocate the finite resources of the public health service. As a director of strategy said in interview:

“It is about assessing the need of our population. We look forward and look at what the needs of the population are likely to be over the lifetime of a contract, and where are we now? We need a method to work that out and we incorporate all those requirements and go out to tender, or stay in-house with current provider but refresh their aims.”

The scale of the importance of effective commissioning should not be underestimated with the NHS spending around £15 billion per annum on goods and services (not including staff pay).21

It is important, in the context of this research, to distinguish between commissioning that includes tendering from private sector providers and the commissioning that would be required to take place in order for resources to be allocated from centrally held or regionalised budgets to public sector providers.

From our desk research and expert interviews we identified the following key lines of enquiry, the points at which the use of open tendering including the private sector is likely to introduce challenges or costs into the commissioning process:

l the process of tendering for contracts is made unnecessarily and unhelpfully complex and costly by the use of the private sector to respond to tenders

l the negotiation and award of contracts is performed inconsistently across the UK, increasing the risk of a ‘postcode lottery’ of service outcomes

l the ‘game’ is not even: commissioning unfolds on an uneven playing field where the private sector and public sector are fundamentally unequal players

l performance management of private sector providers within the life of a contract is more challenging than performance management of NHS providers

l throughout all these stages of commissioning the required capacity of the NHS commissioner is not always equal to the capacity of private sector providers and that insufficient or inappropriate support is available

l the increased involvement of the private sector in commissioning has the potential to cause a conflict of interest or other negative outcomes for the long-term viability of the public sector.

These potential areas of conflict are important because commissioning from the private sector is increasing. Our primary research found strong evidence that although the level and approach varies greatly across regions the general direction of travel is strongly in line with government policy: toward the increased involvement of the private sector in almost all areas of healthcare-related service delivery.

Private sector outsourcing agreements range from large national contracts such as ISTCs and SBS to smaller locally negotiated diagnostic contracts or individual accident and emergency walk-in centres. Some are long-standing such as the arrangements for private sector cleaning or catering contracts, some are more recent phenomena such as the separation of provider units.

We examined our lines of enquiry through two main strands of primary research: interviews with commissioners of services and research with NHS provider services.

7.1 Tendering for contractsAmong our interviewees there was felt to be little or no choice whether to go to tender or to maintain services within the NHS without a competitive process. It was felt that the political imperative to go to competitive tender with more services each year was so strong that local decision-makers had effectively no room for manoeuvre. One director of commissioning felt this was in opposition to what his board would have preferred to do:

21Department of Health, Supply Chain Excellence Programme (SCEP), February 2007

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“If we felt it was too core to our service provision to be sent out that would have to go to the PCT board and to [the strategic health authority]. It is now a serious matter if you are not going to tender. This is a real change in how we would normally work. We are used to spending large amounts of money every year without going to the board currently in the public sector (at least £500m). If we do start going to the board over all issues it is going to create a large burden on them.”

Another said:

“I think the board are instinctively being pushed, this is not where they want to go. Going back to the timing of stuff, as a rule, people have ended up as non execs because they have passion about the NHS, not so much because they want to see [a private organisation] run NHS services. It will be interesting to see what threshold they do choose”

Our research suggests that, when tendering does occur, it does so in the context of markets that vary widely in terms of maturity across regions. Markets in some areas had active private sector, third sector and NHS providers operating within them. In others this has not been the case. In Wales, for example, the market has failed to develop to such an extent that the policy of outsourcing and the internal market has been abandoned by the Welsh Assembly government and local health boards through which commissioning currently takes place. Instead a national body will be established to assess need and possibly fund care.

This inequality in maturity of markets and reliance on the market to determine where care is provided can create an inequality in levels of care across the UK, most notably within rural regions. One interviewee said:

“The acutes were always the dominant feature in the landscape – the only way you can beat that is by introducing the people like ISTCS but it is too expensive to stimulate the competition in our rural context [because patients cannot travel].”

One director of commissioning noted that in her area the lingering uncertainty over the entry of an ISTC into the market, which would increase supply and reduce demand for the local acute trusts, led to ‘planning blight’ for local providers unsure as to what they would be called upon to provide in the coming year. This is a clear instance of a private provider strongly influencing the long-term nature of a healthcare market. This is further exacerbated by Payment by Results, which sets a national tariff for all treatments. Where ISTCs are introduced, therefore, trusts can suffer financial losses when fewer, and often more ‘expensive’ or complicated cases, are treated.

It was felt by some commissioners that the providers dominate the market rather than those who are required to commission services or assess need. This was felt to cause a lack of ‘whole picture’ planning. This was true of both large acute public providers as well as those providing private services. One commissioner noted “we are still not in a position yet where the PCT as a commissioner is holding the power in the market and I would question whether we would ever get to that position.”

Others felt that the increased ‘marketisation’ had introduced a rush for what money was available regardless of need. One commissioner stated: “[Primary care providers] aren’t looking at the area and thinking where the need is, they are thinking we have a particular type of specialist here and we could make a business proposition – the GPs are offering what they can do not thinking about what do we need to do to meet the needs of people and then providing that. It is an [inflexible] sellers’ market.”

Commissioners we spoke to were unfamiliar with how they could stimulate the market to respond to their tenders and thus overcome these problems, but noted that the strong expectation was that they do just this. This was strongly felt to be an element of the role which was not yet widely understood among commissioners. One said:

“The majority of commissioning decisions up to this point [have been about understanding local need]. They have just been to do with what are we going to commission our NHS trust to do? We have not been out there stimulating the market or blazing a trial.”

One strongly voiced benefit of the introduction of the private sector was the increased formalisation of service planning which came with the need to write

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specifications for all services. The fact that the whole commissioning process became more structured when the private sector was involved made commissioners consider the services they were commissioning much more closely than they had previously been required to.

Drafting of the tender document or initial service specification in particular required close analysis of what was to be provided over the coming years whereas previously this had been allowed to roll over somewhat from year to year. One commissioner felt that “a more formalised process can be useful and help us to think through and stimulate how we think differently as well.” This sentiment was echoed by another who stated “we spend £500m a year – I have very little idea other than the old traditional counting approach of what we get for that – particularly in terms of benchmarking, outcomes and value for money, quality and safety”.

In terms of assessing tenders received, it was felt by commissioners that the local NHS providers were put at a disadvantage as they may falsely appear to be expensive for a number of reasons. The requirements of Agenda for Change and the difficulty of factoring in the ‘extra-mile’ that NHS (and voluntary sector) providers will go into bids were two that were most strongly mentioned. For example:

“There is a view that, for all sorts of reasons, for NHS providers to demonstrate value for money is a challenge. They have had ‘Agenda for Change’ and the way that has worked makes them look very costly compared to other providers submitting bids.”

“Some of the assumptions made around hands on patient care time – there is a lot of non-direct care in their tenders. So competitiveness is a challenge for the NHS providers.”

Areas where traditional NHS providers can offer a competitive advantage is in offering local knowledge, ensuring that they are fully transparent to commissioners and emphasising the fact that they are well-known to commissioners and should therefore be natural choices to provide the services they already do, as long as they can demonstrate they are doing so effectively. Interviewees said:

“We aim to recruit organisations and people who understand the local population and can advocate for and meet their needs. That is an uphill challenge for a large national/international organisation.”

“You need to get the idea across to existing providers that they need to be open – allow visits and everything else. That has to be the same regardless of the provider.”

“Our competition policy is that we want to give our existing providers the chance to respond to all specifications of services that they currently provide – only if they can’t or won’t provide a tender that is satisfactory will we look elsewhere. We don’t want to go hell for leather down a market or tendering process.”

There is also an awareness that local providers who are already providing services may have to spend an undue amount of time on answering tenders, a point raised by UNISON in their 2007 report on the role of the voluntary sector in delivering health services.22 An additional and complementary point raised by our research is that if funding is only or primarily available through competitive tender then this clearly increases vulnerability of voluntary providers:

“If organisations are spending a lot of time satisfying our demands for tendering they are not necessarily doing the delivery. It is a huge amount of work. We don’t want to destabilise our core services.”

7.2 NegotiationOur desk research found that in some of the larger scale outsourcing schemes, most notably ISTCs and Shared Business Services (SBS), outsourcing agreements had been negotiated nationally. This can result in those making commissioning decisions being distant from those who are required to work with the commissioned service. Expert interviewees reported an unhelpful tension between those responsible for the national negotiation of contracts (primarily those in the Department of Health) and local healthcare providers.

Our primary research found compelling evidence that this was indeed the case. ISTCs were, until summer 2007, commissioned nationally by the Department of

22Third sector provision of local government and health services, Steve Davies for UNISON, 2007

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Health using little or no consultation with local service providers. Contracts and decisions were essentially handed down to PCTs. An example given to us by one interviewee included £900k being taken out of the PCT budget to pay for diagnostic services. The current use of the ISTC was felt to be between 10% and 20% of agreed capacity.

There was felt by commissioners interviewed to be a ‘one size fits all’ nature to the contracts agreed nationally and delivered locally and furthermore it was felt that little evidence had been offered to local commissioners regarding why or how these contracts had been arrived at; there was very little transparency over this. One interviewee said:

“They wish to show that there are these options and they have been used and they are available. But in fact these are really under-used. The NHS often pays for under-used capacity. It is disappointing that instead the DH didn’t say ‘[PCT X], we are going down the contestability route, why don’t you work out what you want and we will give you the money and you will do it?’. Local PCTs would have been keen on this – instead they plonked down on you”.

One example offered was a ‘walk-in centre’ being parachuted in to sit geographically between two PCTs to fit with the need of the national agenda to demonstrate private involvement in the delivery of primary care, but that fitted with neither PCT’s local strategic plans in terms of location or capacity.

Another example given was of a nationally negotiated elective surgery programme designed to provide patients with choice – a national priority although not necessarily a local one:

“[Our group of PCTs] have been requested to sign up to a range of services provided by national procurement which involves a large investment which is not necessarily something we would normally commission and would not commission in this way. This is similar to the ISTC waves. The only way we can have choice is if the GPs are willing to refer their patients to these providers and it is questionable why anyone would want to go to the private provider which is untested and often farther away than the local acute trust. The [nationally negotiated private initiative] that is coming up this year we have quite a big [financial] input into [the start-up] and this is something that will start from scratch. [Our trust] has been asked to invest a set amount rather than using a call-off.”

When negotiations do take place at a more local level commissioners felt more comfortable about securing what they needed from a competitive tendering process.

7.3 Writing complex contractsThe bewildering complexity of the process of writing effective contracts is a theme that emerged consistently through our desk research, expert interviews and primary research. Sophisticated contracts are required to deliver complex and constantly changing public services and we found evidence that showed that this is an extremely challenging element of commissioning which is primarily necessary due to the increased use of the private sector.

In the delivery of support or back office services contractual relationships are complex and it was found that this challenge can only increase in relation to clinical services; Paul Maltby, research fellow of IPPR, commented “…can you write a contract for that kind of clinical care? It is so complex it is close to the limits of outsourcing.”23

This was echoed in our primary research in this area with one provider pointing out “it is no surprise they have [outsourced] the easy stuff first, services that can be measured on metrics like throughputs… but how can you possibly measure something like end of life care?”

A significant challenge in relation to delivering effective contracts in healthcare is that they need to be both flexible and rigid. However ‘well’ a contract is constructed they need to be responsive to reductions in performance or a reduction in the agreed delivery targets.

Individuals from NHS provider services interviewed for this study talked of a pressure to provide a degree of flexibility:

23The Guardian, 2003, “Outward bound”

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“If they need something done that is not clearly defined in the contract they will put a lot of pressure on us to deliver within our contract, we have to put that back and say this is added work not mainstream core business. Where are the resources coming from? Or are they going to agree to pay?”

This pressure, however, was not felt to be exerted on the private sector in the same way, further creating an uneven playing field between the sectors.

With increasing complexity of contracts comes increasing costs to draft them. There was some disagreement over the ‘net’ cost of contracting in this way but the individual cost of drafting complex contracts did mean that procuring from the private sector was more costly than procuring from the public sector.

For example, one interviewee said: “All contracts go to legal advisors which we wouldn’t necessarily do with public contracts”, with another noting that “The transactional costs are huge. It is all very well saying the private providers are going to be better, they are very good however at finding the clauses in the contract”. On a similar point:

“We will go on spending more and more money on this – contract negotiation skills, transaction costs, etc. We keep these down by not having lots and lots of contracts – for example we have services we buy from other PCTs for example – but if we tender every contract – the transaction costs will be higher.”

7.4 Performance managementOnce contracts are awarded they must be monitored and maintained. Performance management is always important but in the context of outsourcing – related directly or indirectly to delivering healthcare services – it becomes paramount and the impact of any lapse has the potential to be disastrous.

In primary care PCTs are required to have in place strict mechanisms for managing the performance of all who provide services to them including private sector contractors. These are set and advised upon nationally and adapted to fit locally. Nationally organisations such as NatPact and the National Clinical Assessment Authority provide guidelines.

On the face of it the management of a contract with outsourced providers is no different than management of a contract with GPs or with the existing workforce. Our research showed, however, that there are some important differences.

Limb (2004) highlights how being a ‘buyer’ rather than an employer can affect the ability of a commissioner to performance manage. He found that the relationship between PCTs and GPs based on a long-standing interaction are generally well developed but we found that the same deep partnership has not been developed between commissioners and private sector providers. NHS providers commented on some of the difficulties they faced in negotiating the path between flexibility and sticking to contract within a relationship such as this. Quotes from interviewees on this point include:

“We are used to going along to the local trust and talking to them and saying ‘can we just change this a bit’. We have a common way of thinking. It is the NHS family. You can’t go along to [a private provider] and say the same, they will say no.”

“We have effectively had a contract performance notice … about handling admis-sions. They have written to us and asked for reassurance … we have come up with a range of plans to tackle this issue. But if I wanted to I could stand on formality and say all you pay me for is two nurses. If I was just a separate provider [I could say] you get what you pay for and that’s it. We haven’t fully specified everything because a lot of it’s based on historical services.”

It is not surprising therefore that there was a suggestion from one director of strategy that the process of competitive tendering caused tension with long-standing relationships with local NHS providers who are then required to provide core services, those not likely to be outsourced:

“It is a minefield of trying to balance continuity of care and links with providers, and providing competitive processes. To this end we have developed a competition policy which tells us when to go with existing providers and when to go to a wide procurement process.”

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This relationship is vital because ongoing performance management should ideally be a case of relationship management rather than a series of contractual or legal exchanges.

The strength of this relationship relies on the communication channels between providers, commissioners and service users. As one expert contributor observed there are clear distinctions in how the public and the private sector share information, knowledge and data, particularly relating to performance, which make this relationship a potentially challenging one.

In the private sector, for example, information sharing can be viewed as a threat to competitive advantage. This was highlighted in our primary research as being behind some of the lack of engagement with patient and public representatives.

There are also difficulties in measurement of performance, which is an essential element of ‘competition’. Vining and Globerman (1999) highlight that there is often “no ‘best way’ ex-ante to provide the service, although there may be ‘ex-post”.24 They state that once an outsourcing decision has been made there is little clear way to evaluate how well a service is performing. Many measures of performance in the health context are outcome based and therefore inherently long-term. This means they are not necessarily suitable for short-term performance management.

In addition, the levels of compliance of some private providers, most notably ISTCs, with the requirement to submit performance management data is weak. The Healthcare Commission stated in their report on ISTCs that although good quality of data from all bodies that provide healthcare – both in the NHS and independent sectors – is essential for routine comparisons of the quality of care, many independent sector providers are failing to provide the quality of data necessary. A recommendation of the report is that provision of good quality data should be a registration requirement under the Care Quality Commission when it comes into being in 2009.25

These challenges are exacerbated by the inherent long-term nature of the contracts entered into. Healthcare is an expensive ‘market’ to enter and while some outsourced service providers such as ISTCs have been offered support to enter the market, the entry costs remain high. Agreements entered into are therefore often long-term such as the five-year contracts awarded in the first and second round of ISTCs. One of the participants in this research said:

“I don’t think the benefits are being realised over that. My experience has been that the problems associated with monitoring the contracts far outweigh the benefits of the outsourcing.”

Commissioners build these structures for monitoring performance into contracts and rely on these to increase efficiency within the life of the contract. A number of expert interviewees raised the point that attempting to do this in an outsourced organisation is effectively just a more challenging version of trying to increase efficiency in your own organisation.

The flip side to this for NHS providers is that they do not necessarily receive the same security from commissioners and some are commissioned on a yearly basis:

“The contracts with private organisations are longer. They are between three and five years with the potential to extend for another two years … in the market place … people [are] offering us a one year … it is much more risky for continuity of care.”

Entering into long-term contracts based on projected benefit rather than proven advantage is different than entering into work with the private sector due to ‘capacity’ issues. Often simpler contracts are used that minimise the need for ‘performance management’ by allowing the commissioner to use only what she/he needs at that time. Commissioners we spoke to questioned the over-reliance on ‘long-term’ contracts, especially those entered into as nationally negotiated contracts rather than using call-offs or one-off contracts which are more common locally. It was felt that this should be a case of ‘looking before you leap’, for example:

“The most obvious use of the private sector is if you have a big waiting list – you buy 100 operations but creating a long term arrangement strikes me as very different. We have to feed them work especially if we feed them a guaranteed level of investment. But this stems our ability to look to manage care in the longer term”

24Vining and Globerman, 1999, “Contracting-out health care services: a conceptual framework”, Health Policy, Volume 46, Issue 2, Pages 77-96

25Independent sector treatment centres: the evidence so far, Healthcare Commission, July 2007

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Ultimately should performance management in contract fail, outsourcing agreements often leave little opportunity for exit due to unsatisfactory performance or reduction in need for the service. An example found through our desk research was the NHS’s attempts to terminate their 10 year contract with EDS to provide email and staff directory services in 2004 due to lack of demand. EDS’s response was to sue for £11m in compensation.26

7.5 Skills for commissioning Public sector commissioners are required to operate in a field that is changing rapidly and that presents new challenges. The existing capacity in NHS commissioning to achieve ‘good commissioning’ was placed in doubt by a number of expert interviewees. ‘World Class Commissioning’ (WCC) has been put in place to grow or attract the skills required.

Participants in this study felt that investment in commissioning skills was necessary and welcome regardless of the involvement of the private sector. It was furthermore felt by commissioners interviewed that elements of World Class Commissioning were likely to be effective:

“[WCC] will bring about fundamental change in the ways PCTs undertake their business. The impact is starting to be felt and will be sizeable. It will not increase or decrease the use of the private sector but WCC will ensure we are much more robust in dealing with all commissioned organisations whatever sector they may be from.”

There were, however, reservations about how it would be applied, with increasing fear that it will be used as a further way of ‘performance measuring’ commissioners. In fact there is a sense of inevitability about this with one commissioner stating:

“…it is being turned into a transactional, rather than transformational, process which will be used in a judgemental way. Something is getting lost between the DH where it is positively framed and in the SHA where it is negatively framed by turning it into a performance regime. You will have people in the SHA judging people in the PCTs saying – ‘you aren’t living up to what you are required to do by WCC’. ”

World Class Commissioning competencies cover the skills necessary for commissioners to complete the type of outsourcing processes covered in our report and they acknowledge many of the challenges found through our research. The majority of the commissioners we spoke to felt that substantial gaps existed in their trusts between what is to be expected of them and their current position. Comments from interviewees included:

“We have looked at individual competencies in advance of WCC being more formally launched. We know we have some substantial gaps.”

“We have a large gap in three main areas: our procurement skills, actuarial commissioning – assessing risk, and we still use needs analysis data that is not particularly locally relevant.”

“The harder skills … are lacking – the business skills, and how do we make best decisions on how to tender for services. How, when and why do we tender?”

One result of this mismatch between skills held and skills required was felt to be a change in the current workforce involved in commissioning with a reduction in some areas but an overall growth. This was directly attributed to the introduction of private sector involvement by interviewees. For example:

“I feel that there will be required to be a change in the workforce –some of this will come from natural wastage, those who have been in commissioning for a long time will fall by the wayside as they don’t compete in the new environment. They will have to adapt or disappear. But there will be no disinvestment overall, it will be a growing area of investment.”

“Main difference between private and public is that any contract is legally binding. Because of the legally binding nature of these contracts we need more commercially based procurement skills and people who understand the legalities – these skills are not particularly strong currently.”

“Historically most NHS contracts for clinical activity have been let on the basis of volume or roll over contracts and have not been legally binding. You now need commercially based procurement skills.”

26British Journal of Healthcare Computing & Information Management, April 2004

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There was however, generally an upbeat mood about the ability of the NHS to rise to this challenge and develop the capacity required within their own trusts. The ability of trusts to achieve this uniformly across the NHS however was called into question, further raising the possibility that some areas will experience substantially better services based solely upon local expertise. On this point one interviewee said “we are more than comfortable about increasing the size and skills of the staff to meet this challenge. I am not sure that the staff are out there to do this in the wider NHS though”. Worsening health inequality was raised as a potential impact of this.

7.6 Involvement of the private sector in commissioning The increased involvement of the private sector in the commissioning function is a core component of World Class Commissioning. There are two levels of involvement of the private sector in commissioning: learning from them through consultancy type roles or delivery of training and outsourcing of elements of the commissioning functions.

The Department for Health is endeavouring to grow the skills required for commissioning through the private sector through the Framework for Procuring External Support for Commissioners (FESC), which was launched in November 2007. Initial research into the likely impact of FESC has been conducted by the Health Service Journal. A survey27 of 93 chief executives, commissioning directors, finance directors and others from a total of 74 PCTs about their views on FESC found that four in five thought there were ways other than FESC to help the commissioning process at PCT level, and nearly half thought that the framework would prove only ‘a little’ successful within their organisations. Our primary research found that there was a negative impression of FESC across those interviewed, for example:

“We looked at it and rejected it at a senior level … this was around the confidence in FESC, particularly in not seeing it work well in [another trust] and specifically not being confident in commissioning some commissioners if you aren’t very good at commissioning.”

“My understanding from organisations that have tried to use them is that it has been the most cumbersome thing possible. My impression was that you could ring up and get someone straight away – but it has been a bloody nightmare.”

Our research showed that while in some specific instances learning from the private sector was felt to be a helpful tool there was strong consensus among interviewees that it is not the only way to develop talent and skills:

“One of the things that really bugs me is the notion that ‘commercial sector good, public sector rubbish’ in terms of talent. We went through it in internal market days – when lots of key jobs came up defaulted to bringing in private sector boys – totally and utterly wrong. We have extraordinary talent and I think we have made a mistake and paid too much of it off as we have gone through institutional change.”

“The expertise does not lie with external providers – it lies with the trust in getting the technical experts to assess the tenders: patients, clinicians, HR, accountants etc.”

Interviewees highlighted a danger that if extensive private sector involvement in commissioning occurs the best commissioners may move to the private sector. A significant challenge would be posed in attracting employees back into the public sector once they had moved. This could lead to a further weakening of the public sector commissioning function. One rationale for the dampening of this effect was that the NHS held an ethos that attracted commissioners to stay. One interviewee said “there is a fair amount of exchange across the markets – a lot of [NHS commissioners] are now in the private sector”. While another expanded on the point:

“Most people working for [private commissioning organisations] are ex-NHS managers anyway. There have been some people who have moved over who were good NHS managers – in fairness can only think of a few – but there is likely to be some movement of people across sectors. We can’t assume that everyone will jump that way and there are some excellent commissioners left and they are being supported to develop good commissioning skills – as they have done historically. We won’t just get the good ones going and the bad ones staying. People will still feel the urge to work for the NHS because of the NHS ethos.”

27Health Service Journal, “Fitting for Purpose”, November 2007

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While the involvement of the private sector is seen by the majority of those commissioners interviewed as a useful, if limited, tool to help develop expertise - the larger scale outsourcing of the commissioning function is seen by some of our interviewees as a more significant step. For example:

“Not interested in this. We don’t use independent sector to help with commissioning. I believe that PCTs are just commissioning organisations. Why would they commission someone else to provide their only function?”

“For specific things I can see that it makes sense. For example if you don’t have the procurement skills in house – getting your ‘procurement process’ done – but if your commissioning function wholesale was in the private sector you would lose the vision and strategy of the NHS – you would lose the culture.”

There are also local alternatives being pursued at a local or regional level which are NHS managed and developed.

“FESC is one route you can go down but we also use [a local NHS organisation] – this is a group who we can call upon the expertise of. An expert body that can be called upon when you need those extra skills.”

The HSJ report on FESC28 talks about the ‘best case scenario’ being the introduction of shrewd commissioning skills in to the PCTs that would remain after the private sector has departed from the public sector commissioning body. Our expert interviewees felt, however that while FESC may initially be used to develop the commissioning support function it could also be seen to be a way to develop the market for private companies who may ultimately deliver full commissioning functions.

“I would say that FESC is [potentially] a means of getting private sector expertise into the NHS to do the learning with a view to taking over some of the functions in the long-run.”

The first and fullest application of FESC has been in Hillingdon PCT where an interim agreement with Bupa to provide commissioning support was agreed in November 2007. The PCT has now reflected that FESC will not achieve the originally projected savings with the chair of the trust commenting “that at this time he could not see how [FESC] would result in value for money on performance to date”.29

The potential for conflict of interest if such a move is made has been highlighted by organisations including the BMA and the NHS Alliance. Dr Mike Dixon, chair of the NHS Alliance stated in an October interview in Pulse30 that “[Private sector commissioning is] something we must never let happen. It’s been quite clear all along, that the NHS needs commissioning support, but nobody wants the outsiders to come in and do the commissioning, especially if they have any vested interests”.

One commissioner we interviewed talked of the challenge of a private organisation offering both a provider arm and a commissioning support arm. “I don’t think there are any [assurances around conflict of interest] and it is getting very murky in some places. Can a private organisation really divest their provider arm? ...it is a bit like insider dealing in the city – how high is the Chinese wall? They are all one corporate company.”

Others reiterated this point and a selection of their comments are below:

“[I am] a bit uncomfortable with involvement [of the private sector] especially at a higher strategic level such as at DH. It feels uncomfortable – they say [the provider and commissioner side of private companies] don’t talk but it feels almost more worrying if they don’t.”

“I … would have a huge problem with a director of commissioning who was working for [a private company].”

28Health Service Journal, “Fitting for purpose”, November 2007

29Notes of the Audit Committee, Hillingdon PCT, Held on 1st July 2008 at 2.15pm, in the Boardroom at Kirk House

30Pulse Online, Gareth Iacobucci, “Conflict of interest row over private sector commissioning”, 2007

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8. Shared servicesPerceived benefits that can be gained from sharing services across the UK public sector are highlighted by reports such as Gershon and Varney. Experience reported from the private sector suggests that corporate shared services are theoretically capable of achieving efficiencies of between 20% and 50%. Application of these arrangements in the public sector is more prevalent in the local government sector but the health sector is increasingly pooling resources in the hope of gaining some of the benefits.

The organisational structures of shared services can be broadly split in two, those that are nationally available to all trusts and those that are regionally based. The regional model grew first. Groups of trusts in an area would share services such as IT and payroll on a ‘host’ principle, usually one trust would host the shared services in-house and the others would contribute financially but there are also occasions when local private firms would offer the ‘host’ service. The larger national schemes include the Shared Business Service (SBS) agreement. This is a joint private-public partnership between Xansa and the Department of Health.

The Committee of Public Accounts report31 on shared services found that SBS needs to attract a further 22 customers to break even, and approximately 180 more customers to deliver its forecast savings to the taxpayer of £250m by 2014-15. It found that the Cabinet Office’s claim that government could save £1.4bn a year through sharing corporate services32 is an unlikely estimate.

For the purposes of our research, we contacted directors of purchasing and finance of trusts that use SBS and discussed their experiences of applying this example of the private national shared service model in their organisation. We intended to illuminate some of our findings from desk research and earlier primary research and place them in a real world example. Some of those using SBS also hosted these smaller regional ‘hubs’. We discussed these in the course of the interviews and contrasted them with the national agreement.

The theory is that there are a number of benefits to joining a shared service, including:

l economies of scale

l efficiency gains including the potential to reduce staff

l on-line management accounting

l a unified process including a consistent reporting mechanism which allows decision-making across the NHS to be based upon the same metrics.

This chapter examines whether these benefits are actually achieved in practice.

8.1 Performance monitoring and accountability In the case of SBS a number of interviewees stated that these benefits had not been realised. When asked what the benefits to contracting with SBS were respondents were primarily negative, for example one said “Benefits were available but for us as an organisation they weren’t realised” while another expanded:

“It has been a nightmare. It takes more time. You can’t get anybody to give you an answer. It takes me about three or four times as long to authorise an invoice. It is really difficult to track things back. There is no easy way to track things back, takes hours and hours because we get sent the wrong things.”

“We should not agree to something that had no tangible benefits - nothing was out there that showed benefits, how could the board agree to something that is simply a cost?”

The rationale for joining SBS primarily was felt to be ether political will or lack of foresight by trust boards:

“[It was] pure and simple. The trust was in significant financial difficulty, one of the worst performing in the country. The board received notes from the SHA that said

31Improving corporate functions using shared services, Eighteenth Report of Session 2007–08, House of Commons Committee of Public Accounts, March 2008

32Improving corporate functions using shared services, National Audit Office, November 2007

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if we wished to continue to receive financial support we would be required to sign up to SBS shared service. The proposal that went to the board had no benefits in it because there were none discernible. The director of finance disagreed with the SHA and said we should not do it – he is no longer with us.”

The contract for SBS was agreed nationally with no input from the local stakeholders we talked to. One said “In terms of negotiating the actual agreement itself – we had zero input. It was agreed through the SHA and DH and the terms and KPIs [key performance indicators] are all set within that document. I had no say in it.”

Furthermore performance management of the contract is hindered by the perceived distance between the deliverer and the end user:

“There is no contract management in the procurement sense of the word – there are meetings with SBS ‘client managers’, but the job title itself suggest that SBS have a view that there are people there to manage the clients not build relationships with them – to enable trusts to work as efficiently as possible for SBS benefit.”

We asked interviewees whether and how SBS remain accountable to them. A number of trusts and individuals had made attempts to engage with SBS to either raise complaints or to ask for an adaptation of their processes but the arrangement was found to be inflexible. One said:

“That is a very good question – the issue is that the client manager seems to be there to help the trust work efficiently but only because that helps SBS – there is no payback or dialogue.”

8.2 Cost benefitsThe most tangible benefit put forward to trusts was cost saving. This included cost savings from greater efficiency in financial management and reductions in staff, clearly an undesirable impact for those affected. In reality the difficulties with using the system have meant that no such cost savings have been possible. At least two sites interviewed had been unable to produce any cost saving through this route. One respondent felt this was the case across users of SBS:

“From what I can gather for other trusts this is the same across their teams – our team are as big as they were when SBS were introduced. A reduction in establishment did initially occur but most of that was through unfilled vacancy and early retirement – I am aware however that that team has now begun to recruit and is recruiting – so they are at or below the establishment they were at.”

Interviewees described in stark terms the mismatch between the case for shared services and the actual experience:

“As an organisation it was decided primarily on the advice of the director of finance on the back of a reduction in the number of staff. In reality we haven’t lost any staff. We have paid more for the system and we have had to keep the staff in the finance department to make sure we are getting what we want out of the system.”

“I think the value for money is poor in both – it costs us for the service from SBS and we haven’t seen an increase in invoices paid on time and we have kept the same staff. I can’t actually see the cost benefit of doing it.”

Another research participant said that the irony of involvement was that the time spent on monitoring and associated paperwork had increased:

“SBS was however sold on the prospect that jobs would be taken out – all of the traditional invoicing clerks would be removed either through redundancy or redeployment and the cost of SBS would be met by this. This has not happened as we need them to ensure we can use SBS.”

Interviewees commented on the sheer difficulty in establishing whether SBS had any impact on value for money at all, for example:

“I haven’t got a clue of how much money I have spent either on SBS or on my invoices. It is difficult to track whether the expenditure is coming out of the wrong place – you could go in and check the coding for every one but that would take a week.”

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As part of the public-private nature of the SBS agreement, 50% of profit goes back to the Treasury. Trusts were dismissive of the idea that this would bring any benefit to them. There is no guarantee this level will be reached and the money is not guaranteed to be reinvested in health services. Trusts were not aware of any progress on the levels of profit being generated as there is no reporting back to them on this issue.

“We have contracts with people for example providing on-site crèche, they operate an open accounts book and anything above 9% comes back to us – totally open and transparent, as far as SBS are concerned they get a big chunk of money on a regular basis and that’s it.”

8.3 Impact on quality The strong consensus among interviewees was that quality has deteriorated in the trusts concerned rather than improved. This was felt to be caused by lack of adaptation locally, a focus on profit or volume rather than service quality. The impact of this failing was felt to be far reaching, affecting, for example, relationships with staff:

“There seems to be a bit of a problem about their ability to deliver a quality service. They are focused around volume rather than quality and as a result they come up with the same problems again and again.”

Other interviewees said:

“The whole system has caused a lot of ill will from staff and suppliers. There are invoices unpaid and the staff are getting the blame.”

“It has caused some difficulties with some of the smaller organisations in particular who are not used to sending their invoices through to a third party, and some confusion over what goes there and what doesn’t.”

8.4 The future of the agreementIt remains to be seen whether SBS will attract the necessary bulk of customers to achieve sustainability or profit. Respondents reported that they understood the contract would run for at least a further four years in most trusts and that there was no possibility of termination.

“I have not seen [the contract], and I am not aware of what the termination clauses are but I understand they are quite punitive. We have four and a half years to go and we are paying them £300k – £400k a year then if the punitive termination costs are close to the total value of the contract (which I believe they are) then we would have to have a pretty good reason to do so. It would cost over £1 million.”

“I think SBS is here to stay. There doesn’t seem to be any plans to pull out of it. We have established a ‘project way of working’ to try and work through what we can do internally to resolve the problems. It is down to the users to try to improve SBS which will hopefully give us a bit more buy in with them – once we have sorted ourselves out they better sort themselves.”

We can see throughout this worked example of the impact of outsourcing that many of the risks and challenges mentioned by those interviewed in the body of the research were realised. In particular:

l in at least one case the decision to join SBS was based on political imperative rather than proven benefits

l the nationally negotiated contract was not always relevant locally

l use of an organisation not familiar with the NHS apparently resulted in an ineffective system

l few if any cost savings were made as a result of the agreement and it is deemed ‘unlikely’ by interviewees and commentators that they ever will

l accountability was reduced as the contract was considered inflexible and the provider considered ‘distant’ from those it could reasonably be considered accountable to.

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Driven by Dogma?Outsourcing in the health service 9. Conclusions

Our research uncovered compelling evidence that outsourcing health services to private providers brings with it a number of very real challenges. We also found that these challenges are being tackled in local areas with widely varying degrees of success.

The evidence from this study supports the argument that it is extremely difficult to commission services from the private sector in a way that leads to either increased value for money or quality of care. This argument is further strengthened by the finding that once agreements are reached the use of the private sector can create a negative impact on the workforce, weaken the lines of accountability and, in some instances, actually reduces the value for money or quality of public services.

In particular, this study found that:

l Those responsible for implementing outsourcing policy see it as being primarily driven by political will rather than evidence-based practice. The increase in tendering and use of the private sector is strongly driven by the compulsory nature of trust policies or outsourcing being the only option offered to trusts wishing to make service changes.

l Little hard evidence is available to suggest that outsourcing impacts positively on value for money or quality of care. Conversely there are several examples of outsourcing having a directly negative effect on the value for money and quality of care in services.

l Where improvements were identified through outsourcing it was often felt that these could have been delivered through investment in expanded public provision or adaptation of current services. Marketisation is not a clear route to improving healthcare, for example health management professionals in Wales do not feel they are disadvantaged by the minimal use of outsourcing in their system.

l Outsourcing is seen by those working in the NHS as being the cause of a downward pressure on terms and conditions, fragmentation of services and a divisive effect on the ethos of the public sector and the NHS.

l Outsourcing is seen by scrutineers such as patient and public involvement representatives and overview and scrutiny committee members as a challenge to the lines of accountability due to the increasing complexity of outsourcing arrangements and diversity of approaches.

Although it is argued by the proponents of outsourcing that processes and policies such as World Class Commissioning and Local Involvement Networks can minimise these negative effects, the evidence heard from commissioners, providers and other NHS staff is that difficulties endure. Little evidence of how outsourcing has delivered significant financial or qualitative benefits was found.

This lack of hard evidence was cited by interviewees as being in itself a major concern. It was suggested by many that the ‘jury remains out’ on outsourcing after a number of years of policies encouraging its use. With such little evidence of benefit, and increasing evidence of negative effect, there is real doubt over the basis upon which the case to the NHS was made.

An appetite for continuing down the route of outsourcing, partly due to a feeling of inevitability created by force of political will, was compounded by the fact that it has prompted changes in the service planning and delivery (or ‘commissioning’) side of healthcare that are felt to be overdue. These changes are not reliant on the introduction of alternative providers but they have been instigated by them.

Looking to the future, we found an acceptance that there is a limit to what ‘outsourcing’ can offer. While opinion varied, some contributors feel that the government may be nearing, or even have passed this point. We were given a strong sense that there is little appetite, from those who will be responsible for undertaking it, for outsourcing what they term ‘core services’. While the definition of ‘core services’ appears to differ from trust to trust it was put by one commissioner that “It will be a brave commissioner who outsources neonatal care”.

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