Provider selection regime

The Department of Health and Social Care (DHSC) has published its response to its supplementary consultation on the detail of the Provider Selection Regime (PSR) for healthcare services in England here. 

You can find out more about the original proposals and the announcement of the supplementary consultation in our previous post here. There is still no confirmed date for the when the PSR may come into force – regulations will need to pass through Parliament before this happens. 

Executive Summary

In summary the response:

• announces that there will be a new independent panel to oversee the implementation of the PSR
• clarifies that the following services are within the scope of the PSR:
  • services provided by blood banks
  • services provided by sperm banks
  • services provided by transplant organ banks
  • medical analysis services
  • pharmacy services (excluding community pharmacy services)
  • medical imaging services
  • optician services
  • child health visitor services
  • services provided by community and district nurses
  • substance misuse services
  • reproductive health services
• confirms that the PSR will cover “mixed procurements” where healthcare services are being procured alongside other services such as social care services and digital solutions, provided healthcare services are the main subject matter of the contract. Detail of how the main subject matter of a contract is determined will be set out in the regulations and further guidance
• confirms that there will be a two pronged test for whether a change in contract value amounts to a “considerable change”.  To be a considerable change the change in value must be:
  • a change in contract value of more than £500k; and
  • a change in contract value of 25% or more

No further information is provided about the timetable for implementing the PSR.  The next step will be for the DHSC to publish draft regulations.  These will need to go through Parliament before they become law.

Analysis

What is the new panel that is being proposed to oversee the PSR?

The DHSC explains that many organisations “voiced concerns” that under the original proposals commissioning organisations would be reviewing their own decisions, without the involvement of an independent body.

This has prompted the DHSC and NHS England to commit to setting up a new panel to advise on issues relating to the PSR and the anticipated new patient choice regulations.  The panel will be chaired by an independent person, though we do not yet know who.  Further details will be developed in collaboration with representatives from across the health and care system.

There is very little detail at this stage but the proposed panel looks similar to the Co-operation and Competition Panel, previously run by Monitor.  This was set up in 2009 to provide independent advice to system leaders on issues arising from the government’s policies of choice, co-operation and competition.

Which healthcare services are now within the scope of the PSR?

The DHSC has decided that it will implement its idea of using CPV (common procurement vocabulary) codes to define what contracts will be covered by the PSR.  The supplementary consultation identifies various codes that were omitted from the previous consultation, which will be added to bring those services within the scope of PSR.  These are:

• services provided by blood banks
• services provided by sperm banks
• services provided by transplant organ banks
• medical analysis services
• pharmacy services (excluding community pharmacy services)
• medical imaging services
• optician services

The DHSC also recognises that there are some services that will be covered by the PSR but that do not have a specific CPV code.  To get around this problem, the DHSC has decided to include some broader CPV codes that capture these areas.  The broader codes are for:

• community health services, intended to cover child health visitor services and services provided by community and district nurses
• rehabilitation services, intended to cover substance misuse services
• family planning services, intended to cover reproductive health services

The regulations will make clear that these broader codes may be used only to procure healthcare services delivered to individuals.  A full list of codes can be found in the consultation response here.

How will mixed procurements be handled?

The DHSC acknowledges that procurements will sometimes contain multiple elements, some of which may be outside the scope of the definition of healthcare services for the purposes of PSR.  These are referred to as “mixed procurements”.  Examples of mixed procurements include the commissioning of healthcare services (within the scope of the PSR) together with:

• social care services such as homeless and rough sleeping services, domestic abuse support services and rehabilitation services;
• IT and digital services and solutions; or
• goods related to the healthcare services

The intention is that the PSR can be used to procure in scope healthcare services alongside goods and services that are out of scope, provided the ‘main subject matter’ is healthcare.

Further detail will be set out in the regulations and statutory guidance.  The key question is how the ‘main subject matter’ of a contract will be decided.  One obvious option is with reference to the contract value of the various elements.  However, there may well be times where, for example, an IT solution is more expensive than the core healthcare services being delivered.  It will be interesting to see if the regulations cater for such mixed procurements to still be within the PSR.

What is the threshold for a ‘considerable change’ under the PSR?

Changes in contract value

The original DHSC consultation proposed a well-formulated and robust threshold for what will constitute ‘a considerable change’ to differentiate between contracts which would end naturally / roll over, and those where a comparison will need to be made between alternative providers either with or without competitive tendering.  The supplementary consultation asked for feedback on these proposals.

Following the feedback, the DHSC has confirmed that it will implement a two-pronged test for deciding if a considerable change has taken place.  Both parts of the test must be met for there to have been a considerable change:

1. A cumulative change in the lifetime value of the contract above £500k; and
2. A cumulative change in the lifetime value of the contract of more than 25% of the original lifetime value

To illustrate, if the cumulative change in a contract’s lifetime value was £500,000 or more, but this did not equate to 25% or more of the contract’s original lifetime value (as would be the case for many large contracts), this would not be deemed a ‘considerable change’ under the government’s proposals.

Additionally, the government has also said that a change of services can amount to a considerable change:

‘It is our expectation that when a contract is changed to deliver different services, this would be a material alteration and therefore would be deemed a ‘considerable change.’’

It is clear from this that the question of whether a considerable change has occurred will not be limited to assessing the contract value – other factors remain in play and can constitute a considerable change.

Changes that are not ‘considerable changes’

The government has decided that it will continue with its proposal to have a list of contract variations that do not necessitate the re-selection of a provider using the PSR.  As a reminder, the proposed list of such variations included:

• variations clearly and unambiguously provided for in the original contract and published as part of the original process
• variations solely triggered by a change in the identity of the provider (for example as a result of a merger), where this does not affect the ability of the provider to deliver the service
• variations caused by external factors beyond the control of the decision-making body – for example changes in contract value which are driven by patient numbers or the national tariff – that were referenced as part of the original PSR process

Changes in value are assessed under the two-pronged test outlined above.  If only one of the tests is met e.g. a contract variation leads to a change in contract value of £600k and this is only 22% of the contract’s original lifetime value, there is no considerable change and therefore the PSR would not have to be reapplied.

How does the PSR work if we are offering patients a choice of providers?

The consultation considered what should happen if commissioning organisations voluntarily offer patients a choice of provider, although there is no legal obligation on them to do so.

The government has decided that where commissioning bodies do this and have a limited list of providers a patient can choose from, they must use decision-making circumstances 2 or 3 (i.e. run a new selection process with or without a competitive procurement) to select the providers for patients to choose from.  

Where commissioning organisations do not limit the providers from which patients can choose, they must offer a contract to any provider that meets the standard qualification criteria without a provider selection process.

What are the transparency requirements under PSR?

An earlier NHSE consultation established broad support for transparency in the application of the PSR.  This latest consultation asked questions about the detail that should be published by commissioning organisations.  It concluded that:

• intention to award notices must include a statement explaining the rationale for choosing the selected provider, with reference to the key criteria (quality and innovation; value; integration, collaboration, service sustainability; access, inequalities, disparities and choice; social value)
• commissioning organisations will have to produce annual summaries that provide ‘high level data on contracting’. 

When will the PSR become law?

The response does not give a timeline fro when the PSR comes into force. It notes that this is subject to the passage of the PSR regulations through parliament. We would expect to see draft regulations over the coming months.

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