In the first article of a two-part series, Thoreya Swage looks at how the new NHS Standard contract will impact the industry’s interactions with a changing provider base.

The demand and supply elements of the English healthcare system continue to be at the heart of NHS Reform. These elements consist of rising public expectations; having a range of providers patients can choose from; the challenge and demands of an ageing population with more chronic conditions and disabilities to deal with; ever-improving healthcare treatments, including drugs and medical technologies, and current variations in the safety and quality of care provided.

The two main factors essential to driving the Reform Agenda; the development of commissioning and widening the provision of healthcare, play centre stage in this strategy.

This article explains how the provider base will be expanded and the next in the series will tackle how world class commissioning will develop to ensure that the most appropriate services are procured in order to meet health needs.

Widening the provider base

Up to now, the NHS has used different mechanisms for contracting with providers, whether they were NHS or independent sector, for their services.

For NHS providers (i.e. NHS Trusts) service level agreements (SLAs) have been used. Service level agreements are not legally binding and the terms are not always clear. This has led to accusations of unfair conditions and a biased market place from those outside the ‘NHS Family’.

“The challenge for the industry is to get to know these providers and understand how they fit into the local health economy”

This situation is beginning to change with the development of contracts for NHS Foundation Trusts, which do have a legal base. Furthermore, greater clarity is being achieved with the use of agreed contract currencies, Health Care Resource Groups (HRGs – groups of conditions that have the same resource use) and agreed tariffs for each HRG. Throw into the equation patient choice and Payment by Results and the competition for the most effective services begins to heat up.

The next stage in the process has been to develop a ‘national model contract’ or a new NHS Standard contract for health services. The idea here is to develop a contract which can be used to procure healthcare from any type of provider. Rather than have different terms for different providers, the aim is to ensure a fair playing field so that any provider that wishes to offer services according to a defined service specification has the opportunity to do so, so long as they meet certain standards and can do this at the national tariff. A contract is the accountability mechanism between commissioners and providers and defines expectations, quality controls and balance of risk. Providing clearer transparency and accountability leads to mature working relationships between the parties – not a new concept to the commercial world – but the NHS is beginning to wake to the implications of such an environment.

The work is most developed within hospital-based services, although work is underway to develop a NHS Standard contract for community-based services, including mental health.

The new NHS Standard contract was published in December 2007 as Annex E of the Operating Framework for 2008/2009 and will be for, typically, three years. This will replace any other contracts that were in force.

What is the NHS Standard contract?

The NHS Standard contract is actually a framework with different levels of requirements. This is to take into account the fact that the services need to be commissioned according to local needs, however, it does define certain ‘must-dos’.

The way the NHS Standard contract is set up is in three parts:

• standard mandatory requirements
• mandatory requirements that are locally negotiated
• elements for local agreement.

The standard mandatory requirements are those that apply nationally and are compulsory. They are, in other words, the ‘standard NHS terms and conditions’.

These requirements cover national quality standards to be achieved. For NHS organisations, these include the national standards across the seven domains of safety, governance, patient focus, accessible and responsive care, the healthcare environment and public health. For the independent sector these include the national minimum standards. With the alignment of the regulatory systems for NHS and private healthcare, there will be one set of standards that apply in the future.

Other national standards, which may change from year to year, and are identified in the operating framework, define the priorities the government considers to be important for the whole of the NHS. These are modified to make sure that they keep up with changing public expectations.

“Providing clearer transparency and accountability leads to mature working relationships between the parties. The NHS is beginning to wake to the implications of such an environment”

Other national requirements include the payment schedule, i.e. the tariff that will be paid for the services, how information is collected and contract agreement and management of disputes.

The mandatory requirements that are locally negotiated have a little more flexibility. Although these are determined centrally, local discussion is necessary to meet the needs of the local population. For example, local negotiation will be needed to determine how to meet the 18-week target of GP referral to first treatment. Depending on the profile of the local population, different activity levels need to be agreed to meet the requirement. This will be quite a complex figure to work out as referrals will come not only from local PBC groups, but from anywhere else in the country under Free Choice.

Commissioners and providers will have to be very clear about responsibilities if the contract over- or under-performs. The principle, at the moment, is that if the over-activity is generated by primary care then PCTs will be required to pay up. Providers have their responsibilities too in managing consultant-to-consultant referrals and converting outpatients into in-patients or day cases.

Elements for local agreement could potentially cover any issues of local concern. Examples include specified patient pathways, quality standards that reflect local patient preferences and some incentives (particularly where commissioners have been unable to procure services under choice).

To simplify the negotiation and holding of contracts for providers that have a number of commissioners, the proposal is to have a co-ordinating PCT, which provides the single point of contact for a number of PCTs.

What does the new NHS Standard contract mean for the industry?

Widening the provider base means that a whole new set of players will enter the market, with many independent sector providers keen to have a slice of the healthcare cake.

New patient pathways will need to be developed across different services, some of which have hitherto been on the periphery of healthcare provision. New services may have to be set up from scratch.

Some providers themselves may be new to the English healthcare system and will need guidance on how to develop key relationships. This presents an opportunity for the industry to develop a client base that is expanding, for example, facilitating evidencebased care (good clinical practice, effective drugs and interventions), education and training of staff, help with analysis of activity and meeting national and local targets and better information to and involvement of patients.

For NHS organisations, they will be grappling with the new commercial perspective on contracting for healthcare and will need help in understanding how to improve their competitiveness in the market. Here, the skills of sales, marketing, good customer care and evidence-based practice will help in achieving these aims, many of which the industry has a-plenty.

Overall this new NHS contracting landscape has the potential to encourage the provision of high quality health care by different providers. The challenge for the industry is to get to know these providers and understand how they fit into the local health economy.

Dr Thoreya Swage is the Clinical Lead for new projects at the Commercial Directorate at the DH, responsible for transfering the clinical knowledge and experience acquired from the Independent Sector Treatment Programme to the wider NHS. She has worked as both clinician (psychiatry) and senior manager in various NHS organisations. She can be contacted at t.swage@btinternet.com.