The biggest shake-up in NHS procurement is expected to be introduced by the end of 2022 with the advent of the Provider Selection Regime (PSR).
NHS services will be decoupled from the existing Public Sector Procurement Regulations 2015 in favour of a more flexible and pragmatic approach. The changes are significant and, alongside opportunities, will bring their own challenges, particularly as Integrated Care Board (ICB) resources are already focused on developing more integrated ways of working following the recent passing of the Health and Care Act 2022. Although official guidance has not yet been published, the Preview of Proposals provides plenty of clues that indicate action is needed now to prepare.
PSR in summary
The PSR is expected to introduce three ‘decision circumstances’ which will govern how health and care services contracts will be purchased. In brief, these are:
1. Continue existing arrangements
2. Source new providers or commission a new service without a competitive process
3. Competitive tendering, where a competitive exercise is considered beneficial.
There are three circumstances in which existing arrangements can be continued:
1A. The type of service means there is no realistic alternative to the current provider(s)
1B. Alternative providers are already available to patients, including core primary care services commissioned on continuous contracts
1C. The incumbent provider(s) is judged by the decision-making body to be doing a good job and the service is not changing significantly.
This gives commissioners a total of five different selection routes depending on their circumstances. Although the changes suggest simpler processes, there is significant work to do to prepare for the new regime. We expect there will only be a short window between launch date announcement and implementation, which is why organisations need to get a head start now.
Practical steps to prepare for PSR
The first step organisations can take now is to assess which of their contracts are likely to fit into each decision criteria based on the descriptions above. Start by looking at which contracts will be ending within the next 12, 24 and 36 months. This will immediately give a flavour of how many contracts are likely to be appropriate for rollover under decision circumstances 1A and 1B. When using 1C or 2, you will need to consider how to make the assessments required and be comfortable when making them. While the exact details have not been issued yet, you can start considering looking at whether what evidence your organisation has to show a provider is doing a good job. For example, are they consistently delivering against key performance indicators (KPIs)? Has there ever been a need for contractual intervention? Has the contract varied or changed, and if so, by how much? What do patients think of the service?
These questions will help determine suitability for direct award, but they don’t provide benchmarking. A provider may be doing a good job but are there other providers out there that could provide a better or more cost-effective service? When did you last test the market? This question is particularly important when it comes to decision circumstance 2, which is a direct award. It is most likely to apply when there is only one realistic option, due to specialism or location for example, but you need an up-to-date understanding of the market to know what’s possible and be sure you’re not missing new entrants. This is where support from procurement experts such as your Commissioning Support Unit (CSU) can prove invaluable, but demand for advice is likely to be high in the early stages of PSR. Stratifying your contracts early on will help identify where specialist support and market understanding will be needed so you can secure that capability.
Realising benefits while maintaining quality
The PSR gives commissioners much more freedom to arrange healthcare services and maintain contracts. What hasn’t changed, however, is the need for all of us working in the public sector to be responsible custodians of the public purse and act in the best interests of patients, taxpayers and the population. So how do we maintain the best qualities of the traditional procurement approach while realising the benefits the PSR is designed to bring?
The PSR makes provision for decision-making criteria which must be considered as part of any decision-making process. The guidance has not yet been issued but, when it is, training will be provided which is essential for those involved in arranging healthcare services. In the meantime, we recommend organisations keep in mind the principles that existing procurements have been based on – openness and transparency – and consider how you can demonstrate those principles have been applied. While new guidance may not stipulate scoring, for example, this may still prove to be a useful tool to demonstrate, record and defend decision making. After all, contract award decisions rightly remain open for challenge, so robust records will be needed.
This is important in situations where ICBs may effectively be contracting with themselves, as partner organisations, to deliver patient services. Independent support from external procurement teams can of course help ensure appropriate and ethical walls are in place to avoid actual or perceived conflicts of interest.
The PSR has the potential to make arranging healthcare services more cost effective, as services become more integrated across systems. But new freedom brings new responsibility. In ushering in this more flexible approach, let’s draw on past learning and best practice to help prepare for the new regime now, and ensure we continue to source the best and most sustainable services to serve our patients.
This blog was originally published in the September/October 2022 issue of National Health Executive.
