News Update
Health and Social Care Bill - Commissioning Consortia

25 Jan 2011

The government published the Health and Social Care Bill on 19 January 2011, setting out the proposed changes to health service commissioning arrangements including, in particular, the introduction of GP Commissioning Consortia. 

The Bill includes details of the formation criteria, application process, constitutional requirements, financing and failure regime. It also sets out the important roles that will be played by the NHS Commissioning Board (the Board) and Monitor in relation to consortia.

Formation and Constitution

Commissioning Consortia are to be bodies corporate and will have responsibility for commissioning certain health care services for those on the patient lists of its members. 

As expected, the commissioning duty will not apply to services or facilities reserved to the Board, and this includes dental services, services to members of the armed forces or those detained in prison and primary medical services. 

Consortia are tasked with securing improvement in the physical and mental health (of patients) and in the “prevention, diagnosis and treatment of illness”. This represents a shift towards a more preventative (rather than a pure treatment) approach, which is a common theme of the coalition government’s healthcare plans.

In addition to the expected duties (to exercise their functions effectively, efficiently and economically, reduce inequality, increase public involvement etc) a consortium is able to contract with one or more other consortia to provide functions on its behalf or to exercise functions jointly. Consortia are also empowered to raise additional income by the provision of certain services outlined in section 7 of the Health and Medicines Act 1988 (manufacturing and supplying goods, acquiring and managing land etc). 

The requirements for the constitution of consortia are set out in Schedule 2 (Part 1) of the Bill and the constitution must specify the name of the consortium, its members and the area it is covering.  The expected requirements have been included (making provision for conflicts of interest, for example) but there are some surprises in the Schedule, including the ability of consortia to enter into “externally financed development agreements” which will enable consortia to enter into funding arrangements that have been approved by the Secretary of State.  This will pave the way for successors to the PPFI and LIFT schemes.

Application Process

Any two or more persons who are providers of primary medical services and who wish to be members of a consortium can apply by submitting the proposed constitution; the name of the Accountable Officer and such other information as will be prescribed in subsequent regulations, to the Board.  Once an application has been submitted, applicants can be added or withdrawn (for example, if a practice joins or leaves the consortium after the initial application) with the consent of the Board.

A provider of primary medical services can be a member of more than one consortium and, where individuals practising in partnership are members, that partnership and not its individual partners will be deemed to be the member (even although, under English law, a partnership does not constitute a separate legal entity).

The Board must grant an application if it is satisfied, amongst other things, that the constitution complies with the requirements set out in Schedule 2 and that the area specified for the consortium is appropriate. Accordingly, this could create a ‘first past the post’ race in certain areas and may cause tension between emerging consortia where there is an overlap in membership or area proposed to be covered. Early applications are therefore advised.

A consortium will be established upon the grant of the application by the Board.  After a consortium has been established, an application can be made to vary the constitution and/or the area to be covered by that consortium.  Regulations may be published to determine the factors the Board needs to take into account when considering whether to grant or refuse an application.

Crucially, the Board has the power to add or remove any person to the membership of a consortium and to vary the area covered by a consortium. In this way, the Board can ensure that all primary care practitioners are a member of, and that all areas of the country are covered by, a commissioning consortium.  However, this may cause tension within consortia if new members are forced in this way into an established consortium, especially if they have a large proportion of the overall patient list. The Board requires this power to satisfy its duties (see below) but this is likely to create tension and could develop into a contentious area.

The NHS Commissioning Board

The Board is required to ensure that every provider of medical services is a member of a consortium, that consortia cover the whole of England and do not coincide or overlap.  This, when taken with their power to add or remove members to consortia, enables the Board to control the overall geography of commissioning in England.

In addition, the Board can arrange for its functions to be exercised by, or jointly with, a consortium.  In this way, the Board could share the commissioning responsibility for some of the matters reserved to it (such as the commissioning of dental and primary care contracts) with commissioning consortia. This may be the forerunner to a transfer of these reserved matters to consortia. A debate has already started as to why consortia should not also have control of commissioning primary care services and this provision provides the government with flexibility to do this in the future. 

The Board also has some important functions and powers in relation to commissioning consortia:

1. The Board can specify circumstances where one consortium is liable to make payment in respect of services provided pursuant to arrangements made by another consortium.  This facilitates patient choice and payment for services to follow a patient.
2. The Board can issue guidance which commissioning consortia must have regard to. 
3. The Board also has certain step in powers and can use these to take over functions on behalf of consortia.
4. The Board can also provide assistance or support to consortia and this includes financial assistance or making the services of the Board’s employees or resources available to consortia.
5. Subsequent regulations may impose standing rules on consortia and authorise the Board to draft model commissioning contracts for use by consortia.

The Board also has important powers in relation to failed or failing consortia.  There was some speculation as to whether the Bill would include a failure regime as this issue was never properly addressed for Foundation Trusts. The Bill remedies this by including failure regimes for Foundation Trusts and commissioning consortia. 

The Board has powers to require information and explanations and the step in rights referred to above. However, for failed or failing consortia, the Board ultimately has intervention powers, which include giving directions which must be followed, terminating the appointment of the Accountable Officer and appointing a replacement, varying the constitution of a consortium (including varying the area or adding or removing members) and, ultimately, dissolving a consortium. 

If the Board varies the constitution of or dissolves a consortium, it may also institute a property transfer or staff transfer scheme.  These require the transfer of the property, assets and liabilities or staff from one consortium to another body.  The staff transfer scheme is to operate along similar lines to the Transfer of Undertaking (Protection of Employment) Regulations 2006. 

Mergers and Dissolution

Consortia can apply to the Board to merge or be dissolved.  The Board can treat such applications under the failure regime, including the institution of a property transfer or staff transfer scheme. 

Financing

The Board is to contribute towards the expenditure of consortia. In setting the figure for a consortium, the Board needs to take into account the expenditure of that consortium in the previous year and the amount of any contingency fund maintained by that consortium.  This would seem to be a disincentive for consortia to be efficient (if they keep tight control of expenditure or build up a contingency fund in one year, will this reduce the amount allocated to them the following year?).

Although the Bill does not, of course, specify the amount of such payment, it has been widely rumoured that this payment will be in the region of £9 per patient which is, of course, significantly less than the budget allocated to PCTs.

Each consortium is required to perform its functions to ensure that its expenditure does not exceed the amount allotted to it and Andrew Lansley has made it clear that there will be no bail outs for failing consortia.  That said the Bill does, as discussed above, provide power to the Board to make financial arrangements and to assist failing consortia. 

Accordingly, the financing of consortia is likely to remain a contentious issue. 

However, the Board may make additional payments to a consortium if, in the opinion of the Board, that consortium has performed well.  These payments can be distributed amongst its members and this is an obvious financial incentive to encourage consortia to perform well. 

Monitor

The Bill also gives certain additional powers to Monitor that may impact on commissioning consortia and these include:

1. The encouragement of competition: Monitor is given market investigation functions concurrent with the OFT and can impose requirements on commissioning consortia to secure good practice and procurement, the promotion of competition and the protection of patient choice. 
2. Failure regime: The Bill applies the Insolvency Act 1986 regime to Foundation Trusts. The Bill also introduces a health special administration order which enables an administrator to be appointed to a failing Foundation Trust. However, Monitor is empowered to establish a fund to assist such administrators and can impose requirements on providers and commissioners to raise money for such a fund.

Author

Ross Clark
Partner
t: 01423 724012
e: r.clark@hempsons.co.uk
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