New podcast: Primary care contracts – don’t get trapped!
Listen to the episode below:
In this episode, they discuss:
00:18 – Introduction: the purpose of contracts
01:45 – The pros and cons of NHS contracts
03:00 – Trap one: entering into a contract inadvertently
05:13 – Trap two: the role of customer practice
07:36 – Trap three: conflicts
10:12 – Trap four: gaps in subcontracting
13:00 – Trap five: unfair provisions in commercial contracts
16:39 – Trap six: unclear termination provisions
19:19 – Trap seven: insufficient payment provisions
Hello and welcome to the latest episode of Hempsons’ Primary Care Podcast: Don’t be Trapped, on contracts in primary care. I’m Robert McCartney, I’m an associate in the primary care team, and I’m joined by my colleague, Kirsty Odell, a fellow associate in the same team. Today, we’re going to be discussing the key things to look out for when you’re looking at a contract, and particularly where you might find that you get yourself trapped if you’re not aware of the risks associated with particular clauses.
With that, we’ll go straight into it. I just want to start with why are contracts needed in the first place? We’ve gone through a period in primary care where there certainly used to be a dynamic of a gentleman’s handshake type of agreement, but that is no longer really viable and hasn’t been for a little while. We need to have increasing formalities. Kirsty, from your perspective, what type of issues are we seeing where it says, highlights why contracting is so important in primary care?
I think it’s just key really just to make sure you’ve got certainty in what you’re doing and what contracts you’re entering into. It can also help with avoiding disputes. So it’s really clear again on what you’re doing, and it just avoids any ambiguity.
I mean, that’s a good point about avoiding disputes. I think in the context of primary care, it’s particularly important because many organisations are partnership-led. As a partner, you’re individually responsible for the terms and conditions that you enter into and can have personal liability. It’s not so important – actually it’s still very, very important when it’s a company, but as an individual, potentially your house is over the line in the worst case scenario. If you enter a contract that isn’t appropriate and can’t be delivered.
On the more positive side of contracts in the NHS, they do give entitlements that are very beneficial. Entitlement to NHS pensions, entitlement to some indemnity provisions such as the NHS clinical management schemes, and the ability to use NHS branding. With that in mind, we want to look at some of the key traps that are out there. So when you are negotiating a contract or even if you’re in a contract that needs reviewing, what are those key areas that need to be considered? The first one, which I’d like to get your views on, Kirsty, is the risk of entering into a contract inadvertently.
Yeah, of course. And surprisingly, it’s quite easy to enter into contracts possibly without even knowing that you are doing. There’s just some key factors that form a contract. So to firstly an offer, moving on to acceptance, consideration, and then finally an intention to create legal relations. So if those four elements are ever present, then you have created a contract, and once you’ve created that contract, you’re legally bound by it and you’re committed to provide whatever it is that you’ve agreed to provide. So maybe a useful example might be submitting a tender bid. So by doing that, we’re agreeing to provide whatever it is that the tender’s for at whatever level and rates and things that you put in your bid. And once that bid has been, you know, you’ve been the chosen bidder, you are then obliged to carry out and fulfill the duties that you’ve agreed to do.
So bearing that in mind, what steps can you take to limit the risk that… let’s say you’re in discussions with a commissioner and they’re saying, We really want this exciting new service. And you’re saying, Yes, we can do that, but it’s too early to truly commit. What steps can you take to make certain you haven’t accidentally gone in beyond the line to say, yes, we are committed and they’re holding you to it.
Yeah, I think the first thing is just don’t rush in. Take it slow and give yourself time to actually negotiate and to think about what it is that you’re doing and what you can deliver. So any discussions and communications with them, you make subject to contracts. So put that in your e-mail correspondence and make it clear that you’re not actually agreeing to anything yet, you’re not ready to commit and to be bound yet, and everything remains subject to contract until you’re happy. And just be clear that you understand what the requirements are. So ask questions if you need to, get clarifications, and just be fully clear of what it is that you’re entering into and what you’re happy to deliver.
Excellent. Thank you. So the second trap we want to consider is the role of customer practice. So when you’re running a service and you’ve actually got a contract that’s up and running, you should be tied by the terms and conditions that are actually within it. But there’s a risk that those might vary over time. Do you want to expand on that for us, please?
Yeah so, they might vary by customer practice. And by that we’re talking about patterns of behaviour that become accepted. So it might be a supplier agreement to do something within a certain time frame that you’ve agreed under the contract, and then by customer practice, you’re changing that time frame and delivering a little later. That might be the accepted position, which then becomes a variation to the contract. It could be really subtle changes over time. It could be applying procedures and policies and things in an inconsistent manner. So one example there might be your partnership agreement. There’ll be a process, for example, of when a partner retires and you might not follow the process in the partnership agreement, you might have another way of dealing with it. And if you do that consistently for a number of partners that are leaving, that then could become the new agreed custom and practice and the new agreed arrangement with that partner.
So if you found that you’ve done a review, let’s say, of your contract and in this scenario, partnership deed, and you say, Actually, I don’t think we work like that anymore. What should you do to try and rectify it?
Yeah, that’s a variation. If it doesn’t match what you actually do in practice, then you want to rectify that and make sure that you do have an agreement that reflects what you actually do day to day. We’d suggest a variation in writing is what we’d always recommend, so that it’s really clear what you’ve agreed. That could be, like I say, a variation, whether it’s your contract, which a contract should be whatever form of contract it is, and it’s just an agreement between all of the parties to it that should really be signed by all of the parties to it, confirming that that term has changed or there’s additional service being sent into it, whatever the variation is, that that’s properly documented and reflected.
Great. Thank you. The third trap that we’ve been considering occurs when there’s a conflict, either between contracts or within contracts. Now, we see this fairly frequently as people who draft contracts, but if you’re somebody who reads them as more of a operational perspective, it might be easy to slip by. How does this type of trap occur and what does it look like?
Yeah, so you often see, I think, where you’ve got agreements with complicated schedules and things attached to them, or contracts that are overlapping, and where you use poorly or undefined terms. One example might be where you’ve got an agreement that refers to another agreement, like, for example, a data sharing agreement, and where the two just don’t marry up because they’ve been drafted as completely separate, down the line documents, so they might refer to different terms and they might just contradict each other. You can have one document saying one thing and the other saying something completely different. That’s where we see it, often.
It’s not uncommon to see this in very complex long contracts that might have had multiple parties of input. I’ve certainly seen where you’ve got complex service schedules, service specifications, which actually purport to add additional clauses. I think when you’re looking at the NHS standard contract, which is a 200 to 300-word document when split into three different categories, and then on top of that, you’ve got a 50-page specification. You can often find they don’t marry up. And it is complex. From a real practical perspective, we were discussing the importance of actually having more than one pair of eyes looking at this at any one time. Certainly, that’s how we would operate.
Yeah, definitely. I think when you start reading a contract and you’ve read it so many times because you’re the one that’s been drafting it and negotiating it, you read what you want to see rather than what’s necessarily on the page. So always get a second pair of eyes, or third or fourth, or however many to have a look at it. Also, just be careful that you’re identifying your cross references in the document, the definitions, and things that they all make sense, and just to generally understand the context of what the document’s for and what it’s seeking to achieve and whether it actually does it consistently.
Great. So one of the areas where that type of conflict can occur is particularly in subcontracting. The fourth trap we were considering is where there are gaps in subcontracting, where they don’t actually marry up as well as we’d like to. Could you give an example of where we’ve seen that recently?
Yeah, so we see that quite frequently with regards to PCN standard subcontracts. Normally services by PCNs are subcontracted in one of two ways. It’s either that all of the services are passed through, or it could be where just specific services, or a single service is passed down and subcontracted. The gaps are where not all services are covered in those subcontracting arrangements. It’s then unclear as to who’s given what service and what happened in the event of non-performance of that service that’s been missed out.
One of the great examples and frequent discussion points we come up with is the role of the IIF in the PCN Des. The novel thing about the IIF is the PCN as a group is responsible for the outcomes and the funding goes to the PCN as a whole. But individual elements of it are the responsibility of practices. So there’s a question there as to whether or not you subcontract the whole of the IIF as part of the overall PCN subcontract, or do you exclude it so the practices remain responsible for it, or do you create some new relationship that clearly defines who does what? You might end up, and I’ve certainly seen this, where you subcontract to your PCN organisation or your Federation, and then sub-subcontract back to the practices to actually deliver some of it. In those circumstances, it can get quite complicated. Are there any practical steps that you’d recommend to monitor and track these?
Yeah. So I think the key thing is creating a checklist of all the requirements from the Master Contract. You can then tick them off and make sure that you’ve allocated every element of the service somewhere, whether it be through sub-subcontracting arrangements or otherwise, but you need to have a home for every element of the service and don’t miss any out. And consider variations as well. So to the extent that you haven’t done that and you’re thinking about your subcontract agreements now and wondering what’s going on with that service that isn’t included in them, try and vary those contracts now, enter into a written agreement to vary them so that they cover everything off.
Okay, great. The fifth trap that we were considering is about unfair provisions in commercial contracts. There’s a distinction here between commercial and consumer contracts. Very briefly, do you want to summarise that?
Yeah, of course. So consumer contracts are us. So that’s when we go to the supermarket and we enter into the contract by buying some groceries as an example. And obviously as a consumer, you have a different level of bargaining power than the businessman or woman that you’re dealing with. And so there’s extra protections in place for you as a consumer. And that doesn’t apply in relation to business-to-business contracts because it sees you more of an equal bargaining power. But Robert, that’s not always the case, is it? I mean, there’s still inequality and bargaining power in commercial relationships and how practices go about mitigating that.
Yeah, that’s particularly evident when you’re dealing with commissioners or public services, so you’re dealing with the NHS and your local ICS and ICB, I should say. They are huge organisations that have all the power in these negotiations. Consequently, you may find that your ability to negotiate is very limited. A lot of negotiation on these terms and conditions is done at a very high level. And we do know, for example, the DES contracts recently that they have largely been imposed over the last two years because negotiations have not been successful. That leaves you in a position where you have a specialist practice level in these scenarios that you’re limited to saying, Yes, we will do it and we’ll make it work in whichever way we can, or no, we won’t. A very binary type position which isn’t necessarily ideal for anybody. Having said that, in those circumstances, there are some very chances to vary locally. There are opportunities to try and refine the services and get them working to the best of your ability. I think in most cases, the DES requirements, people have been able, and it’s one of the strengths of primary care, to be fairly innovative in how they’re implemented and how they’re structured, which overcomes some of that disparity in the bargaining power.
So in terms of trying to solve a situation where you find yourself in this unfair position, if you are directly negotiating, then there are opportunities to say, Actually, we do need to hold you firmly to these clauses. There are some protections relating to you can’t be penalized unfairly of the penalty clauses. And if you’ve entered into a contract that already includes these types of clauses, negotiate them as part of the contract review. Once you’ve got evidence in front of you that you can present to your commissioner, you’re in a far stronger position to say, Actually, we do need to make a change and we can justify it for this reason or that reason. The reality of it is you often have to make a commercial decision, whether it’s at practice level, PCN level, Federation level, company level, depending on who you are and what you do. You as a board or as a partnership need to make an informed decision as, Will we accept these terms? And the only way you can do that is if you properly understand them, understand the risks associated with them, and have a plan to try and manage them.
Absolutely. So the next trap we thought about was around unclear termination provisions. The idea being what happens in either a worst case scenario or an exit situation and how that’s dealt with. I mean, when would a trap occur in this situation?
Some of the most common ones are where there’s a very long contract period which doesn’t have any break clauses. So if there’s a fundamental change in the way that services are to be delivered and they no longer become viable, you can’t get out of your contract. You often see this in contracts such as maintenance contracts for photocopiers or telephone systems. They’re often very hard to get out of and they’re long term contracts. You also get scenarios where contracts may not have a clear mechanism for renewal. And that might end up in a situation which I have certainly seen where there’s a one side renewal. So Commissioner only renewal that says you have to keep running this service because we say so, even if you don’t actually feel like it’s suitable anymore. That’s particularly important if there’s no break clause. In all of these scenarios, you need to rectify it as quickly as possible.
Yeah, absolutely. I mean, is there anything else that you’d recommend for practices to consider, to avoid this trap?
So if you’re at the negotiation stage still, make certain you look at the contract term. How long is it? Is it for a fixed period? Is it a variable period? Can it be extended? Are there break clauses? Are they in a reasonable period that is likely to reflect the nature of the business? Will there be additional conditions to how and when you implement them? I recall many of the APMS contracts from a few years ago were five-year contracts without necessarily extensions. The problem with some of those contracts is you spend three years setting up a service, one year getting it working how they wanted it working, and then the next thing you know it’s out for procurement. So there’s a degree of instability on some of those smaller contracts, which led to increasing ten year contracts with agreed break periods. But that’s something to look to. If you’ve already entered into a contract, then again, it goes back to that point that we’ve said before, have open discussions, communications with commissioners, and seek variation where you can.
Definitely. Something else that I think is a potential trap is around insufficient payment provisions. So when it’s not necessarily clear on what the payment structure is, whether you’re going to get paid enough and what happens in the future if it is a slightly longer term contract. So what should people be looking out for in those types of situations?
I think the key here is to make sure that you undertake appropriate financial planning when you’re considering any contracts, assess whether or not the proposed funding covers any overheads, and most importantly, does the mechanism actually account for inflation increases, pay rises, cost of your materials to deliver service, rental increases, all these key elements that may increase over, say, a five year term of a contract or even a three year. Is there a mechanism that actually factor this in? Because if not, you could find that a profitable contract becomes – a very break even type contract – becomes a losing contract. And often it takes very little in the NHS for that to flip from one to the other. So good cash flow and payment plans is a key part of that with your financial budgeting.
Yeah, definitely. I think something else that’s probably a bit more of a buzz these days is around the the NHS Pension Scheme and whether or not particularly PCNs, for example, would have access to the NHS Pension Scheme or just generally how you ensure that staff maintain that access. I mean, it’s quite tightly controlled, isn’t it, the NHS Pension Scheme and how therefore do we ensure that they staff get that access?
It is very tightly controlled because it’s such a good scheme. Competitively, it’s that nobody else can really match it. There are pros and cons to it. There always are. But certainly if you just look at it in terms of what you get out of what you put in, it’s incredibly beneficial in the grand scheme of things. So as a consequence, it’s very tightly controlled. So the people who are eligible have to really prove not only are they eligible, but that the organisations who employ them are eligible themselves. It’s a fairly easy one to test, though. The eligibility basically relies on a small number of contracts, either primary care contracts, so GMS, PMS, APMS, or any of the main NHS standard contracts, which are the main master NHS standard contract, standard subcontract, or the new subcontract, which is specifically for PCN Networks, which is actually called the NHS subcontract for the provision of services related to the network contract DES. I know it’s nice and easy to remember. The thing about that one, though, is it was purposely designed so that practices could subcontract their services, particularly enhanced access in October 2022 to other providers, whether it’s Federations, or if they’ve set up their own PCN incorporated vehicle.
However, NHS BSA that controls NHS Pension changed the criteria in April that basically said if you want to have pension access and you’re a Federation or a PCN company employing people on behalf of PCNs, you have to have one of these subcontracts in place. And that was a significant change because a lot of places didn’t have that. They just did it on the fact that we’ve got a network agreement, we’re therefore eligible, and they can have their pension. So by having this particular type of subcontract in place, it ensures that they can continue to offer pensions to their staff and offer it in the future for future staff, which helps with recruitment. The test is therefore relatively easy, whether or not you entitled to it. Is it one of these key contracts? And the other part to consider is, does the contracting party have the right to give you that contract? So if it’s an NHS Commissioner. Is it a GP practice specifically underneath that? It shouldn’t be a problem. However, if you’re negotiating a subcontract with some NHS trust with a provider of a GP Federation provider of services, it’s unlikely that you’re going to be able to get access to it. So it’s definitely worth checking.
Absolutely. And it is quite easy to contact, I think, the BSA, isn’t it? To run those questions by them and make contact with them. So you can test it in that way as well to make sure that you know whether or not what your arrangements are will be covered under the scheme or not.
Yes, the team at the NHS BSA is very helpful. They do respond to queries fairly quickly, and it’s really a very useful resource. But you have to be realistic that they are very busy, so it may take a little while before you get a response. Another NHS organisation, which is worth contacting if you have queries, links in with our next trap, and that’s NHS resolution.
The next trap that we identified is also linked to one of the benefits is the Clinical Negligence Scheme for GPs. Now, this scheme was set up originally for primary care and primary care services, but there’s a risk that the contracts that are coming out increasingly to PCNs are working at an integrated level and may not automatically fall within the CNSGP remit. This could create quite a significant risk if you’re not careful, as it may mean that you don’t have appropriate indemnity cover in place. With that in mind, we would recommend that whenever a new service is being provided or being discussed, you make certain that the commissioners have addressed this point of whether or not it is likely to be covered by one of the NHS resolution schemes. If not, you can contact insurance brokers and obtain medical malpractice insurance. And many federations over the years have actually used medical malpractice insurance as a safety net just in case anything slips out of the remit of CNSGP.
Right, so that was a whistle-stop tour from the main traps that we’ve identified. I think it’s fair to say we did have a longer list that we had to try and whittle down. So if anybody wants to learn more, please reach out to us. We’re always happy to discuss it. I think as a closing comment, I just want to reiterate the importance of ensuring that you do have appropriate support from contracting perspective. It’s one thing we would obviously say this, to instruct lawyers to help you with ensuring that contracts are appropriate, are well drafted, and work suitable. But there’s just that cover point that we said about get extra support where you can. Ask other people to read the documentation. Don’t let it be all or nothing on one person within your team. It can be a shared obligation. Kirsty, any closing thoughts?
No, I think you said it all, really. I think the key is just to make sure that you read things carefully, you are clear on what it is that you’re meant to be contracting for, and that it covers everything you’re expecting it to, and just making sure that those expectations are in line with what the contractual documentation says. Ideally, always have contractual documentation to get things in writing where you can. If you need to vary any existing contracts that you’ve got in place, then do that sooner rather than later and start those conversations and that engagement.
Excellent. Thank you very much. Well, hopefully you found that useful. Please reach out if you’d like to discuss any other topics we’ve covered, or indeed, if there’s any other topics you would like us to cover. We, as a firm, can discuss multiple different areas, and we’re always interested to know what interests you. Okay, we look forward to having your responses. Bye.
Bye. Thank you for listening.
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