Procurement and competition and the NHS White Paper

In our series on the NHS White Paper, we have covered a number of the key legislative proposals for a Health and Care Bill outlined in the Department of Health and Social Care’s Integration and Innovation: working together to improve health and social care for all. In this latest post, we consider the proposals on procurement and competition.

Changing the procurement processes

The White Paper seeks to enable NHS and local authorities to arrange healthcare services and avoid “needless bureaucracy” while retaining core duties to ensure quality and value. This commitment is not new: it formed part of the Government’s Busting bureaucracy document published in November 2020 to make procurement rules more flexible.

What is changing ?

Proposals will remove the current procurement rules which apply to NHS and public health commissioners when arranging healthcare services. The White Paper explains that the proposals will give commissioners “more discretion” over when to use procurement processes to arrange services than at present but that where competitive processes can add value they should continue. So commissioners will have flexibility over when they choose to run a competitive tender.

How?

The current NHS (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 sometimes referred to as the section 75 arrangements under the Health and Social Care Act 2012 will be revoked and the Public Contracts Regulations 2015 amended to remove healthcare and public health services from their scope. The current system will be replaced by a new provider selection regime which will provide the framework for NHS bodies and local authorities to follow when deciding who should provide healthcare services, currently being consulted on.

On the issue of patient choice under this new provider selection regime, bodies that arrange NHS services as the decision makers will be required to protect, promote and facilitate patient choice with respect to services or treatment. The White Paper explains that the process for any qualified provider (AQP) arrangements will bolstered.

But what about the role of the voluntary and independent sector ?

The White Paper states that “…there will continue to be an important role for voluntary and independent sector providers, but we want to ensure that, where there is no value in running a competitive procurement process, services can be arranged with the most appropriate provider.”

But as Nigel Edwards of the Nuffield Trust explains in a recent article (paywall), there can be a number of "unintended consequences" of changing procurement processes “…the upside of reduced bureaucracy could be overstated. There is a danger that an overly cosy approach could prevail that favours incumbents and excludes the voluntary sector or innovative external providers – whether from the NHS or the independent sector.”

The new model of procurement does need to ensure the appropriate checks and balances to mitigate the risks of contracts simply being handed out to incumbent providers, particularly when commissioners are pressed for time to ensure continuity of services to patients. Further, any new approach must ensure diversity of provision ranging from the voluntary to the independent sector.

Lastly, the proposals make clear that the changes will only apply to healthcare services – such that, the procurement of non-clinical services, such as professional services or clinical consumables, will remain within the scope of existing procurement rules which are themselves under consultation.

Competition

The White Paper paves the way for the NHS to organise itself without the involvement of the Competition and Markets Authority. The focus has changed to one of collaboration – and a move away from competition as the driving tool for service improvement, which has in some cases “hindered” integration between providers.

Three key proposals are set out:

• Remove CMA function to review NHS foundation trust mergers. But the CMA’s jurisdiction in relation to transactions involving non-NHS bodies (eg. between an NHS Trust/FT and private enterprise) and other health matters (eg. drug pricing) would be unchanged.
• Remove NHS Improvement’s specific competition functions and its general duty to prevent anti-competitive behaviour.
• Remove the need for NHS England to refer contested licence conditions or National Tariff provisions to the CMA.

The other change is that NHS England’s main role will be to support improvements in health outcomes, the quality of care and the use of NHS resources.

Observations

Our early thoughts are that a reduced focus on competition will be welcomed, including the CMA’s role in merger control.

Issues around supporting patient choice look to form part of NHS England’s role – and form part of the wider package of reforms.

It will interesting to see to what extent NHS providers will be subject to competition law in respect of a provider’s elective care for example.