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Speech by Rt Hon Patricia Hewitt MP, Secretary of State for Health, 20 February 2007 to the King’s Fund: Commissioning new providers

As the NHS moves from a public sector monopoly to a truly patient-led service, exciting opportunities are opening up for hospitals and other providers, whether public, private or not-for-profit.

But the change also creates uncertainties and challenges to established services, as patients, users and commissioners seek the best possible quality and value.

Today, I want to talk about both the opportunities and the challenges – and how providers and commissioners need to work in order to get the best for patients.

I’d like to start with a story. An MP complained to me the other day that his local Primary Care Trust awarded a contract to an NHS Foundation Trust "forty to fifty miles away". He publicly criticised the PCT for daring to choose the best and most efficient service; in other words daring to put patients before the existing provider.

I know the background to the case. That's exactly what the PCT did.

Both NICE and the Department of Health expect PCTs to introduce new laboratory tests – using liquid-based cytology - for cervical cancer smears.  After two years of talks with its local trust this particular PCT put the service out to tender.

The existing provider – the local acute trust - put in a bid along with four other NHS trusts and lost. The contract was offered to the neighbouring NHS Foundation Trust because the PCT judged that this trust could offer the best quality service with the best value.

That was a real blow for the existing provider’s 30-strong cytology department – although I understand discussions are taking place with the staff about transferring to new jobs and the department will continue to do other work.

But it is going to make a huge difference to 40,000 women a year. Test results will be faster; fewer women will need to be re-tested; and although the laboratory service is moving, women will still get their tests locally.

Better care, better value, and long-term savings that can be invested in other services.

NHS Foundation Trusts

What interests me about this story is that effective commissioning was matched by an entrepreneurial trust – an NHS Foundation Trust using its independence to expand services and spread best practice, not only in its local community but around its region.

When we come to look back on the decade following the NHS Plan, I believe we will see that the creation of NHS Foundation Trusts was one of this government’s biggest and most far-reaching reforms – not simply in the NHS, but in public services generally.

They challenged the idea that public ownership means state ownership. They revived an old tradition of mutualism that was the foundation stone of the co-operative and ultimately the Labour movement.

By bringing patients, the public and staff into membership – 620,000 so far and rising – NHS Foundation Trusts put the ‘public’ back into ‘public ownership’. 

And their success should reassure anyone who still believes that we are "privatising" the NHS.

The existence of NHS Foundation Trusts is itself the most powerful guarantee that the public sector will continue to provide most NHS acute care. Already, fifty-eight acute and mental health trusts have become NHS Foundation Trusts, answerable to their own members and elected governors, to the commissioners who pay for their services and to an independent regulator. By the end of 2007 we expect up to 100 NHS Foundation Trusts to be providing around half of NHS acute care.

But NHS Foundation Trusts are not an end in themselves. They are just one way of improving patient care by giving Trusts - and the staff who work in them - greater freedom to respond to what patients need and commissioners ask for.

Front line NHS staff – people who are dedicating their lives to NHS patients - know how to give even better care, even better value. But all too often, they haven’t had the freedom or the tools they need to do it.

Now we can see NHS Foundation Trusts using their freedoms, their incentives – and their financial strength - to innovate and improve services.

The examples are inspiring.

• Harrogate and District NHS Foundation Trust – one of the two best hospitals in the country, according to the Healthcare Commission – proving that small can be outstanding as they create alliances with other hospitals across Yorkshire to give their patients the best specialist care, as close to home as is safely possible.
• Birmingham University Hospitals NHS Foundation Trust opening a state-of-the-art, life-saving PET/CT scanning service for cancer patients, thanks to a joint venture with Alliance Medical.
• The Royal Marsden NHS Foundation Trust agreeing to provide its world-class cancer services to another trust.
• The Heart of England NHS Foundation Trust now consulting on its proposed take over of Good Hope Hospital NHS Trust. If the proposals go ahead and the marriage works, it could well be the right model to deal with some other NHS hospitals that – whatever their clinical strength – suffer from long-term financial and management problems.

I have no doubt that we will see far more NHS Foundation Trusts acting creatively and entrepreneurially over the next few years.

The process will accelerate as more patients exercise choice, GPs, PCTs and local authorities work together as commissioners to define the outcomes they want and the national tariff promotes greater efficiency and value for money.

Independent providers

But NHS Foundation Trusts are not the limit of diversity in the NHS. If we are going to create a truly patient-led NHS - where patients everywhere can get the best possible care - then private and not-for-profit providers must be able to contribute too.

Why? Because new providers help us to all the things we want to do: improve the quality of care; increase capacity; support patient choice; drive value for money and promote greater equality.

Can't the traditional NHS do all that by itself?

I know that the British Medical Association and Unison would argue that for any procedure or system deployed by an independent provider, the same or better can be found within the NHS. And sometimes that’s true.  Separating elective from emergency care began in the NHS Treatment Centres, not their independent equivalents. In this case, the challenge has been to spread everywhere the best practice that exists somewhere. That needs strong commissioning and patient choice, combined with the possibility of a different provider.

But it is also true that when medicine is global and innovation takes place in every health service, the NHS can also learn as well as teach. 

Shepton Mallet Independent Sector Treatment Centre was one of the first wave of ISTCs.  At Shepton Mallet, the provider UKSH, whose clinical partner is New York Presbyterian Hospital, see an orthopaedic patient, carry out diagnostic tests and book an operating slot, all in one day - a process that typically would have taken months and at least three appointments in the past.

They have also transformed care for a wider group of patients as this example has now been copied by Yeovil NHS Foundation Trust. Managers there say the ISTC made their own clinicians "sit up and take notice". As a result, they too have established one-stop outpatient clinics for orthopaedic patients, reorganised the way they use their consultants' time and slashed waiting lists.

These new approaches have helped Somerset Primary Care Trust and Yeovil NHS Foundation Trust to radically reduce waiting times.

So much so, that yesterday Yeovil was named as one of 13 trusts in the country aiming to achieve the 18 week target from GP referral to operation by the end of this year – a year earlier than the 2008 deadline we have set for that goal.

Social enterprise

By the same token we need to support and recognise the distinctive contribution social enterprises can make to health and social care in our country. Their distinctive marriage of public service values and private sector entrepreneurialism can help to generate the quality and efficiency that the public are looking for.

An example: According to The Sunday Times' 100 Best Companies guide, Sandwell Community Caring Trust is now considered to be the second best company to work for in the UK.  Not bad for an organisation set up in 1997 by Sandwell Metropolitan Council as an independent charity with the specific mission of developing new, flexible services more cost effectively.

And they've achieved some staggering results. They've developed new accommodation, found alternatives to capital funding and reduced the unit cost of residential care for an older person from £630 to £325 per week.

They have not done this by slashing the terms and conditions of the staff. They've done it by cutting administration costs and retaining high quality staff. When the trust was formed, staff took an average of 22 days-a-year sick leave, now it is less than one day. Because the trust spends 82 per cent of its turnover on care, the quality of service is better and their staff  are happier. They no longer need agency staff and they can guarantee consistency for the 400 people they care for.

Better, cheaper care because Sandwell council tried an approach that could cut local council bureaucracy and re-motivate staff.

Let me give you another example. Care Direct in West Yorkshire is the UK's largest community mutual provider of out-of-hours primary care services serving more than two million people. It has an annual turnover of £17m, an impressive range of services and is governed by the public, its employees, and local GPs and Primary Care Trusts.

Social enterprise is part of the future of health and social care. Last month we announced 25 pathfinder social enterprises, and an investment fund of more than £70m to support the development of social enterprises over the next four years. Just as we needed to help the first wave of NHS Foundation Trusts to establish a new model, and we needed specific incentives to bring new private sector providers in to the NHS some years ago, so we now need to make a special investment in not-for-profit organisations to help them fulfil their potential.

A level playing field

Everybody complains to me that "diverse providers are fine but it's not a level playing field."

And it is 'everybody'.

• NHS Foundation Trusts don't think it's level because they can't compete for ISTC contracts.
• ISTCs don’t think it’s level because they can’t compete for NHS Foundation Trust contracts.
• GP practices – which have always been small independent sub-contractors – complain about the entry of large companies.
• The private sector thinks social enterprises are being helped unfairly..
• Social enterprises and mutuals complain that they haven't got the financial muscle to compete against the big boys.
• NHS staff who want to move into social enterprises are understandably concerned about continued eligibility for NHS pensions. But some new providers complain that the NHS has an unfair financial advantage because it pays less for its pensions.

They are all valid points and I am not going to take the easy route of saying that if everyone is complaining, we may be getting it right! We are working with Ed Miliband, minister for the third sector, to help ensure a truly level playing field.

It is also essential to take account of the context decisions were made in.

ISTCs were given a special place at the beginning. The NHS needed extra capacity, but didn't want to pay UK private sector prices.

We needed new blood and the people prepared to take on the risk of building, training, equipping and running new units required medium-term guaranteed contracts to mitigate their risk.

Yes, we are paying a premium for the first wave of ISTC operations but it is not the 40% to 100% premium the UK healthcare sector was charging for spot purchased operations. The average premium for ISTC operations is 11% above the NHS tariff and companies like Alliance Medical are now providing MRI scans at below NHS tariff.

Three years after the first independent sector treatment centres opened their doors the context has changed and so has our approach.

The current round of ISTC procurement has led us to strike tougher and different deals as circumstances and demands have changed. And we have learnt lessons from the first wave about integration with the NHS, including the need for the independent sector to provide its share of training opportunities for junior doctors.

Patient choice

But choice will be the real leveller. And choice is coming sooner than the public – and most commentators - realise.

By June of this year the Extended Choice Network will give patients needing an elective procedure around 200 additional hospitals to choose from, including every NHS Foundation Trust and ISTC. 

Over the coming months we will make choice an integral part of the NHS.

In the next few days we will announce a contract for the design and development of a "healthy choices" website. It will give the public easy access to comparative information on all the health providers who could offer them treatment, together with advice on individual health issues. Patients, carers, and professionals will all be able to give "ebay style" feedback on the quality of service they have received and to share information with other NHS users.

I expect this website to go live in early summer.

In our 2005 Manifesto, we promised all patients a completely free choice of any hospital or clinic that could offer NHS quality at the NHS price by the end of 2008. But because waiting times have always been longest for orthopaedic patients, we are currently working on plans to give orthopaedic patients that "free choice" in the next few months, with other specialties to follow until we achieve the pledge we made.

Effective commissioning

But patient choice, the development of new providers, with better services and better value will be held back if Primary Care Trusts and GPs aren't open to new ideas,; succumb to the temptation of commissioning traditional services based on price rather than value; impose their views of what is viable on a potential new provider; or fail to overcome unfounded prejudices about social enterprises and charities.

Lord Victor Adebowale, the chief executive of Turning Point, has recently set up a pilot of the charity's Connected Care programme in Hartlepool. The programme involves the community in designing seamless health and social care services but to get it running the charity had to convince PCT officials that its ability to innovate didn’t mean a lack of regulation and governance.

Turning Point is regulated by the Health Care Commission, the Commission for Social Care Inspection and the Housing Commission. The charity embraces regulation. It doesn’t see it as a barrier to innovation because it understands the people it is trying to help.

Perhaps we should all take that on board.

When we publish the Commissioning Framework for Health and Well-being shortly it will take further steps towards breaking down barriers between health and social care. It will focus commissioning on getting the best outcomes for individuals, their families and communities, on promoting better health and well-being, and proactive preventative healthcare. That means understanding your communities, having clear data, knowing your client, involving the public and creating a transparent procurement process.

And this process shouldn't be governed by failure. Good commissioning is driven by a desire to improve the quality of services, responding better to the needs of individuals and the community and getting better value for money.

We are also finalising a framework for commissioning support services which will enable the private sector to be available to help PCTs with the critical responsibility of  commissioning. 

Competition and co-operation

I don't want anyone to leave this room today thinking new providers are simply about creating competition in the system. That would be a clear misunderstanding of what we are trying to achieve.

There will be occasions where competition is necessary: for elective operations where patients are choosing, or where practice and PCT commissioners decide they want a new or improved service.

But there will be many other services where competition is simply not appropriate, including the emergency services that are such a large – and vital – part of the NHS.

And there will be many occasions where co-operation is essential: designing the best patient pathways, ensuring smooth patient handover, providing training.

Striking the balance between co-operation and competition will not always be easy. But I am clear that I do not want to see any behaviour that places the well-being of an organisation before the well-being and safety of its patients.

I don't want to hear stories of trusts telling consultants not to talk to GPs about the redesign of services. Rival providers accusing one another of poor quality services or poorly qualified staff. Or a trust recklessly carrying out more work than its PCTs can afford.

The NHS has always used different providers. New providers – NHS Foundation Trusts , the independent sector, social enterprise – are as much part of the NHS family as GP practices and local hospitals always have been.

Provider principles

And so that every provider in the new NHS family is clear about the way they should conduct themselves, we have recently proposed that all NHS contracts should in future include 10 simple principles that will guide both commissioners and providers in their working relationships.

These are currently being consulted on and should be understood by everyone delivering NHS services.

These common values, that are at the heart of the NHS, will connect diverse providers for the benefit of patients.

The future of health and care services will depend upon the innovation and imagination of providers as they respond to patients and commissioners ... and upon the ability of commissioners to allow providers to give of their best.

I have no doubt that, as we work together, you will rise to that challenge.

Thank you.