Request for Guidance on Independent Sector Contracting from the Managing Director of NHS England to the Secretary of State for Health and Social Affairs

From: Amanda Pritchard, NHS Executive Director

To: Rt Hon Sajid Javid MP, Secretary of State for Health and Social Affairs

January 7, 2022

Dear Secretary of State,

The government asked NHSEI make the necessary changes to maximize the use of independent sector bed capacity across England in case the local NHS GEORGIA bed capacity (including peak capacity) is at significant risk of being exceeded. With the emergence of Omicron, this requirement has become more urgent. Consequently, it is necessary to immediately put in place the necessary commercial arrangements, in particular to secure peak capacities. The independent sector, with its acute care hospital sites, good facilities and access to a limited pool of staff, could help tackle the pressures facing the NHS.

The NHS would also seek to maintain urgent elective activity at sites in the independent sector to the extent possible. The aim would be to help ensure the continuation of the most urgent planned care.

The independent sector is generally not used for medical bed capacity and its staffing model does not easily support significant 7/7 bed capacity. It is therefore not possible to determine with certainty what additional medical bed capacity would be available and we assume that core NHS staff will be fully stretched at this point to staff major acute care sites and any surge capacity on these. Site (s. It is also likely that there will be significant levels of staff absences due to COVID infection that will further limit the capacity of the NHS and IS sites.

Given the need to be able to act very quickly, we approached, via IHPN, those independent industry suppliers who were considered, based on our market knowledge and experience, to be well positioned to meet our requirements and be able to work effectively with the local NHS.

the ISP who have indicated their capacity and willingness to make arrangements to provide surge capacity could provide approximately 5,600 back-up physical beds if required. It is estimated that approximately 2,000 to 3,000 of these beds could be filled (subject to staff absence levels), but the ISP cannot confirm it to us.

NHSEI teams worked with the independent sector service providers concerned (ISP) to negotiate the terms of a possible contract to be entered into with each ISP that would allow the NHS full access to independent sector facilities in the event of a national, regional or system-wide surge. Given the significant uncertainty surrounding the exact amount of additional capacity required, the terms of the proposed arrangements consist of 2 stages:

  • the first stage is a period of ‘pre-deployment of the push’ which allows the independent sector to prepare for the move to the push, if necessary, while the NHS and private elective activity continues

  • the second stage is the deployment of the peak stage, where up to 100% (subject to the clinical prioritization of patients in situ and other) of the capacity of the providers of the independent sector concerned will be made available, supported by the NHS if necessary in a particular area

As an accountant, before moving forward with these arrangements, I am required to assess whether the contracts that we would enter into with suppliers in the independent sector meet the required standards as set out in the management of the public money from HM Treasury. Some elements of this proposal carry risks based on value for money.

In return for a commitment to stop their private work and make their resources available to the NHS in the short term if needed, the IS the suppliers requested that:

  • we guarantee each of them a minimum level of NHS income for the duration of the contract

  • if the NHS requires activation of the overvoltage (where ISP stop private sector work to build capacity for the exclusive use of the NHS) we pay for affected facilities and staff on a non-profit cost recovery basis

The NHS would normally only pay for the activity actually delivered. By granting a minimum income guarantee (MIG), there is a significant risk that the NHS will pay for an activity that is not performed. To mitigate this risk, the NHS and ISP have agreed to set the MIG 90% of the value of NHS work delivered to affected facilities in the best 4 weeks between October and December 2021. If work with a greater total value is delivered, we will reimburse the excess work actually performed. We have also agreed to a 10% premium over the standard NHS tariff for any work exceeding the value of the MIG, and other bonus additions for all more complex work (such as cancer) to encourage ISP to a delivery activity that would not normally be carried out by ISP because they see it as unprofitable at standard NHS tariffs.

  • the MIG level is therefore set at a level lower than what we could reasonably assume the NHS would command through the IS in a normal winter period when surge voltage is not required. We estimate this value based on current information to be between £ 75 million and £ 90 million per month. This equates to the value of the elective activity that was delivered by roughly the same group of ISP in Q4 2020 to 2021 (during the last major wave of COVID).

  • In addition, tariff premiums should help to encourage ISP continue to advance the work of the NHS and facilitate the transfer of more complex work if it is not possible to continue this work at NHS sites.

Therefore, while there is a financial risk in the proposed arrangements for the fourth quarter, sensible measures have been put in place to mitigate this risk. In addition, the incentive we have sought in the proposed contract offers us the possibility of obtaining a better combination of treatments from providers in the independent sector, including cancer and other specialties more complex than they are. normally have not offered. This is particularly beneficial to our goal of continuing the most urgent elective work during this time.

However, in the event that a system requires the installation of surge devices, the then applicable cost recovery devices will be significantly more expensive, at around £ 175million per month, based on 2020 device data. On a per bed basis, this is significantly more expensive than the equivalent cost of an NHS site with much less certainty about potential staffing capacity. There are also logistical challenges that need to be overcome to facilitate the transfer and care of patients between NHS systems and around 150 IS sites across England. There is therefore an additional risk on the ability to maximize the use of effective capacities.

To mitigate these risks, governance arrangements have been agreed that require 7 days’ notice to implement surge arrangements and that these (when requested by a system that anticipates the requirement for a capacity additional bed) should also NHSE regional and national approval to ensure that a plan is in place and then implemented. If not implemented, these provisions would be rescinded.

These surge devices are considered to be emergency devices, to be implemented in extremis, given the potential cost and the uncertainty involved. Their implementation will only be considered necessary when all other reasonable options for providing patients with medical care and supervision have been exhausted.

Additionally, emergency agreements that provide emergency capacity on agreed financial terms can be considered triggered if independent providers have terminated their agreements with local NHS intensive care support trusts. Although this is an understandable condition for the ISP to require, this introduces the additional risk of activating a surge for a system without national NHS clearance and in circumstances where the surge capacity cannot be used effectively or is not required. This is mitigated by a 72 hour window to allow the NHS to seek to resolve intensive care arrangements before it triggers an increase under the business arrangements.

the ISP‘The requirements come with the risks and costs that I have outlined above. While we have implemented measures to mitigate them, we would continue to be financially exposed, particularly if surge agreements are triggered. Given the uncertainty as to the value for money of the proposed approach, I therefore seek ministerial direction.

As a Minister, you have the right to consider factors broader than what my obligations as an accountant allow me to do. Such factors may be your judgment that given the immediate impact of the Omicron variant, there is no time available to perform further analysis, design alternative arrangements, or agree to improved arrangements. You can also consider that if we do nothing or delay, the risk of pressure building up on the NHS leading to overloading of Omicron’s local systems is unacceptable. The manifestation of such risks would lead to a significant cancellation of elective care, where we began to combat the impact of previous waves of the pandemic. So you can consider that accepting the contract now is less risky in terms of fighting Omicron and the risk of higher value for money is acceptable. If so, it might be appropriate for you to ask me to continue.

I therefore ask for a ministerial direction that you are satisfied with NHSEI to make these arrangements despite the value for money considerations I explained above.

In accordance with the usual process for Ministerial Instructions, I am copying this letter to the Comptroller and Auditor General (who will brief the Public Accounts Committee) and the Treasury Accounting Officer.

Sincere friendships,

Amanda pritchard
Director General of the NHS

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