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The imminent creation of Primary Care Networks which in turn will be expected to expand into larger organisations in the future, will place some GPs into the nature of organisations with which they may be unfamiliar. My own experience so far is that a number of PCNs will be looking to work with their local federations, and that may well involve some reorganisation to meet the various legal, accounting and tax requirements.

There is a lot written about PCNs, the mandatory agreement, the various five structures mentioned in the BMA PCN Handbook, but this article is written from a different perspective, to look at two well-known failures from the past and to see what can be learned from them.

Hinchingbrooke Health Care NHS Trust

In March 2015, the House of Commons Committee of Public Accounts published an update on the failure of Circle’s management of Hinchingbrooke Health Care Trust.

The report explains that in February 2012 Circle took operational control of Hinchingbrooke Health Care NHS Trust. In 2013, the Committee reported their concerns that Circle’s bid had not been properly risk-assessed and was based on overly optimistic and unachievable savings. In the event, Circle was unable to make the Trust sustainable and in January 2015 Circle announced its intention to withdraw from the contract just three years into a ten year franchise.

What were the lessons learned?

According to the Public Accounts Committee, these are the key lessons:

  • The savings expected in Circle’s bid were unprecedented and the high risk involved played down.
  • Oversight by various parties who had a role in the organisation was poor and inadequate and no one was held accountable for the consequences.
  • The Committee commented that public bodies will not achieve value for money from their contracts until they become commercially skilled.

UnitingCare Partnership Contract

The second case to look at is the collapse of the UnitingCare Partnership contract in Cambridgeshire and Peterborough. In July 2016 the National Audit Office produced their investigation into the collapse.

According to the investigation, Cambridgeshire and Peterborough CCG commissioned an innovative integrated contract from UnitingCare Partnership, a Limited Liability Partnership (LLP) formed from two local NHS Foundation Trusts. The five year contract was terminated after just eight months because it ran into financial difficulties.

These were the key findings of the investigation:

  • On a positive note the general consensus was that the contract design for patients was innovative and ambitious, popular with patients, staff and providers. However:
  • The VAT implications of using an LLP had not been properly considered and the VAT that was expected to be reclaimed could not be, adding significant costs to the contract
  • There was confusion over who would fund the transformation funding, the CCG expected the provider to invest their own funds while UnitingCare disagreed with this expectation.
  • The 10% cost reduction over the term of the contract was optimistic.
  • There were important gaps in the specialist advice given.
  • There were limitations in the data available which meant that it was difficult to price the bid accurately.
  • The timings were too tight, the contract started on 1 April 2015 even though the CCG knew that the contract price would change.
  • Within a month of starting the contract, UnitingCare Partnership requested £34m of extra funding and by December 2015 UnitingCare was forced to terminate the contract when the CCG informed it that no further advanced funding was available.

There are a number of lessons here from these two cases:

  • Getting good advice early, especially about the structure would have clarified the VAT issue.
  • Being rushed into unrealistic deadlines can prove to be expensive and potentially catastrophic if it means that the full extent of risk has not been assessed.
  • While it is reassuring to make plans with an over-optimistic mindset, it does not help if it proves to be unrealistic.
  • Clarity over responsibilities, not just between the commissioner and the provider, but between members in the provider team is essential, effective delegation does require properly allocated responsibility.
  • There is much to be excited about with the changes in primary care and learning the lessons from the past can help avoid mistakes in the future.

This article was written by Laurence Slavin, a partner at Ramsay Brown who specialises in the finances of Primary Care and GPs. He can be contacted at [email protected] or 020 8370 7710