NHS CONFEDERATION RESPONSE TO THE MONITOR DISCUSSION PAPER ON THE FAIR PLAYING FIELD REVIEW (DECEMBER 2012)

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1 NHS CONFEDERATION RESPONSE TO THE MONITOR DISCUSSION PAPER ON THE FAIR PLAYING FIELD REVIEW (DECEMBER 2012) 1. ABOUT THE NHS CONFEDERATION 1.1 The NHS Confederation is the only body to bring together the full range of organisations that make up the modern NHS to help improve the health of patients and the public. We are an independent membership organisation that represents all types of providers and commissioners of NHS services. We speak for the whole of the NHS on the issues that matter to all those involved in healthcare. We also reflect the diverse views of the different parts of the healthcare system. 1.2 We welcome the opportunity to contribute to the independent review into the Fair Playing Field for NHS-funded services undertaken by Monitor. We believe that this review should cover important issues that need to be addressed in the new system for NHSfunded care. The Health and Social Care Act 2012 does not create a blank page to begin with, but it does present an opportunity to establish key principles on the provision of care in the NHS. 1.3 Our response seeks to provide an overarching perspective from a range of providers and commissioners of all types of NHS care, bringing together input from across our networks. It complements the response by the NHS Partners Network, which is a part of the NHS Confederation and represents independent providers of NHS care. 2. GENERAL COMMENTS ON THE CONSULTATION 2.1 We believe that this review is right to focus on the idea of a fair playing field for all providers of NHS-funded care, as opposed to a level playing field. Significant barriers to market entry and disadvantages for one type of provider can prevent choice and competition from operating effectively as a means to drive improvement and encourage innovation. However, the NHS should not aim for all providers to operate in an identical way, as this would fail to deliver the benefits offered by a diverse approach. At the heart of this review are the interests of patients and it should focus, as should Monitor more generally, on how choice and competition can be harnessed to improve care for them. 2.2 As a membership body representing all types of organisations that commission and provide NHS services, we understand how complex some fair playing field issues can be. Monitor may often struggle to find agreement across the system on some of the deeprooted issues, but this should not deter it from addressing them. There are concerns about how far this review can go and what it will be able to achieve, but we believe that if Monitor considers the issues in a fair and balanced way it should establish a good basis for further exchanges of opinions. 2.3 To achieve this balanced approach, Monitor will need to ensure that commissioners are fully engaged in the process. We believe that, as a key part of the system, the views of commissioners must be fed into the review. CCGs are currently occupied by their authorisation and many may not feel in a position to respond to the review effectively. We recognise that Monitor has been working closely with the NHS Commissioning Board to try to include more commissioners and we recommend that it should continue in this regard. If Monitor's final recommendations are perceived by commissioners to adequately reflect 1

2 their views they will be more likely to use them, which would significantly enhance the influence of the review. 2.4 The review has chosen to consider factors between different types of providers, but we believe that some distortions do not necessarily fit this distinction as providers are not homogenous groups. Furthermore, we recommend that Monitor undertake further work to consider the innate tensions from competition between providers, and how this will sit with the need for co-operation to achieve better integrated care to benefit patients. We recognise, however, that this may fall outside of the current scope of this review. 2.5 Monitor also needs to be careful in how it interprets the responses it receives and should make certain that it is considering feedback in the context in which it is given. Examples that may be considered unfair in isolation could in fact be part of trade-offs that can often cancel each other out. Part of Monitor's challenge in this review will be disaggregating these trade offs and considering the issue of fairness as a whole. 2.6 Finally, we believe it is important to appreciate that this review is taking place at a time of major change for the NHS and for the provision of NHS-funded care. This is partly because of the implications of the Health and Social Care Act reforms, but is also the result of major pressures on NHS funding due to broader economic insecurity and the increase and changing demands for healthcare. The need to find a financially sustainable solution to providing NHS-funded care is driving significant change in the existing provider landscape. 2.7 Change is also being driven by policy shifts, such as the determination to recognise the value and benefits of integrated care across acute, community and primary health and social care services. This review has to consider all of these factors and make certain that its recommendations are relevant for where the NHS is heading, and not just where it is right now. As such, part of Monitor's recommendations to the Secretary of State should be to insist that this review not be seen as the final answer, rather the beginning of a very important, but rather complicated, conversation. 3. RESPONSES TO CONSULTATION QUESTIONS 3.1 Do you believe there is another relevant dimension that should be considered as part of the scope of the review? The Secretary of State was clear that the independent review should focus on "matters that may be affecting the ability of different providers of NHS services to participate fully in improving patient care". Monitor has interpreted this to focus on areas where one provider is unfairly advantaged over another, which is a sensible approach. However, there is probably scope for Monitor to expand this and consider areas where some providers are disadvantaged in favour of other actors in the system. Some instances where this is the case could in fact prevent providers from participating fully in improving patient care. 2

3 3.2 Do you believe that a diverse range of providers is an important lever for helping to improve patient care? Patients clearly value choice in health services and the ability for them to choose between providers can incentivise providers to promote high-quality services. However, in the NHS there are some situations where there may not be a choice, but it is not necessarily detrimental to patient interests Furthermore, Monitor should consider the implications of its recommendations on its duty to enable integrated care. Monitor is assessing disadvantages for providers and is likely to recommend where distortions should be addressed. In doing so, it has to make sure that the impact of these recommendations is consistent with the need for more cooperation and for services to be better integrated to benefit patients. 3.3 What do you believe is the single most important factor in provider decisions to expand into a new area (whether that "area" is serving a new geography or providing a new service)? We are not certain that there is a clear and definitive answer for this and it is unlikely that there will be an overarching factor that all providers concur with. Commissioning and tendering 3.4 In the responses to our initial call for evidence, commissioning was overwhelmingly identified as important to ensuring a range of providers can offer their services. To what extend do you think the main issues relating to commissioning and the fair playing field are being addressed through current reforms? It is unclear at present how CCGs are likely to discharge their commissioning duties in the new system. Therefore, it is hard to understand yet what impact this might have on a fair playing field for providers. We recognise that the design of the new commissioning system is intended to support more clinically-led, local decision-making, which we support. However, until the new system begins to develop we will not be sure of the effect that CCGs will have What we can be certain of is the importance that commissioner behaviour has on the market for providers. Given this, we would be keen to promote key principles of transparency and even-handedness regardless of how the new system develops. We recognise many of the concerns that have been expressed in the discussion paper, in particular on tendering and contracting. However, we would be keen to emphasise the importance of evenly considering the perspective of both providers and commissioners. Some of the contracting and tendering issues that have been raised in the discussion paper could in fact be the result of sensible commissioning decisions that focus on value for money and attempt to minimise the risk of uncertainty It is difficult to present a consistent view from providers on the nature of contracts and their impact on providers' ability to participate fully in improving patient care. Certainly, we recognise that smaller providers may find it hard to compete for contract tenders that are bundled or short in length, although the extent to which this is the case will depend on 3

4 the service being tendered. Short contracts can sometimes be useful for small providers to demonstrate their ability to deliver a service, which could help them to compete for a tender in the future One specific issue that we would be keen to raise is the tendering of local enhanced services (LES) in primary care. Many of our community provider members have told us that commissioners rarely tender for LES, which they feel they could add value in providing. We understand that the NHS Commissioning Board had identified this area as a key concern going forward and this should be approached in a fair and transparent manner. Furthermore, should these services be opened up there could also be regulatory fair playing field concerns, given that family health services are excluded from the proposed NHS provider licence introduced by Monitor next year. Payment systems The fair playing field review should assess the way that products and services are priced in the NHS and consider where the payment system is unfairly favouring one type of provider over another. We believe there is a strong case for improving the information that is used as a basis for NHS prices, which will ensure that they accurately reflect costs and quality. We recognise that Monitor is undertaking some work in this area and is proposing to pilot patient-level information and costing systems. We support these initial measures and recommend that they be developed to complement further reforms that need to be made to the pricing system. Tax asymmetries 3.5 Are you aware of any specific examples where costs arising from tax differences between NHS, private sector, voluntary and charitable providers have had an impact on provider decisions about whether to bid for contracts (or provide services covered by AQP)? The fact that some providers are required to pay tax, both corporation and valueadded, while others are exempted is an area that this review should be considering on the grounds of fairness. Certainly, some of our members that are not exempted indicated to us that they were often unable to bring their prices down to compete due to a need to cover tax costs. However, it is not clear what scope this review will have to influence the UK treasury, which will ultimately have the authority to amend this. Staff terms and conditions 3.6 Are you aware of any specific examples where costs arising from differences in pension costs between NHS, private sector and VCS providers have had an impact on provider decisions about whether to compete for contracts (or provide services covered by AQP) and on providers' ability to attract high quality staff? It is not clear if there is a consistent view on the impact of pension costs on the ability of providers to participate fully in improving patient care. Some of our members have indicated that not having access to the NHS pension can sometimes impinge on their ability to recruit, although others have suggested that it can sometimes be beneficial in allowing them to offer lower wages. We have also heard that some providers are 4

5 establishing their own pensions arrangements, which allows them to control contributory benefits and to incentivise staff by paying annual dividends We recognise that the Department of Health is currently reviewing the provision of the NHS pension. As part of this review, it will be considering if the NHS pension could be extended to other providers and so it is important that Monitor does not pre-empt what emerges from the Department. 3.7 Which of the issues identified in the review do you feel is the most important to you or your organisation? Are there any important issues that you feel we have missed? We believe that Monitor may also want to consider how regulation can affect the ability of providers to participate fully in improving patient care. For some providers, the burden of regulation can be a disadvantage if they have less capacity to manage what it is being expected of them. This has particular relevance for Monitor's own provider licence, which it is expected to launch in April next year. If the costs in meeting the requirements imposed by that licence, and the related requirements for providers of commissioner requested services, pose a heavy burden on providers then this would likely impact harder on some providers than others. Compliance fees, both direct to the regulator and indirect through external advice costs, forgoes money that could otherwise be spent on patient care and must be considered in comparison to benefits to patients. Monitor needs also to consider the impact that different regulators, even those outside of the Department of Health's remit, can have on different providers. 3.8 What type of provider do you feel are most disadvantaged by the current NHS playing field and why? We believe that it is difficult to provide a consistent view on this. If you have questions about this response or require clarification, please contact Paul Healy (Senior Policy and Research Officer), NHS Confederation paul.healy@nhsconfed.org Tel: