In January 2013 PRUComm (the Policy Research Unit In Commissioning and the Healthcare System) published its interim report following the commencement in 2012 of a three year study into how health care commissioners negotiate, specify, monitor and manage contractual mechanisms to improve services and allocate risk in their local health economies. The study is looking at both acute services and community healthcare and will run until late 2014.

Difficulties arising from contracting for health care services are:

  • Difficulties in specifying and measuring all aspects of care which means that the contract can never be ‘complete’ or ‘discrete’;
  • Even where performance can be measured, the contractual relationship tends to be based on ‘relational norms’, ie past practice or an accepted level of trust and flexibility between the parties, rather than the formal aspects of the contract which are therefore not always adhered to;
  • Local commissioners rarely include contractual mechanisms on top of the nationally mandated ones;
  • Even where there is a clear breach commissioners do not routinely use all the contractual levers available to them; and
  • Actual allocation of financial risk does not always follow that set out in the NHS standard contract.

The study looked particularly at:

  • Pricing and the allocation of financial risk;
  • Use of financial levers to improve quality, ie CQUIN; and
  • Agreed financial sanctions form low quality.

They found difficulties in some areas in commissioners finding the money to pay PbR prices for all activity and the continued use of block payments for non-PbR activity. In respect of over-performance above agreed activity levels, there was a mixture of block payments and discounted PbR rates paid.

A wide range of locally agreed quality measures are being included in CQUIN Schedules, but there is little consistency between different commissioners. Although stage payments of CQUIN monies are common and encourage providers to achieve at least part of their CQUIN goals, commissioners are willing to withhold CQUIN where the measure is not fully achieved or not all CQUINS are achieved.

In contracts very few commissioners had agreed additional quality requirements at local level which were subject to financial sanctions. Some commissioners had agreed specifically not to impose financial sanctions for breaches, relying instead on providers carrying out remedial action plans (sometimes at the commissioners’ expense). Generally remedial action plans are used widely but there were instances of penalties being imposed for failing to provide a remedial action plan or to carry it out effectively. One view held by commissioners was that the financial penalties in the contract were insignificant and therefore of little value as a contractual lever. Imposing penalties was also seen as time-consuming and damaging to the long term relationship with the provider. Commissioners also complained that staffing levels were to low to enable them to build the contract management relationships they would like with all their providers.