NHS rules and guidance relating to competition and co-operation

In addition to the legal instruments affecting the competitive and cooperative behaviour of NHS organisations, a wide range of NHS guidance was in existence during the research period. Before HSCA 2012, the main NHS specific rules governing the operation of competition and co-operation were laid out in the NHS procurement guidelines and the PRCC.

Procurement rules within the NHS

NHS Commissioners have some freedom over the nature of the competition for NHS contracts when procuring clinical services. The Department of Health issued guidance to NHS bodies to help decide which procurement approach to use for health services, bearing in mind the legal requirement for equality, non discrimination and transparency, and that processes should be ‘defensible to scrutiny’. The guidance in place for the majority of the research period (June 2010 onwards) was the ‘Procurement guide for commissioners of NHS- funded services’ (Department of Health, 2010f). This guidance was replaced by the Procurement, Choice and Competition Regulations No.2 2013 when they were issued in February 2013 (Monitor, 2013g).

Options open to NHS commissioners range from use of the formal procedures applicable to Part A services (e.g. single tender action, open tender process etc.), to ‘contract management’ in which an existing contract is negotiated to secure incremental improvements, to the use of the AWP model (a ‘call off’ contract). The Procurement Guide recommended that whilst there was no requirement to advertise Single Tender Actions, it would be advisable to do so (Department of Health, 2010f)

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An important element of procurement within the NHS is the requirement for proportionality. This is an acknowledgement that the resources available to commissioning activity within the NHS are limited, and that therefore the resources used for any particular process should be ‘proportionate to the value, complexity and risk of the services contracted’ (ibid. 1.27). The NHS Procurement Guide acknowledged that contracts for public procurement are usually based on value for money criteria rather than cost. However the guide also stated that it is possible for commissioners to decide to seek competition on cost for non-tariff services with minimum quality standards (ibid. 3.4). The standard NHS contract is three years with a one year option to extend, but can be up to between five and seven years.

The NHS Procurement Guide specified some of the behaviour expected of commissioners in relation to the requirements of transparency, non-discrimination, equality of treatment and an additional NHS specific requirement of proportionality. Of particular note is the expectation that commissioners state their commissioning intentions on their websites, and on the NHS Supply2Health website, highlighting those procurements which are single tender and which will use competitive procurement. It is also mandatory for commissioners to advertise procurements and contract awards over a specified amount on the NHS Supply2Health website (£100,000 at the time of the fieldwork), and on the Official Journal of the European Community website (£156,442 at the time of the fieldwork). The requirements also necessitate other behaviours such as retention of an auditable documentation trail providing accountability and clear documentation of criteria used for the evaluation of tenders.

As the legal requirements for Part B services are general rather than specific, prior to April 2013 it was for Strategic Health Authorities to agree the local processes for governance of procurement and dispute resolution, and for commissioners to approach Strategic Health Authorities with potentially contentious issues. The NHS Procurement Guide (Department of Health, 2010f) was replaced by the Procurement, Choice and Competition Regulations No.2 2013 when they were issued in February 2013. Supplementary explanatory guidance about procurement processes was published by NHS England for CCGs (NHS Commissioning Board, 2012). Notably, there was no corresponding process for local dispute resolution in the supplementary guidance, as the hierarchy of organisations at a local level had been removed.

Commissioners are also encouraged to have a policy on the management of conflicts of interest. Before 2013, the main guidance for commissioners was found in The Procurement Guide (Department of Health, 2010f) which outlined the steps commissioners should take.

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HSCA 2012 contains requirements for the management of conflict of interest by CCGs (s140). It might be expected that conflicts of interest would become an increasingly relevant issue as CCGs become active, and a guide to CCG requirements for the management of conflicts of interest has been issued by NHS England (NHS Commissioning Board, 2013a). In addition to procurement law GPs are also governed by the General Medical Council ‘Good Medical Practice 2006’ which requires them to tell the patient and purchaser at the point of referral about any conflict of interest (General Medical Council, 2006, para 7).

Principles and Rules of Co-operation and Competition

A set of NHS specific rules ‘The Principles and Rules of Co-operation and Competition’ (PRCC) (Department of Health, 2007b) were introduced in 2007 (see Table 3.1 below). The PRCC were in place for the vast majority of the research period (June 2011 – March 2013). The PRCC were not enshrined in law. A breach in the PRCC could be raised with the NHS CCP, who would, in their advisory role, make recommendations to the relevant regulatory body for commissioners and providers, either the local Strategic Health Authority or Monitor, and to the Secretary of State for Health. A small number of interviews was conducted after March 2013 when the PRCC were abolished and replaced by other mechanisms, including the Procurement, Choice and Competition Regulations No.2 (2013), and conditions in Monitor’s provider licence (see section 3.6 below).

The PRCC were grouped around four areas: obligations on commissioners, co-operation and agreements, conduct of individual organisations and mergers and vertical integration. There were ten principles, and each principle was supported by a rationale, summary of expected behaviour/action and rules.

Whilst CA 1998 prohibits anti-competitive behaviour, and abuse of dominant market position, the tenor of the PRCC was that both competition and co-operation were desirable, and the PRCC took other concerns into account in addition to competition. In some aspects the protection of competition was blunted. Various principles addressed the need to ensure a competitive environment. Commissioners were required to commission services from the most appropriate providers (principle 1), commissioning was required to be transparent and non-discriminatory (principle 2), patient choice was required to be promoted (principle 5), commissioner/provider agreements should not restrict choice against patient and taxpayer interest (principle 6), promotional activity was encouraged (principle 9) and mergers should

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not restrict choice and competition against patients’ and taxpayers’ interests (principle 10) (Department of Health, 2010e). However, in addition to addressing competition, the PRCC also emphasised other considerations, some of which related to co-operative behaviour. Organisations were expected to co-operate to ensure service improvement and seamless and sustainable care (principle 4). Within the rules of this principle NHS bodies were reminded of their statutory duty to co-operate, and that they should co-operate to maintain patient safety and improve quality of care, ensure a seamless patient experience regardless of organisational boundaries and ensure service continuity and sustainability. They were also reminded that they should share best practice.

In relation to those principles which protected and promoted competition, the detailed rules in the PRCC provided important caveats. Decisions regarding mergers were not to be considered simply in relation to the protection of choice and competition as they would be in a market, but also in the light of patients’ and taxpayers’ interests such as whether they will ‘deliver significant improvement in the quality of care’ (principle 10).

The PRCC were subject to two sets of revisions after they were issued (March 2010 and July 2010), both occurring before the start of the fieldwork in June 2011. A substantial change in the PRCC was the inclusion of two new principles (numbers 6 and 7), both of which sought to protect choice and competition, and incorporate some aspects of CA 1998. Principle 6 emphasised the need to ensure competition and choice was not restricted against taxpayers’ and patients’ interests, in line with the provision in CA 1998. Essentially this principle aimed to prevent commissioners and providers reaching agreements which reduced choice and competition, for example a group of providers agreeing to refer patients to a single provider. Principle 7 also sought to promote competition by ensuring a diversity of provision. It stated that providers should not ‘unreasonably refuse’ to supply a service where this restricted choice and competition.