Health Care Services (Provider Selection Regime) Regulations 2023 - Motion to Approve

– in the House of Lords at 3:50 pm on 27 November 2023.

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Lord Markham:

Moved by Lord Markham

That the draft Regulations laid before the House on 19 October be approved.

Relevant documents: 1st Report from the Secondary Legislation Scrutiny Committee

Photo of Lord Markham Lord Markham The Parliamentary Under-Secretary for Health and Social Care

My Lords, the Government are committed to giving patients better, more joined-up healthcare services. To do so, we need to ensure that we have the right procurement regime so that the NHS can best allocate resources which meet the needs of patients. These regulations do that. They would establish the provider selection regime on 1 January 2024.

This House knows that the challenges we face as a country are changing, and the NHS is changing to address them—an ageing population, an increase in people with multiple health conditions, and persistent inequalities in health outcomes. We must respond to these challenges. To meet them, we need to provide an enabling and empowering framework that allows the NHS to combine the value of competition with the benefits of collaboration in the interests of patients.

In March last year, the Health and Care Act 2022 was passed. It sought to bring together NHS organisations and partners to tackle issues in our health and care system. This instrument builds on that progress. In 2019, engagement across the NHS identified that the use of the current rules on procurement presented a bureaucratic barrier to bringing NHS organisations and partners together. NHS colleagues wanted a framework that allowed them to use the right approach for different scenarios; a framework that included competition without defaulting to it and which supported the increased need for the alignment of services, including those provided by non-statutory organisations in the voluntary sector, to join up care for patients. The Government developed the legislative framework in the light of these requests. Furthermore, in June 2019, the Health and Social Care Committee also agreed that this was the right approach to

“ease the burden procurement rules have placed on the NHS, ensuring commissioners have discretion over when to conduct a procurement process”.

As our colleagues in the NHS and across the health system have emphasised, we must seek to balance a system-driven approach to planning services while recognising the importance of provider diversity for service innovation and value. That is also why my officials have worked closely with a broad range of colleagues and organisations across the system, including both commissioners and providers of healthcare services, to prepare the instrument before you today. This work has included extensive consultation. In 2021, NHS England published a consultation on the detail of the policy behind this instrument. Of 420 responses received from NHS representative bodies and individuals, 70% of respondents agreed or strongly agreed with the detailed proposals set out in that consultation. In 2022, the department published a further consultation to help inform the detail of our regulations.

Finally, we have not neglected to do the analysis of impacts associated with this regime change. Our voluntary impact assessment shows that, in the most likely scenarios, introducing this instrument will deliver savings to the NHS by reducing bureaucracy. Although it is difficult to provide a precise figure ahead of monitoring this regime, those noble Lords who have read the assessment will be aware that our central estimate suggests that savings of up to £230 million are possible. While I am on this subject, I was very glad to see that the Secondary Legislation Scrutiny Committee welcomed our consultation and voluntary impact assessment in its report on this instrument.

To summarise, the instrument reflects engagement and careful balancing to present commissioners with the right options for procurement so that they can find the most collaborative, value-add solutions that will work for patients. Engagement with providers has told us that both more collaborative approaches to healthcare—where those with services to offer can get around the table, help break down barriers and promote provider diversity—and putting a contract out to tender are valuable and need to be in the commissioner’s toolkit. That is why this instrument reaffirms the role of competition in arranging services by providing explicitly for those processes, while also providing some flexibility to commissioners to adopt a more direct approach.

As many noble Lords will know, getting the balance of a framework right to promote the best culture and behaviour on the ground is tricky. I am glad, therefore, that we have worked so closely with providers and commissioners to find and test that balance. One result of that engagement was to agree to establish an independently chaired panel which will act as a non-statutory advisory body for contested decisions made under this regime. We intend that this will help commissioners think carefully about the approach that they take to procurement, and its justifications.

Furthermore, we must ensure that the system understands these rules so that it can have the best chance of promoting the right behaviour on the ground. That is why NHS England is leading an extensive programme of familiarisation with those draft regulations and the draft statutory guidance, which is available online. Of course, legislation and guidance are only part of the story of how the new legislation will influence outcomes. That is why the department is committed to monitoring and evaluating this new regime from its implementation.

For these reasons, I am content to move these draft regulations, which, subject to the approval of the House, would bring the provider selection regime into force. I beg to move.

Photo of Lord Stevens of Birmingham Lord Stevens of Birmingham Crossbench

My Lords, I welcome these regulations. They get the NHS off the hook from inappropriate compulsory competitive tendering of clinical services but also avoid throwing the baby out with the bathwater. Open procurement will remain an option where it is in patients’ and taxpayers’ interests.

In my previous experience, there have been several problems with the way in which the accretion of UK procurement rules and the EU procurement regime have tied the hands of the NHS. We have often had to go through the motions of competitive clinical procurements for services that would quite obviously be provided only in one place and by one part of the NHS—for example, billions of pounds-worth of specialised cardiac and cancer services for which it was blindingly obvious that the Germans and Italians would not turn up and try to replace Leeds General Infirmary or St Thomas’ Hospital. These regulations make these processes honest, in that when we embark on procurements, it will be for a good reason.

A related problem is that the legacy procurement rules have tended to lead to too much service fragmentation. We have seen examples where community nursing services have had to be tendered out but core general practice services have not, so getting the community nurses and GP practices working together has been much harder. One of the fragmenting consequences of the 2012 Act was that a lot of what had previously been NHS services became local authority-procured, and so sexual health services and health visitors were operating on a different procurement process through local authorities rather than through the local NHS. The Health and Care Act 2022 and these regulations overcome that problem. The NHS will still be subject to transparent and fair procurement, but it will now be much more flexible and proportionate.

The regulations are quite complex. Those noble Lords who have read through the materials may agree that it is fair to say that they will not command the attention of the pubs and clubs of Barnsley or Barnstaple, but they will make a huge difference to the way in which care is delivered right across the country.

The five routes the Minister spoke about—the direct award processes A, B and C, the most suitable provider process and the competitor process—are conceptually all very clear, but the real-world impact will depend almost entirely on how they are applied. It is welcome to see some of the safeguards laid out in these regulations—the prior notification, standstill periods and independent review panel—but it will also be crucially important to monitor in practice when the so-called most suitable provider process is being used rather than the competitor process, how the specifications are set and how the criteria for contract awards are in practice weighted.

That is all for the implementation. The Government cannot be accused of having acted over-expeditiously on this one. The consultation first began in 2019, was repeated in 2021 and again in 2022, and we really are ready to roll. As I say, my experience in the health service was that I always tried to have in my mind the mantra, “Think like a patient, act like a taxpayer”. In my judgment, these new regulations give the NHS some better tools to do exactly that.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Labour 4:00, 27 November 2023

My Lords, like the noble Lord, Lord Stevens, I very much welcome these regulations. As he put it—in a very kind way—in essence they withdraw the wretched health Act 2012, which enforced competitive tendering on clinical services and, as the noble Lord said, was not only bureaucratic and costly but got in the way of integration and collaboration. Of course, the Explanatory Notes that go with this SI are very explicit in saying so. I noticed, though, that the Minister failed to mention the 2012 Act. In fact, the Explanatory Memorandum was just the thing my noble friend Lady Thornton used at the Dispatch Box as we sought to scrutinise the wretched 2012 Bill, which cost so much money and staff time and achieved so little.

I want to pick up one or two points that the noble Lord, Lord Stevens, raised. The first is to acknowledge that there is a huge challenge for the procurement profession. I remind the House that I am patron of the Health Care Supply Association. I understand that the provider selection regime regulations come into effect in January, but these are ahead of the procurement regulations which come into effect in October next year. It is important that the Minister mentioned the guidance and I am very glad he mentioned the work that will be done by NHS England in supporting the service implement these regulations. However, I say to him that if you are trying to work out the relationship between the 2022 health Act, the 2023 Procurement Act, these regulations and the forthcoming procurement regulations, to a procurement manager sitting in an NHS trust this can be rather complex. The more help and guidance that can be given to those professionals, the better.

The Minister may well be aware that at the same time as procurement teams have been asked to implement this big change, they are having to generate short-term savings to meet the financial pressures in-year at the moment and actually cut their department operating costs. It is a short-term saving that may have long-term consequences, particularly as investing in procurement for the long-term value we wish to see enhanced in the health service makes economic sense. I point out to the Minister the recent announcement by NHS England that it is investing £600,000 in new commercial roles to unlock £1.5 billion of savings. That is very welcome, but we should be investing similarly in local and regional procurement teams as well. It is also important that the analysis behind the £1.5 billion savings is made available in order to guide the procurement function in the areas they need to be focusing on.

What is being done to support the skills, training and development of the NHS procurement and supply chain people? Will we invest in learning and development through organisations such as the HCSA and the NHS Skills Development Network to support upskilling and developing their functions? I commend the strategic framework for NHS Commercial, published only in September, and support the establishment of academies of commercial excellence—these are good initiatives—but you also need to support the people on the ground to do the job most effectively.

The noble Lord, Lord Stevens, said that there is a good balance in the regulations, because, while we want to get rid of the bureaucracy of automatic competitive tendering, as there is clearly no point doing it, we do not want to lose the opportunity of inviting innovative companies to play a part in the health service in the future. There is an issue around conflict of interest in the new structures. He will be aware that, around the table at integrated care boards, the chief executives of the local trust will often be in membership. In these regulations, and more generally, there are rules about how you mitigate that in a competitive process, but the decisions that ICBs make will sometimes be not to go down a competitive process at all—decisions, as I understand it, that those trust CEOs can be part of. I have had a briefing from Specsavers, which says that there surely needs to be some kind of requirement for ICBs, particularly for community services, to consider proposals from non-commercial providers who can demonstrate that they can improve value, quality of care and clinical outcomes. It is there that the conflict of interest issue arises.

How will value-based procurement be driven forward? In the draft PSR statutory guidance, “value” and “social value” are two of the national criteria for procuring health services. As I understand it, value-based procurement is about looking at which product is not only cheapest per item but best for patient outcomes, quality of life and avoiding relapses or unintended side-effects. I have been championing value-based procurement because in the long term it provides better value for money and better quality of what is being procured. The Minister has kindly agreed to meet me—I am grateful for that—but a statement from the Government on the importance of value-based procurement would be helpful.

Finally, I will ask the Minister about health technology. How far does he think these regulations support our vital health technology sector? I have been in discussions with ABHI about the potential that health tech offers the UK—it is fast—but there are worries that, in the new world, there are issues limiting the ability of many of these companies to be competitive, some of which are clearly to do with regulatory uncertainty. He will know of the issues with the MHRA’s performance. I pay tribute to the MHRA, but there is no doubt that it has resource issues—both money and staff—when getting things approved where they need to be approved. Coming back to Brexit, surely one of the advantages of having an independent regulator is that we can be seen as a place that, for medicines or medical devices technology, has a first-rate regulator that takes these processes through as quickly as possible. The problem, as he will know, is that there has been a blockage inhibiting innovative companies, so we really need to do something about it.

Overall, I warmly welcome the regulations. I thought that the Minister could have acknowledged a little more the failings of the 2012 Act, but we will pass on that. I certainly very much support the general thrust, but the procurement function in the health service needs every support it can get in understanding the new architecture and implementing it fully.

Photo of Lord Allan of Hallam Lord Allan of Hallam Liberal Democrat Lords Spokesperson (Health)

My Lords, this is an altogether weightier statutory instrument than the previous one we discussed, running to many pages and with lots of interesting new acronyms. The noble Lords, Lord Stevens and Lord Hunt, have set out effectively the case for why the changes are necessary, in a kind of Birmingham pincer movement as I stand here in the middle. I also have ringing in my ears the comments of the noble Baroness, Lady Merron, on the previous statutory instrument, when she talked about a particular instance where procurement went wrong. We need to have that in mind.

It is worth putting a marker down now on the potential impact. We are talking about many billions of pounds of expenditure; how many billions is an interesting question that we will come to in a minute. The potential benefits are hundreds of millions of pounds of savings, as the noble Lord, Lord Stevens, pointed out, but we must acknowledge that there is a potential downside risk, which could be millions in fraud and legal fees. It is worth spending a moment as we debate the instrument to make sure that everything is being done to ensure that we get the upside but minimise the downside.

My first question is around the integrated care board members and conflicts of interest—something that was raised by the noble Lord, Lord Hunt—particularly where they are not in a competitive tender situation, where we are talking about direct awards and most suitable providers. Once that decision has been made, there are some valid questions around what that means. Candidly, we do not want to create 42 ICB VIP fast lanes where people can talk to the ICB and somehow get themselves out of the normal procurement process when they should not be out of it. Therefore, there are risks at that level; we must be conscious of that. Given the roles that ICB board members have, and since these are local entities, it is likely that an ICB board member will have relationships with people in the local community who deliver services that will be subject to the tender.

My next question is about the variability and the number. It is flagged in paragraph 4 of the impact assessment that the expenditure over a period was

“estimated to be between £75bn-£380bn”.

I am not great at maths but that is quite a significant variability. It talks about how the £75 billion concerned procurement processes that went through the EU process and were notified, while the long tail of the other £300-odd billion concerned other procurements that were not notified. However, we should be able to get better information than that. One of my requests for the Minister comes with a suggestion: there should be a machine-readable database somewhere where all health and care procurement can be analysed and studied. I know that the department intends to do that but, actually, the best way for us to understand that we are getting good value for money is this: if anyone, whether a researcher at one of our excellent universities such as the University of Birmingham or another interested party, wants to be able to look at NHS purchasing data and can analyse it, they should be able to do so.

This seems to me to be a reasonable request to make of government: that information about procurement—including the status and how the contract was awarded, whether it was competitive or elsewhere—is publicly available and analysed by any third party who chooses to do so. The Government would benefit from that, as would individual NHS procurers, as people will analyse those patterns of purchasing and perhaps suggest something that they had not thought of themselves where they may be able to make more savings.

The final area that I want to cover is one that the noble Lord, Lord Hunt, touched on: skills in procurement. I suspect that all of us who follow healthcare have seen the Health Service Journal article in October that talked about integrated care boards in the south-west of England paying £1.7 million in compensation for a procurement failure. Obviously, that is happening under the existing regime, but it is a strong warning sign that we need to heed what happens when we get this wrong. Again, the impact assessment helpfully talks about the litigation process and the different costs that may be assigned to each area. I think that we tend to underestimate these things. If anything, once you get into a litigation process, the pressure to settle and resolve it means that money is often thrown at the problem. This could mean a significant cost to the NHS if we get it wrong. The fact that we have a new process means that new risk is being introduced. What is being done around training? That comes in two aspects. The first is general awareness raising, which applies to everyone. Certainly, I have had experience in business of working for an American company where you are subject to the Foreign Corrupt Practices Act, meaning that you go to prison if you try to bribe a member of a foreign legislature.

We did not direct the training for that simply to the people who worked in public policy; every single person who worked for the company did a short training module that helped them understand the legal risks, not only to the company but to themselves, of breaking the rules. Sometimes you can break the rules with perfectly good intentions without doing anything deliberate. The same applies here: there should be some kind of generalised training available to people who are working in the health and care system so that, even if they are not involved in procurement, they understand—again, looking at the case in the Health Service Journal—that the casual conversation they have with their friend who happens to be a supplier could later turn out to be something that is material in a litigation process. That generalised awareness is important.

The second piece that the noble Lord, Lord Hunt, referred to is procurement professionals, including how we make sure that those whose job it is to spend large amounts of money every day are up to speed with the new systems. I do not think that we can overinvest there; the tendency is always to underinvest. Again, a generalised complaint I have heard is that managers in health and care feel that they are so pressurised in just getting on with the day job that training is a luxury they will do tomorrow, tomorrow, tomorrow. In this case, if we are introducing a new system from 1 January, the training needs to be happening now and not put off until tomorrow. I hope that the Minister has something to say on that.

I do think that this change should go ahead. I recognise that there are savings to be made—again, the noble Lord, Lord Stevens, has far more experience than I of why that should be the case; I am really pleased that he has brought it to this debate—but there does need to be transparency. The report shows us why the current state of play, where we cannot get our hands around NHS and care procurement today, may itself be inadequate. That should not be the case; the data should be collected and made available in a machine-readable way such that there is full transparency. It is absolutely critical that we get ahead of this question of training and ensure that these procurement processes are not just fair but are seen to be fair and are robust if they are challenged, which they will be. The suggestion from the noble Lord, Lord Hunt, of a list of measures that we might take would be a very good start for that.

Photo of Baroness Merron Baroness Merron Opposition Whip (Lords), Shadow Spokesperson (Health and Social Care) 4:15, 27 November 2023

My Lords, I bring more cheer to the Minister by adding our support for these regulations—I thank him for bringing them before your Lordships’ House today—because the provision of this statutory instrument is to define and give relevant authorities greater flexibility to procure healthcare services. This will, I hope—I know that other noble Lords also hope this—benefit patients and service efficiency by better integrating services. Like the Minister, I am pleased to note that the policy behind these regulations has been informed by both a voluntary impact assessment and an extensive consultation that received 70% support from 420 respondents; this is welcome news.

It is the view of the Opposition that the NHS should be the preferred provider of commissioned healthcare services, not least because it embodies not just a public service ethos but efficiency, resilience and democratic accountability. It is also the case, particularly in the short term, that, in order to treat NHS patients and bring waiting lists down, the independent sector has an important role to play where a service cannot be provided by a public body because the capability or capacity just is not there.

Your Lordships’ House may recall that, when the Health and Social Care Act2012, which my noble friend Lord Hunt described as “wretched” on several occasions, went through its various stages in Parliament, these Benches argued that relevant authorities should have the appropriate flexibility to award contracts, which was something for which the Act did not provide. As my noble friend identified, the competitive tendering requirements of that Act did not serve the NHS, patients or the public at all well. Therefore, where we are today with the provider selection regime, which does allow for this, is as long overdue as it is welcome, as is seeing that good sense, flexibility and efficiency will now apply.

During the passage of the Health and Care Act 2022, these Benches also argued for the legislative provision to be made as outlined in these regulations. Although the Government did not take that on at that time, I am glad that the benefit of hindsight has prevailed and that the Opposition’s view, which was set out during the course of that debate, has now been set out in these regulations.

As the noble Lord, Lord Stevens, illustrated so well, these regulations recognise that it would not be an efficient use of resources in certain circumstances for relevant authorities to use competitive tendering, but that there continues and needs to be a procurement process that relevant authorities can and should use. As the Minister will be aware, concerns have continually been raised about the impact of the current procurement framework, which often places additional burdens on community and mental health providers in particular, where services have been much more likely to be subject to expensive and disruptive competitive tendering processes. I therefore welcome the alignment of the PSR’s aim with the spirit of collaboration within health and care systems, as well as the offer to commissioners and providers of a clear and transparent process by which procurement decisions can be made.

The PSR will offer a consistent model for both NHS and local government bodies to follow with regard to health services, and I hope that this will support local relationships and decision-making, as well as integrated care. However, it is important that national bodies engage with all organisations that will be subject to the new regime in an effort to smooth the transition to a new procurement framework.

I ask the Minister for more detail on how NHS England and the department will review the application of the PSR over the course of the next year to ensure that real-time feedback on the operation of the regime can be collected, as well as evaluated and, importantly, acted on as swiftly as possible. I make this point as it will be crucial to capture feedback on whether any difficulties arise for commissioning bodies in selecting which procurement process is the most appropriate across various different scenarios and circumstances, and whether any challenges arise for providers in the application of their approach.

My noble friend Lord Hunt emphasised the need for support, training and guidance—something that other noble Lords also emphasised. This is a point that the Minister would be well advised, as I am sure he is, to pay absolute attention to, so that we support those who work in NHS procurement and the NHS supply chain, not least because the combination of these regulations, other regulations and other Acts is something of a complex field. We should support and guide those who make the interpretation and the application, and, if necessary, adjust in real time any of that training, support and guidance. More information from the Minister about how this will be done will be extremely welcome.

I am aware that NHS Providers has worked with membership bodies for providers in the independent and voluntary sectors, the department and NHS England to make the case for the new regime to include a challenge function for decisions made by commissioning bodies to be reviewed and scrutinised if appropriate. Although the PSR panel does not have legally binding powers, does the Minister consider it appropriate to give providers some opportunity to challenge the application of the regime and raise legitimate concerns where appropriate?

As I said at the outset, I am glad to provide our support to these regulations. I hope that we can look forward to great improvements because of them in the years ahead.

Photo of Lord Markham Lord Markham The Parliamentary Under-Secretary for Health and Social Care

I thank noble Lords and welcome the support offered. I appreciate their understanding on my lack of comments on 2012 and all that. I also appreciate having the vast experience of the noble Lord, Lord Stevens, and wonder whether he could be here so that I can phone a friend on some of the questions we have, because I fear he may be far better qualified to answer a lot of them. I will take home the “Think like a patient, act like a taxpayer” mantra.

I think we all agree that, although this is welcome, it is complex. We are trying to set out an approach, knowing that really we want sensible people to act sensibly around the table and to co-operate with each other. We all know that it is very hard to put a rules-based system around that. As all noble Lords have mentioned, the training of staff in that is vital. I have some personal experience, as I know the noble Lord, Lord Hunt, does, of many of the people in this space, and I have to say that they are very good people. My experience is obviously much more on the national level, but clearly it needs to be taken down to the local level as well.

I believe we are publishing the strategic framework for NHS commercial tomorrow. That tries to set out the importance of commercial capability, and the investment and critical skills required. It will be accompanied by a programme that sets out what upskilling needs to be done and a programme, with support from the Crown Commercial Service, that I hope we can effectively use to upskill in the way that we all believe is necessary.

To answer the point by the noble Baroness, Lady Merron, whenever you are trying to put in place a value-based system, for want of a better word, in terms of culture, you have to have those guard-rails around making sure that there are appeals processes and lessons learned. My understanding of this independent panel is that companies or providers that feel they have been wrongly excluded will have the opportunity to appeal directly. I have challenged them quite strongly on that, given my experience in this space, and asked how much a company will really want to be awkward. Often you know that if you are being awkward and challenging, that might make life more difficult for you in future, so there are some difficulties involved there. A lot of companies often ask whether that challenge is really worth it. Getting that right, with the panel, is vital, so that it is welcoming and open and that, as the noble Baroness, Lady Merron, says, there is that “lessons learned” kind of constant review. At probably the year stage, we will look to understand how it has gone so far and what we can learn from it.

Having been involved in quite a few start-ups, I am also very aware of the point the noble Lord, Lord Hunt, made. Time really is money in these things; a regulatory process that is opaque or cumbersome is not very helpful. I acknowledge some of the issues the MHRA has had. That is what the £10 million investment behind it is trying to address. I know it is very much looking to act on this.

A very good example of that is what the MHRA is doing in the point-of-care space. One Brexit advantage that I have seen is the ability very quickly to set rules around point-of-care medicines, particularly around when you take a biopsy and then provide an individual patient with treatment according to that for a certain cancer. Clearly, if you follow the strict rules, you would have to be regulating that every single time, and that just would not work. The MHRA has introduced a sensible framework that tries to adopt an umbrella-type approach. I know that the MHRA understands the possibilities in this space and really wants to use this as an opportunity to show that we can be fleet of foot and leaders in that space from it all.

On the point raised about trusts sometimes having a conflict and the example provided by Specsavers, that is what the panels are supposed to be there for. It is important—I will check this out—that, in the rules, we are guiding the 42 ICBs on how they should manage some of those conflict situations and when they should put people aside. We have all managed it in our corporate and public lives, and there are rules about it. Just as we put the emphasis on noble Lords to declare interests and so on, clearly we must make sure that there are similar rules for the trust CEOs, but it is a point well made that we need to pick up. I look forward to going into some of these issues much more when we have the value-based procurement meeting shortly.

On how we can make the analysis available, I have seen a tool that the NHS has recently introduced which is very good in terms of being able to drill down straightaway and provide that analysis. That is a good base point. I will find out some more about how that needs to be tweaked, but there is a basic premise about making that information available—that is a sensible move. On the point made by the noble Baroness, Lady Merron, it should be used to arm providers with the ability to challenge the panels.

I welcome the input. Such is the knowledge base around this, I am happy to suggest that, in nine months or one year’s time, we have that round table where I will appreciate some of the skills here. We can ask how it has gone down so far. We can do that through a debate, but it is probably better done through a round table, so I would like to propose that so we can learn the lessons.

In summary, I welcome the points made and that noble Lords believe that this is the right direction, although it needs work along the way to make sure it stays going in the right direction and does what we hope it does. With that, I commend the draft regulations to the House.

Motion agreed.