Changing Procurement - The New Provider Selection Regime for Healthcare Services
The way healthcare services are procured by NHS commissioners is about to change and will have important implications for suppliers.
Background to Procurement
The procurement of certain types of healthcare services will no longer be subject to the Public Contracts Regulations 2015 (PCR) but will be contained under a new Provider Selection Regime (PSR) under the scope of the Health and Care Act 2022. This is a radical departure from the current approach to commissioning healthcare services and changes the expectation for healthcare services to be subject to competitive tendering.
What is the PSR?
The PSR is a new set of rules for arranging public healthcare services in England. It aims to promote collaboration, patient choice and flexible decision-making. It is intended to replace the current procurement regime to enable effective existing service providers to continue their arrangements, as well as implementing new parameters for selecting new healthcare service providers. The aim is to move away from the expectation of competition in all circumstances.
What Healthcare Arrangements Fall Within the Scope of the PSR?
Examples of healthcare services that will be subject to the PSR include dentistry and orthodontic services, ophthalmologist services, physiotherapy services, services provided by medical laboratories, as well as medical practices and hospital services.
Pharmaceutical products and IT services will continue to be covered by the procurement regime as they are classified as goods and non-clinical services.
A full list of qualifying services can be found on the Government website on the basis that they are:
- designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness (Section 1(1) of the National Health Service Act 2006)
- directly linked to individuals
- arranged by integrated care boards, NHS England, local or combined authorities and NHS trusts and foundation trusts
While social services will normally remain subject to the PCR, some mixed procurements, that relate to both healthcare and social care services, can be conducted within the PSR.
How Will the Proposed Rules Work?
Whenever contracts for healthcare services are being awarded for the first time, changing or coming to an end, the NHS and local government decision-makers will need to consider the following:
- how to best continue existing service arrangements within NHS England
- how to identify new providers or substantial changes to existing service provisions
- whether competitive procurement is necessary when there is more than one suitable group or provider available
Some of the most significant proposed changes are as follows:
- There will be a number of circumstances in which the commissioner can roll over existing arrangements (for example, where they are working well or where there is no realistic alternative and the services are not changing), rather than running a competitive tender. This may be good news for incumbents but make it more difficult for new suppliers to enter the market or to give a second chance to suppliers who narrowly missed out on a previous tender.
- Corporate takeovers are less likely to fall foul of procurement restrictions, a common problem because of the rules relating to change in the identity of a supplier.
- Greater clarity regarding the changes that can be made to a healthcare contract without triggering an obligation to consider running a procurement (for example, it is proposed that contracts can change in value by up to £500,000 without triggering an obligation to consider a new procurement).
- A change to the remedies regime. In most cases, there will still be a requirement for commissioning authorities to publish a standstill notice advising of its intention to enter into a contract. However, while the final rules have not yet been published, we understand that the jurisdiction of the UK courts together with the remedies of contract ineffectiveness, fines and damages for procurement breaches under the PCR will be replaced by an internal review procedure. In our view, from a legal perspective this is a significant weakening of remedies particularly when coupled with the fact that commissioning authorities will have a wide discretion as to how they apply the decision making criteria to award a contract. Whilst there are potential benefits in terms of reducing delays and costs involved in court challenges for both commissioning authorities and suppliers, the review will need to be seen to be rigorous and impartial.
What Happens Next?
The final details of the PSR will be published following a consultation process that took place earlier this year and will be set out in regulations. The PSR was expected to come into force soon after the establishment of the integrated care boards, but has yet to happen.
How Can VWV Help?
If you intend to bid for healthcare contracts in future, you will need to keep on top of the new rules and guidance as and when they come into force. VWV Healthcare Lawyers regularly advise, and provide training to, healthcare professionals on procurement processes and the related challenges together with other aspects of healthcare provision.