With headlines proclaiming the increasing strains that the NHS is under, the latest research from healthcare consultancy LaingBuisson argues that there is a mass of opportunity for innovative and cost effective healthcare providers across all sectors – public, private and voluntary – to step up to the challenge of offering a range of specialist services in new ways, away from traditional hospital settings.

According to 'Primary Care & Out-of-Hospital Services', published today, the latent market for reconfigured services could be £10-£20bn a year, involving the expansion of home healthcare, telehealth and telecare, disease management and above all 'whole pathway' commissioning with the prospect it brings for the first time of effective integration of primary, community and hospital services alongside social care as well.

The report argues that the UK healthcare system has to step up the pace of change if it is to build on the success claimed in meeting the first Nicholson Challenge to release efficiency savings of £15-20bn between 2011 and 2014. The NHS has now to tackle the spectre of a £30bn funding gap set to hit by 2020/21 as a result of the growing gulf between flat funding and rising demand driven in the most part by an ageing population. While there may be limited further scope for efficiency savings in terms of containing NHS pay rates and reducing administrative costs, both 'easy wins' to date, LaingBuisson reports that the prospect of further driving down tariff rates in the face of a number of NHS Trusts running into financial difficulties is much less likely. Therefore NHS productivity initiatives will in the future have to be more focused on reconfiguration of services away from hospital based care towards new kinds of services in primary and secondary care settings and people's own homes.

What's more, adding in a new sense of urgency, is the proliferation of stories focused on the immense strain that NHS Trusts are under – enough to declare major incidents status – due to high volumes of A&E demand from people with long term conditions who 'could' with the right planning be treated elsewhere.

The report identifies outcome-based, whole pathway contracts as potentially the most important driver of the sort of NHS reconfiguration which could deal with the root of these chronic problems in the medium to long term.

NHS-logoIncreasingly adopted by Clinical Commissioning Groups (CCGs), early examples include the ground-breaking Cambridgeshire and Peterborough contract for a range of older people's services (£800m over 5 years), and similar tenders run by innovative CCGs in Oxfordshire for older people's services and mental health and most recently Croydon where the CCG was reported in November 2014 to be working with Croydon council to develop an integrated health and social care contract for older people's services estimated to be worth £1.7bn over ten years. In essence, these outcome-based whole pathway contracts incentivise the prime contractor, or an alliance of contractors (whether public or private) to achieve a level of integration of services that has proved so difficult for non-contested public services to achieve. Another major example is the spate of MSK (musculo-skeletal) contracts that have been let. These also cross traditional administrative boundaries, and aim seamlessly to co-ordinate all services from GP referral, including community health services (e.g. physiotherapy) and surgical treatment where necessary in hospital. Independent sector providers have enjoyed considerable success in bidding for these, including Bedfordshire CCG's £120m five-year contract announced in September 2013, with Circle as lead provider, as well as the more recent joint venture between CSH Surrey (a public sector mutual spin-off from the NHS) and Bupa announced in September 2014 to provide a similar MSK service for NHS Coastal West Sussex valued at £235m over five years.

Any reconfiguration, however, requires elimination of legacy costs – which raises two major challenges. First, the challenge for incumbent NHS acute hospital trusts and their staff, who will need radically to modify the scale of their activity and the processes by which patients flow in and out of their hospitals. Second, and arguably more important, is the challenge to politicians of such change. The policy of migrating services out of hospitals and into community settings has to date not been well articulated to the general public with politicians remaining wedded to support for their local hospitals. In order to facilitate genuine cost saving and quality enhancing reconfiguration, there needs to be a clearer vision and more highly developed narrative about the benefits of decommissioning hospital capacity for politicians to subscribe to.

Author of the report, and LaingBuisson CEO, William Laing said:

'Rather than criticising the tendering of NHS clinical services, we ought to be welcoming it – particularly the large scale, outcome-based 'whole pathway' tenders which more and more pioneering commissioners are issuing. They offer a genuinely dynamic approach to service integration – across both health and social care – where the traditional NHS 'command and control' model has lamentably failed to make progress over the last 40 years.

'What is particularly encouraging is the emerging maturity of this market, in which both public and independent sector providers are competing with each other on a reasonably level playing field, forming an re-forming consortia in order to find the best combination of skills from whichever sector they are located in.

'It is too early to tell whether these contracts will deliver what they promise, but indications are encouraging that they will prove to be a 'game changer' for the NHS. They will be certainly be subject to intense scrutiny as they progress.'

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