In this article we look at the current rules for the procurement of health and social care services in the UK, and the proposals for reform following the passing of the Health and Care Act 2022 and our exit from the European Union.
The current law
Under the current law, the procurement of health and social care services in England is primarily governed by two pieces of legislation:
- The Public Contracts Regulations 2015 (“PCR”), a set of public procurement rules which transposed the EU Directive on Public Procurement into UK law; and
- The National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 (“PPCCR”) which were made under section 75 of the Health and Social Care Act 2012.
The PCR apply to all “contracting authorities”, which include NHS bodies, local authorities and, since September 2004, Housing Associations / Registered Providers. Under the PCR if a contracting authority wishes to procure a contract for health or social care services over a certain amount (currently £663,540 over the lifetime of the contract) it must advertise it in the UK Find a Tender Service and tender it in accordance with the so called “Light Touch Regime” under the PCR. The Light Touch Regime allows the contracting authority to devise and structure its procurement process largely as it sees fit, provided that the procedure complies with the general principles of transparency and fairness to all bidders.
In addition, the PPCCR impose requirements on NHS bodies in order to ensure good practice in relation to the procurement of health care services for the purposes of the NHS, to ensure the protection of patients’ rights to make choices regarding their NHS treatment and to prevent anti-competitive behaviour.
Proposals for reform
The Health and Care Bill 2021 received Royal Assent on 28 April 2022 and became the Health and Care Act 2022. The Act provides for major reforms to the NHS, one of which is the repeal of the PPCCR and the power for the Secretary of State to create regulations to implement a new “Provider Selection Regime” (“PSR”) in its place. The Secretary of State will, at the same time, have the power to remove the commissioning of healthcare services from the scope of the PCR, which are considered to be a barrier to collaboration and integration.
The Government has also set out its proposed reforms to the PCR themselves in its Green Paper – “Transforming public procurement”. The consultation on the proposals has now ended and we are expecting the new Procurement Bill to be published in the coming months, with the new legislation being enacted sometime in 2023. One of the changes proposed is to the scope of the Light Touch Regime, which currently governs the procurement of contracts for NHS and non-NHS health and social care services falling within the list of services set out in Schedule 3 to the PCR. The Government’s response to the Green Paper indicated that the Light Touch Regime will remain – but given that healthcare services are now to be subject to the NHS Provider Selection Regime, it remains to be seen precisely which services will be covered by the Light Touch Regime under the new Procurement Bill, which services will be subject to the full procurement rules, and which services will be exempt from the procurement regime altogether.
The Provider Selection Regime (PSR)
The PSR is intended to provide a regulatory framework for the award of healthcare contracts by NHS commissioners and (in certain situations) local authorities that sits outside the formal public procurement regime under the PCR, meaning that those contracts will not need to be procured in accordance with the PCR (or its successor legislation) – giving commissioners of these services far greater flexibility and freedom in this regard.
It is not yet known precisely when the PSR will be introduced by implementing regulations – health commissioners have been told not to make future commissioning plans on the assumption that the PSR will come into effect by any particular date.
It is proposed that the PSR will apply to the following services:
- A service for the purpose of the health service in England (as defined in s.1(1) of the NHS Act 2006;
- A healthcare service which is provided directly to individuals or has an outcome directly for an individual (eg a diagnostic service);
- Services arranged by:
- Integrated Care Board (ICBs) when commissioning healthcare services for the purposes of the health services (whether NHS or public health);
- NHS England when commissioning healthcare for the purposes of the health service (whether NHS or public health);
- Local authorities and/or combined authorities when arranging healthcare services as part of their public health functions;
- Local authorities and/or combined authorities when arranging NHS healthcare services as part of section 75 partnership arrangements with the NHS; or
- NHS trusts and foundation trusts when arranging the provision of healthcare services by other providers.
Non-clinical services such as business consultancy, catering and cleaning are expressly excluded from the scope of the PSR, as is the procurement of goods and medicines. Social care services are also not intended to be covered by the PSR unless they are required to be procured alongside healthcare services that would fall under the PSR.
The new Light Touch Regime
It is anticipated that the services which are to be excluded from the scope of the PSR will fall within the new Light Touch Regime under the new Procurement Bill, meaning that they would need to be procured in accordance with that regime where the contract value is above the applicable threshold.
However, the Government’s response to the consultation on the Green Paper indicates that not all the services currently covered by the Light Touch Regime under the PCR would continue to be subject to the new Light Touch Regime under the new Procurement Bill. The Government acknowledges that some services may need to be treated differently due to their highly tailored / specialised nature, and where service user choice is important. The Government gives adult and children’s residential care, fostering and special education as examples of these. This raises the possibility of these services being outside the scope of the new Light Touch Regime and also the PSR, giving procuring authorities much greater freedom in how they go about procuring these services.
In summary, the proposed reforms set out above represent a sea change to the rules governing the procurement of health and social care services by the public sector.
The new PSR will provide healthcare services commissioners with far more freedom than they have currently when it comes to procuring and awarding contracts for these services. This will include the potential for them to roll on existing contracts at their end of their term where they are satisfied that the incumbent provider is delivering the services to the standards required to meet key performance criteria.
Services excluded from the PSR are likely to be covered by the Light Touch Regime under the new Procurement Bill. As noted above, a draft of this still awaited which will shed more light on this new regime, the precise services it will cover and the financial thresholds at which it will apply. The Government has previously indicated that once the Bill has been published it wants to implement the new legislation as swiftly as possible, so both commissioners and service providers alike will need to be in a position to get to grips with the new rules quickly, and prepare for the impact on their organisations.
For more information, please contact Kris Kelliher.