03 October 2022

Introduction and Background

The NHS Provider Selection Regime (“PSR”) was first proposed on 11 February 2021 in a consultation published by NHS England. On 21 February 2022, the Department of Health and Social Care (“DHSC”) released a supplementary consultation building on the consensus of the February 2021 consultation and expanding on the detail of the proposal.

The proposal was to replace the existing healthcare procurement rules with a new set of rules for arranging healthcare services in England. The existing rules stem from s75 Health and Social Care Act 2012, the National Health Service (Procurement, Patient Choice, and Competition Regulations 2013) (No. 2) (“PPCCR 2013”)), and the Public Contracts Regulations 2015 (“PCR”), as applicable to certain healthcare services.

The powers to establish the PSR are contained in the Health and Care Act 2022 (“HCA 2022”) which received Royal Assent on 28 April 2022. The relevant sections of HCA 2022 are not yet in force and will come into force on a day appointed by the Secretary of State in further regulations. As yet, there is no official word on the timing of this, but NHS England have suggested that an update will be provided shortly.

The relevant sections of HCA 2022 (when they come into force) are:

  • s80 HCA 2022 which will repeal the existing rules, in particular s75 Health and Care Act 2012 and PPCCR 2013 will be repealed; and
  • s79 HCA 2022 which contains the power to make regulations in relation to the processes to be followed and objectives to be pursued by relevant authorities (combined authorities, Integrated Care Boards, Local Authorities, NHS England, NHS Foundation Trusts and NHS Trusts established under s25 HCA 2022) in the procurement of health care services and other goods and services (for example social care services) procured together with those health services in England. These Regulations must:
    • include provisions specifying the steps to be taken when following a competitive tendering process; and
    • in relation to the procurement of all health and care services to which they apply, make provision for the purposes of ensuring transparency, fairness and compliance and managing conflicts of interest.

NHS England must publish guidance, to which relevant authorities must have regard, as it considers appropriate, about compliance with the new regulations.

DHSC’s supplementary consultation closed on 28 March 2022, however the results have not yet been published as DHSC is still analysing the feedback. A high level summary of what we know from the documents published with the supplementary consultation is set out in the following.

Aims of the PSR

The overarching aim of the PSR is to move away from the expectation of competition in all circumstances and towards a more flexible and collaborative approach across the health and care system.

It proposes a flexible process for decision-makers to follow when selecting healthcare service providers and establishes simpler procedures to reduce the time, bureaucracy and cost associated with the current regime.

While competitive tendering would continue to exist as an option available to decision makers, the regime is intended to give healthcare providers the ability to move away from this approach where existing arrangements are performing well or value to patients and taxpayers in seeking an alternative provider is limited.

The impact of the PSR

The PSR would replace the PCR for “healthcare services and public health services which are arranged by NHS bodies and local government, provided directly to individuals or patients under the NHS Act 2006 and have a direct impact in the prevention, diagnosis, and treatment of physical and mental illness”.

The scope outlined in the consultation will not include services that are less directly related to the delivery of healthcare or social care services, such as cleaning, catering, as well as the procurement of goods, such as medicines and medical devices, or consumables.

The proposed PSR mechanism: a high-level summary

The PSR regime will establish three new commissioning scenarios:

a) Continuation of existing arrangements (referred to as “Circumstance 1”)

This will be applicable where the incumbent provider is the only viable provider due to the nature of the service, or an alternative is already available to patients through other means. In such scenarios, a change of provider would be unnecessary or of no value.

b) Identifying a new suitable provider for a new or substantially changed arrangement (“Circumstance 2”).

This will be relevant when the incumbent provider is no longer able to provide the changed service and the decision-making body can provide a suitable alternative provider without running a competitive tender.

c) Competitive procurement (“Circumstance 3”).

If the decision-making body cannot identify a suitable provider or wants to test the market, it may elect to run a competitive procurement.

These circumstances will permit decision-makers a new flexibility to decide the course of the procurement process without the burden of competition.

Once the relevant circumstance has been applied, decision-makers must then follow the decision-making approach relevant to that scenario, ensuring their decisions are justified with reference to the criteria listed below.

Notwithstanding the flexibility afforded by the new regime, the PSR would include a duty to make decisions that are in the best interests of patients, taxpayers and the population. Transparency would also be an integral principle under the PSR; decisions will be made public and undergo sufficient scrutiny to ensure they are made in good faith.

The broad base of criteria that is proposed to underpin decisions made under the PSR is as follows:

d) quality and innovation

e) value

f) integration

g) collaboration and service sustainability

h) social value; and

i) opportunities to increase access to healthcare, reduce health inequalities and disparities, and promote patient choice.

Details of how to apply the circumstances set out above, the criteria and the relevant decision-making process will be set out in the statutory guidance.

Supplementary consultation

The supplementary consultation sets out further details of the proposed regime, building on the discussions that have previously taken place. The proposals focus on:

a) Scope

Primary legislation and regulations will provide criteria that must apply for an arrangement to be within the scope (as defined at paragraph 1.2). The consultation has suggested a list of common procurement vocabulary in an effort to further clarify the scope of the regime and promote understanding of when it applies.

b) Mixed procurements

If a procurement is for a requirement that contains service elements that fall within the scope of the PSR, and others which do not, the proposal is for the PSR to aply where:

i) the main subject matter of the contract is the delivery of healthcare services to individuals

ii) procuring these services under separate regimes in separate contracts would adversely impact care quality, lead to overall contract aims remaining unfulfilled, or would not be in the best interests of patients, taxpayers, and the population.

c) Threshold for “considerable change”

The proposal sets out a threshold for when a change in “considerable”. This will feed into the decision-making process for the recommissioning of a service (see the three main circumstances set out above). The threshold broadly aligns with the one that is currently used in the existing Public Contracts Regulations 2015 and the new Procurement Bill, but with some additions relating to increases in price caused by higher patient volumes or NHS tariff increases. The consistency between these measures is welcomed.

Contract variations

The proposal lists certain variations, which would not warrant the reapplication of the regime (i.e. running a new procurement procedure, or a reassessment of the methods of awarding a contract set out above). Again, this is a principle that has been borrowed from the existing law on material variation, and (subject to seeing the fully drafted provisions) is a sensible approach.

d) Patient choice

A list of stated service criteria is proposed to be introduced into the PSR regulations on patient choice. Where a provider meets these stated conditions and wishes to be an option for patients, they must be offered the NHS standard contract by the decision-making body, and the provider will be able to register it services on the electronic referral system (ERS). Decision-making bodies will be able to restrict the number of providers on voluntary lists, and may apply Circumstance 2 or 3 (noted above) to appoint the chosen providers.

e) Transparency

In line with general procurement principles, it is proposed that in each of the methods for awarding contracts (Continuation; new provider direct award; or competitive procurement) will have specified notification requirements. This is designed to ensure that decisions are transparent, which will be particularly important in circumstances when there is no competitive procurement. NHSE is consulting on whether the notices should include details of the reasons why the decision-making has taken a certain decision. In our view, this will be essential to ensure that the process is robust and credible. Without an explanation of why a certain provider has been chosen, then neither the public or alternative providers will have the necessary confidence in the system.

So where does that leave us?

We await the fully drafted Regulations, which will give clarity over the extent to which healthcare commissioners will be given greater flexibility under the new regime. What will we be particularly looking out for? The implementation of Circumstance 1 and 2, in particular, will come under the spotlight. These are the biggest departures from the PCR. For the new regime to be sufficiently robust, it will be necessary for providers and service users to be able to scrutinise whether Circumstance 1 and 2 are correctly implemented, through the use of full, clear and timely notifications. When the Regulations are published, we will provide a further update. 

If you have any questions in relation to this article, please contact Patrick Parkin or your usual Burges Salmon contact.

Article written by Patrick Parkin, Isabel Rawlings and Lizzy Marke.

Key contact

Patrick Parkin

Patrick Parkin Partner

  • Healthcare
  • Procurement and State Aid
  • Commercial

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