NHS England must rethink outsourcing after contract shambles says PAC

REPORT SUMMARY

NHS England’s outsourcing of primary care support services to Capita Business Services Ltd (Capita) was a shambles.

Its short-sighted rush to slash by a third the £90 million it cost to provide these services was heedless of the impact it would have on the 39,000 GPs, dentists, opticians and pharmacists affected.

Capita recognises that the service it provided was not good enough. Its failures have not only been disruptive to thousands of GPs, dentists, opticians and pharmacists, but potentially have also put patients at risk of serious harm.

We acknowledge that Capita has now apologised for its mistakes and will hold it to its commitment to improve services over the remaining life of the contract.

Neither NHS England nor Capita understood the service that was being outsourced, and both misjudged the scale and nature of the risks. They ignored many of the basic rules of contracting, and, once problems emerged, did not do enough to stop the issues from getting worse.

Rather than focussing on improving the service, NHS England and Capita have spent too long disputing basic elements of the contract and are still in disagreement over future payments.

It is clear that NHS England ignored the many lessons this Committee has constantly highlighted about how to outsource effectively and benefit both users and taxpayers. 

COMMENT FROM PAC CHAIR MEG HILLIER MP

“NHS England made a complete mess of what could have been a responsible measure to save taxpayers’ money.

“It is clearly unacceptable that poor procurement should put patients at risk of harm and undermine the ability of GPs, dentists, opticians and pharmacists to do their jobs.

“NHS England needs to rethink its approach to outsourcing and invest time in getting its contracts right.

“That means listening to concerns from the frontline and properly considering the impact changes will have on services and public health. But it also means establishing an effective relationship with the supplier.

“The dismal fall-out here, with NHS England and Capita squabbling over details that should have been agreed in 2015, tells its own sorry tale.

“As we have seen time and again, take away the pillars of best practice and there is every chance a contract will collapse – at the expense of taxpayers and service users.

“Central government must show leadership and ensure Government departments and agencies do the job properly.”

CONCLUSIONS AND RECOMMENDATIONS

NHS England’s outsourcing strategy led to a short-sighted rush to achieve savings, heedless of the impact on patients or practitioners. NHS England saw primary care support services, which were delivered across 47 local offices and managed under local arrangements, as ripe for transformation. But NHS England focused on maximising financial savings quickly, at the expense of service quality, without any piloting, effective user consultation or time spent getting the contract right. NHS England paid only lip service to engagement with doctors, dentists, opticians and pharmacists on service changes. Stakeholders, such as the Optical Confederation and the Local Optical Committee Support Unit, told us that NHS England and Capita had not adequately involved practitioners in designing services to test whether plans would work. They said that they had raised concerns about service changes, but had been ignored. NHS England accepts that some of its previous engagement with stakeholders has been only “lip service”.  Additionally, performance indicators used for measuring Capita’s performance were focused on speed and efficiency, rather than providing a quality service. Performance indicators did not cover all the services that Capita was required to deliver and were not agreed from the start of the contract. It is deplorable that NHS England did not engage with practitioners and was content to expose primary care practitioners to the risk of poor service performance in order to make savings.

Recommendation: NHS England should assess the likely impact on users of a service before outsourcing and should update the Committee by July 2019 on how it is involving stakeholders at an earlier stage in changes to the service, for example by seeking and responding to their views on transformation plans and getting them involved in pilots.

Neither NHS England nor Capita properly understood the scale of the challenge before agreeing the contract. NHS England wanted to reduce its costs by 35% from the first year of the contract at the same time as implementing a range of modernisation measures. This was a high-risk approach, particularly as the service was not well understood and was being outsourced for the first time. There was poor data on the volume, cost and performance of services and not enough was known about how local services were working and in particular what was working well which could have informed the transformation. But despite this, neither NHS England nor Capita did enough to gather the necessary information, assess the risks or test whether Capita would be able to deliver the service to a good standard. The short transition period between Capita signing the contract and making changes to the service meant there was no time to identify the many unknowns.

Recommendation: NHS England should report back to us by January 2019 on how it will improve its future contracting, including, for example, by understanding what is already working well locally, collecting sufficient data on the services being outsourced, setting appropriate performance measures and ensuring that service changes are sufficiently piloted.

NHS England incentivised Capita to close offices as quickly as possible but did not have the mechanisms to stop the office closure programme when it proved to be a costly mistake. Capita expected to make losses of £64 million in the first two years of the contract, in order that NHS England could meet its objective to reduce its costs. Capita therefore had a financial incentive to close primary care support offices and reduce staff as quickly as possible, in order to minimise those losses and, between December 2015 and November 2016, it closed 35 of the 38 support offices it inherited. The office closures resulted in the loss of local expertise and meant that Capita did not have the resources needed to deliver the services required. NHS England raised concerns about the office closures in May 2016, too late in the day and it did not have the contractual mechanisms to stop Capita from going ahead with its plans. Capita now acknowledges that it was a mistake to carry on closing offices and that in continuing to do so “We just made the problem worse as we went along … we should have stopped.” As Capita needed to spend more than it expected to support failing services it has in fact made a loss of £125 million in the first two years and accepts that it is unlikely to make a profit over the remainder of the contract. Capita has told us that it will devote the resources required to ensure that it delivers the contract and we will watch this closely.

Recommendation: NHS England and wider government contractors must ensure that basics, such as appropriate mechanisms to intervene in service changes if they do not go as planned, are part of any contract.

Failure to deliver services led to disruptions and extra costs for doctors, dentists, opticians and pharmacists. Capita’s failures to deliver back-office functions resulted in approximately 1,000 GPs, dentists and opticians being delayed from working with patients, and some lost earnings as a result. The failure to update ‘performers lists’ (confirmation that practitioners are still suitably qualified to practice) also potentially compromised patient safety in cases where practitioners should have been removed. Stakeholders also raised concerns about missed and inaccurate payments to practitioners, a backlog of half a million patient registration letters and failures to deliver medical supplies. 

Recommendation: NHS England should write to us by January 2019 setting out what they have done to compensate primary care practitioners for the disruption to the service.

Service failures following the outsourcing put patients at risk of serious harm. Delays in moving medical records impacted patients’ ability to access necessary care, and 87 women were incorrectly notified that they were no longer part of the cervical screening programme. A review by one of NHS England’s Medical Directors in December 2016 noted that the failures had the potential to put patients at risk of serious harm. NHS England is currently assessing an incident to identify whether there has been actual patient harm.

Recommendation: NHS England should update us on whether there is evidence of any harm to patients, by January 2019.

A lack of collaboration between NHS England and Capita resulted in them taking too long to address the issues with the service. Capita’s chief executive noted that partnership working is key to delivering contracts successfully. For example, he cited that there should be strong alignment between objectives and performance measures, and an environment in which either party could challenge the other about performance measures and delivery. However, some two and a half years into the contract, basic elements of the contract between NHS England and Capita are still not agreed. For example, they have still not agreed on all the performance measures or how to calculate payments owed to Capita. NHS England recognises that it has not always been having the right conversations with Capita. There have recently been improvements in their partnership working, including the introduction of senior-level meetings that we heard are held on a monthly basis since March 2018. But it has taken over two and a half years to put in place these top-level meetings.

Recommendation: NHS England and Capita should write back to the Committee by January 2019, showing whether changes to their partnership working has improved the relationship, and whether they have agreed outstanding areas of difference.