Robert Breedon: Governance arrangements in new care models - the legal viewpoint

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Robert Breedon, Partner and Head of Health and Care Sector at Gowling WLG, explains the legal challenges of governance and accountability in partnerships between organisations.

This presentation was recorded at our conference on Governance and accountability in new care models on 8 February 2017.


I was slightly worried about standing up on a topic of governance as a lawyer, because I know there’s often reactions and there to the legal profession, what does a lawyer know about all these things and then Pearl came out with good governance and the law go together, so thank you for that justification. I’m going to try not to be too toady in the usual sense of the word. Just to explain where I’m taking you, first of all we’re going to look very briefly at the organisational structures and options that are up there and then just reflect on some of the legal considerations and issues that come out of that.  Why am I going to bother with organisational structure – because as Ben has pointed out in his report, what we’re seeing is a desire on the part of commissioners in the health and care sectors to move budgets and accountability across to either a larger provider or group of providers and from the lawyer’s perspective that bumps into, well how to do that then?  What are the underlying structures that allow you to move the budget, the risk and the accountability? And that’s coming through in three or four different types of organisational form but let me stress at the outset that the organisational form is not the end game.

The end game is about the learning sets that Ben mentioned. It is about achieving the opportunities that Ben mentioned at the outset. The organisational form or the structure is not the end result. It should be there to support and underpin what you’re trying to do as a group of commissioners and providers together.  If you get the wrong organisational form and the wrong contractual structure, I think that can cut across and create the wrong incentives, if you get the right one it can help you through the achievement of your objectives, but I’m very clear it is not the ending itself, and I don’t lay that claim.

So, we’ll look initially at some of the options and then we get into some of the legal consideration. Here’s an advert for two The King’s Fund publications; the first from Rachel Addicott back in November 2014 and that goes into some detail of just some of the options we’re going to be looking at; the lead provider model, alliancing and so on, so if you want to understand a little bit more about that then Rachel’s paper goes in and gives you some of the case studies around that and then Ben’s recent paper from last autumn around some of the governance issues that we’ll touch on in this session.

But what I am going to look at, to look at prime provider, prime contractor integrator; sometimes those terms are still used interchangeably, so I’ll just give you my thoughts on that. The provider collaboration model or contractual joint venture, corporate vehicles, in vogue, possibly out of vogue at the moment, alliancing which we’re seeing increasing interest in and one of the options that’s in Ben’s paper and is clearly on the cards, I’m not going to get onto this day, it’s around merger and what we would suggest that, when we’re asked to work with groups is when looking at these different options, work out what it is you’re trying to do, what’s the objective and which of these models then best supports it? So the old adage of form follows function and you might do an options appraisal against these and you might ask yourselves in light of what we’re trying to achieve what are the important criteria that we’re going to assess these models again.

So, examples might be, which of these will best deliver an improvement in the quality of the care? Which of these best allows us to engage with service users and patients? Which of these is best able to allow us to engage with our frontline staff?  How are we best to achieve outcomes? How can we drive innovation?  Which of these is easier to implement?  Actually, which is, it is an important factor.  Which of these allows us to move at the right pace?  How do we achieve the pace of change we want to?

I think increasingly we’re throwing into the debate, what’s the capability of the individual organisations around the table to actually work in some of these different structures? So, what are my observations on the lead provider model, is the lead provider needs to have the capability and the capacity to manage the supply chain and to manage complex contractual relationships which is traditionally not something that a lead provider organisation has done. So on paper the model looks quite simple, in practise it’s proving to be quite difficult.

And you might from a commissioners perspective, when you look at some of these different models, you might have concerns about dominant providers and monopolistic behaviour and so on. So, we’ll have a quick look as I say, at the different options and then we’ll get into some of the legal considerations.

So the first one we look at is prime contractor model; so contracted it’s quite simple from a commissioner’s perspective, I have a contract with a single entity, it has to be that way because the NHS standard contract doesn’t allow you at the moment, to sign up to arrangements with more than one provider. So, from a commissioner’s perspective, if you’re pulling the budget together for a particular group of services, I have a contract with one contractor and I say to that contractor over to you, you’re responsible for the A to Z of services, and you the prime contractor will then subcontract with various other providers around the system. My relationship is with the single entity, I hold the single entity to account and they will manage through the relationships of a subcontractor.

Prime contractor, prime provider, sometimes people try to make a distinction there between a prime provider in our blue box here would have a role to play as a provider. So, not only does it provide services it then manages the rest of the system. Prime contractor or integrator, the distinction sometimes is made well that’s an integrator role where the organisation themselves are not delivering clinical services.  They’re put in place to manage and coordinate the rest of the supply chain.  In Ben’s report I think you found there was little appetite for the integrator.  We’re actually starting to see some interest in roles for organisations which bring a different skill set into the mix, the organisations that understand data and can apply that to a system to understand how you better design care pathways and so on.  So, that’s a simple model.

A variant on that then, is to hold the contract with your lead provider, in here the blue box labelled host, but you’re actually trying to contract with a group of providers, collectively. Because of the standard contract doesn’t allow you to have that multi-provider relationship, what you then have is the circular arrangements across those providers. So the providers themselves then sign up to a collaboration agreement, a joint venture agreement, confusingly sometimes called a provider alliance agreement but a document that captures how we as a group of providers will work together to share responsibility for the delivery of the services, and the difference between this model and the first model is that all of the providers are now going to have a say in how the services are designed and how risks are shared. So, there’s a piece of surrounding governance and decision making that is laid over those providers and the relationship that they have with one another, and this is the type of model that we’ve seen used down in the MSK services down on the south coast in Sussex and elsewhere.  So it’s a provider collaboration.  Providers coming together to collectively share the risks and the rewards.

From the commissioner’s perspective, again it has the attraction of being a rather simple relationship within an individual provider organisation that commissioners would then hold to account.

I apologise for the speed that I’m running through these on, get on to the interesting legal bit.

The SPV, so this is an attractive at one level because it’s simple, providers come together they form a new vehicle. It could be a limited company, it could be an LLP and that new entity holds the contract with commissioners and takes responsibility for the delivery of the suite of services. The relationship with the providers is then governed either by a shareholders’ agreement, in the case of a company, or a member’s agreement in the case of an LLP, and again, that records and documents how do we make decisions together as a group of providers? How do we risks and reward? How do we pay one another?  So all of that sits behind the scenes and then it’s contracted out.

A little point of detail there at the bottom of the slide, you sometimes hear lawyers talk about fat and thin JVs, so a fat JV would be the purple box, itself employing staff, owning assets and delivering services. A think JV sees the purple box holding the contract, but actually what it does is subcontract everything out to its members and I have to declare an interest here in the Cambridge & Peterborough United Care partnership where we advised the commissioners that this was the structure that was put in place in Cambridge & Peterborough as you now know. United Care Partnership with a shell LLP which helped the contract and when the going got a little tougher than anyone anticipated, that LLP decided to walk away and hence you’ve had all of this debate since then about what are the assurances and the guarantees that you should put in place when you’ve got this type of model.

I’m going to talk a little bit later about two other concerns that have emerged in relation to that particular model.

The final structure that I want to put up and we’re seeing some increased interest in the area of alliance contracting and later on I know you’re going to hear from Amanda and the example in mid-Nottinghamshire and the Better Together Alliance.

So, alliance contracting really is best characterised by a structure in which there are shared responsibilities, shared risks and rewards across commissioners and providers and shared decision making and this model is very much about collective accountability and picking up the question earlier on about system failure, I think if there were a model that was leaning towards trying to address that issue, I’d say it’s the alliance model. Some of the phrasing you hear around this is collectively your problem is my problem. We’re in this together.  That’s very much the philosophy of alliance contracting.  The way it works here, the red triangle is the alliance contract, the relationship contract, between all of the commissioners and providers involved and the blue columns are the service contracts, the NHS standard contract or the care home contracts, or indeed the GP contracts that then underpin  all that.

So those are some of the models we’re seeing and just as you thought, I’ve got my head around it now, Robert’s just described the four models, I’ve got that, there’s a slight complication because what you then, not surprisingly see, you see blurring and blending of these things. So, you could see for example, provider collaboration, provider joint ventures involving multiple prime contractors. So you might have a prime contractor for community services, a prime contractor for mental health, a prime contractor for urgent care for example and then you wrap all of those around with a provider joint venture.  We’re seeing that one up in the north west, or you might have a corporate vehicle, where you have all the providers come together into an new SPV, but one or more of those providers may say actually I’m unable to take shares in the company because my specialist skills don’t allow me to or I don’t want, and therefore you can have the SPV wrapped around that with a contractual joint venture with those providers that don’t want to or can’t join in the contractual in the corporate vehicle.  So, there are various shades between those various options, so it’s not always as straight forward as it might otherwise be.

So, I’ll just repeat my message from earlier on, those are options, I would do an options appraisal against that once you’ve worked out within your system what it is you’re trying to achieve, which of these best support and underpins that.

So some of the legal considerations then, the opportunities, first of all I’d say all of these models can deal with a single budget or a capitated budget approach. It’s perfectly possible to deal with that in any of those models. I also think that all of them can be structured so as to incentivise outcomes, whether it’s an outcomes based payment or it is similarly incentivising providers and commissioners to work together to achieve a collective outcomes, they can all accommodate sharing of risks and rewards.  I’ve got particular observations about the loss of commissioner’s ability to use local sequins in this contracting round.  I think it’s a shame that there isn’t greater flexibility to use sequins to incentivise providers which we were able to use last year and the year before.  And they all use the standard contract, they can all accommodate the particular constraints that we have around having to use the standard contract with a single provider.

So those are all the upsides. What are some of the challenges and considerations that you need to think about, when you’re doing your options appraisal and when you’re rolling it out? The first one for me, probably the most important one, is this, well it’s come already this morning, which is okay we’ve got a group of providers and commissioners, might be providers in a collaboration, commissioners and providers together, coming together into some form of legal structure.  How does the decision making and the delegated authority and the accountability work within that structure?  And what we’re seeing is a nervousness on the part of some organisations to say to this new collaboration, this new entity, you have the authority to go and make decisions about service delivery, off you go that group because actually as I sit here as an FT governor or a director on a board of an independent sector provider, I’ve got my own duties to my organisation, I’ve got my sovereign organisation responsibilities and the extent to which I’m able to let that go, is something which is going to be of concern to be, and so we’ll start to put limits and constraints on that authority and problem in practise, comes through, when the board of our collaboration decides that it wants to do something, if all the people around the table say yeah that’s a really good idea, I’ve just got to take it back to my own organisations and get their approval, you’ve this toing and froing going on, so ideally you’d give that new body the responsibility to make decision, but that’s difficult isn’t it, because that’s binding your own organisations now, into something where the collective group is making a decision that impacts your own organisation.

It becomes even more interesting when you thing about what are the types of decision making process that we’re going to agree. So, if we agree unanimous decision making, which I’m a fan of, it’s very powerful, that essentially means that what you’re doing is, you’re moving at the pace of the slowest and you’re giving one organisation around the table the ability to stop and veto what’s going on. The counter argument is, well if I’m at the table, I’m constantly being out voted, I’m not going to be particularly interested in this collaboration anymore because I’m feeling disengaged and disenfranchised.  So there are pros and cons to the different models but you bump up again very quickly that sovereign organisation’s responsibility and statutory duties.

That’s really behind the next about the inherent conflicts of interest, particularly if you think about that corporate vehicle model I mentioned earlier on. If I’m appointed as a director of the new corporate vehicle but I’m also an officer of one of the member organisations, let’s say a foundation trust, I’m immediately wearing two hats. I’ve got my FT hat on and now I’m a director of this company, under which I have statutory duties under the Companies Act to make sure I act in the best interest of the company, and there’s a tension in all of that.

Another area that we hear about and we get asked this questions, as commissioners are we able to delegate our responsibilities to a new provider organisation? We’re no longer the commissioner, they’ve become the commissioner and we hear talk about strategic commissioners and tactical commissioning. I’m not sure I see this as delegating commissioning functions and commissioning responsibilities.  I see this as commissioners retaining those responsibilities but contracting with a provider to deliver and perform some of those functions on behalf of commissioners.  I don’t see commissioners given away the statutory duty to engage with the public.  You might say to the provider group, you in practise will go and engage and provide the information, but you’re doing it essentially in my name, because I’m the one with the statutory duty.  So I don’t see it as delegation of the responsibilities I see it as a subcontracting out and a working together to achieve that.

Primary care is important. I put here GMS, PMS in or out. You’ll all be familiar now with the MCP framework that’s come out and the different models under that.  We’re seeing the emergence of GP accelerations and super partnerships which I think is hugely beneficial when you’re talking about new care models, because you need a large primary care body to be able to be at the table and to have a single voice. It’s better that that thirty six different individual GP practices.  So that’s a huge benefit.  One of the challenges is how do you contract for that in a GMS arrangement and do you see some GPs starting to opt out of that as we’re seeing in the Symphony project down in Somerset.  What are some of the issues around that? So some careful thoughts.  But the MCP framework and the MCP contract is very much designed at helping some of those issues.

A very quick one around commercially sensitive information. If you’re in one of those providers collaborations or an alliance just be aware of the desire to start to share lots of information. There is less that is truly commercially sensitive out there, but it is something to be aware of.  What you don’t want to be doing is sharing information across providers which might fall foul of competition law if three months down the line, you both find yourselves bidding for an opportunity up the road, and by part of your collaboration in one area, you’ve started to share some information that has given you insights into one of your competitors costs of business or whatever.  So, just be mindful of it.  I’m not entirely convinced that it’s hugely, hugely sensitive, some of the information that people get very excited about, but that’s the bit that we’re concerned that we have the right Chinese walls in place to deal with that.

Procurement law; how do you commission one of these things? How do you procure an alliance or a lead provider? is a frequent question and then once you’ve put it up and running, let’s say you’ve entered into a ten year collaboration and you start to redesign the services, might that trigger procurement law considerations? So we’ve just redesigned services in an area and it means that we’re going to change the service model and if that involves something new and innovative should that be tested in the market or do you just do that within your provider collaboration.  Some of the questions coming.

Two of the points I wanted to pick up on; the corporate SPV, power to form corporate vehicles if you’re a provider, NHS Trust provider organisation which is not a foundation trust, in our view you don’t have the statutory power to take shares in a company and therefore you’ve got this problem. FTs can do it, non-FTs can’t. And then as we now know out of Cambridgeshire and Peterborough, if you form a corporate vehicle and even if it’s wholly owned by NHS organisations, that corporate vehicle is not itself an NHS organisation which means that parties contracting with it fall outside of the VAT regime that allows you to work within the same VAT group and that was an unforeseen consequence of the LLP in the United Care case.  So, VAT implications are significant when you’re looking at the corporate vehicles.  I think those two alone are putting a question mark against the SPV corporate vehicle model.

And then the final one, needs for guarantees and other assurances, I put there especially for corporate vehicle, it’s probably as valid in some of the other models, depending on who your lead provider is. If you’re a commissioner, you’ve got a small lead provider, you might want some assurances and guarantees from some of the other larger providers sitting behind that in terms of well where is the working capital going to come from and so on and so forth.

So, it’s a whistle stop tour. I hope that okay.


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