During the initial phase of the programme, commissioners and providers worked in relatively informal partnerships to develop the MCP and PACS care models. That may have been a pragmatic approach to kick-starting the vanguards, but rather more robust arrangements are now clearly needed before commissioners can transfer substantial budgets to providers on long-term contracts.
So how should multiple local providers – primary care, community services, local hospitals, social care and potentially other services – bind themselves together as a coherent organisation or partnership, one that is capable of managing a multi-million pound budget and making the most efficient use of resources?
Among the MCPs and PACS, commissioners and providers are considering a series of options for the structure of the local provider system, with lead provider and sub-contractor arrangements at one end of the spectrum, different types of strategic alliance in the middle, and integration within a single organisation at the other.
Articulating a range of options is one thing. Deciding which of these arrangements provides the best foundation for an integrated local system is quite another challenge. One approach is to weigh the benefits of purchasing services from external providers against the costs of having to contract with third parties. Where transaction costs are low, it makes sense to maintain arm’s length relationships with suppliers in a market. Where transaction costs are high, it may make sense to forego markets and deliver services in-house.
As many studies have illustrated, there are stronger arguments for delivering services in-house where it is difficult to measure a supplier’s performance, where it is hard to draw up contracts that cater for a range of contingencies, or where one party has the power to hold the other to ransom once investments have been made or the contract has been won. If such behaviour seems implausible within the NHS family, take a look at the various autopsies of the failed UnitingCare contract.
In the NHS, there is clearly some value in considering the costs and benefits of some provider relationships through this lens. For the MCPs and the PACS, there may be advantages in a lead provider or partnership retaining arm’s length contracts with some services, for example some domiciliary and residential care providers in competitive markets.
Conversely, applying this reasoning might cast doubt on the merits of arm’s length, highly transactional approaches to securing complex bundles of interrelated, mutually dependent services over long periods. Just consider the difficulties commissioners ran into attempting to use a hard-edged competitive procurement to secure services for adults and older people in the UnitingCare case. Competition and arm’s length contracting relationships clearly failed to deliver for patients here. We doubt that simply tightening up the due diligence on VAT or parent company guarantees will be enough to address these problems.
Yet these discussions risk missing other benefits of bringing services together within a single organisation. A key advantage offered by organisations is the ability to develop a clear, shared purpose, strong relationships, shared values and a common culture. Within an organisation, it is possible to establish common routines, behaviours and social norms which help groups to collaborate.
In part, commissioners’ and providers’ thinking on these issues will depend on whether they see themselves putting in place a new care model, or whether they see themselves laying the foundations for a dynamic system. One set of arrangements might be sufficient if the aim is simply to bring particular staff together in multidisciplinary teams or for hospital doctors to spend more time in community clinics. Others might be needed if the ambition is to create learning systems capable of exploring a range of opportunities for improvement. If this is the prize, organisations appear to have substantial advantages in pursuing innovation, precisely because they help to establish shared purpose and common culture, allowing for purposeful, yet flexible collaboration.
None of this automatically points to a swathe of mergers, something we have warned against in different circumstances. We know from other industries that it is possible to develop effective systems that achieve some of the benefits that come with being a single organisation without the need for full integration. But these do look very different to either loose partnerships or highly transactional relationships.
Consider the relationships that Toyota has maintained with its network of tier one suppliers. Senior staff from Toyota regularly visit suppliers to share Toyota’s improvement methodologies and support innovation. There is also substantial sharing of information and collaboration between suppliers. These arrangements appear to be a halfway house between integration in a single organisation and arm’s length contracting arrangements.
Whether at Toyota, Southcentral in Alaska, US, or Canterbury in New Zealand, long-term relationships between a small number of established organisations, repeated interactions and the expectation that they will work together in perpetuity are the glue that holds these systems together. While some appear to be traditional contractor/sub-contractor relationships, contracts seem in practice to play a minor role. Toyota’s brisk supplier agreements – famously short of details on risk sharing or dispute resolution – are a far cry from the 200-page NHS contract. They would surely fail the review processes being developed to assess the contracting for new NHS care models.
In short, established relationships and a common culture, rather than contractual details, need to be at the foundation of new, integrated local systems. But the approaches that commissioners and providers take to contractual and organisational forms also matter, since they can either help or hinder these relationships and culture in their development.