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NHS Enterprise

Feature: social enterprises

 In July last year, the Department of Health announced it wanted to create “the largest social enterprise sector in the world” at the launch of the Health Bill’s predecessor, the white paper Liberating the NHS. Since then, an awful lot has happened: the resulting legislation has been pulled apart by critics and put back together again, full of compromises; GPs have formed commissioning groups and worked day and night to make sense of the task ahead of them; and primary care trusts (PCTs) and strategic health authorities (SHAs) have started to slowly self-destruct ahead of their abolition in 2013. But what happened to all those social enterprises?

Well, not much. Despite all NHS staff having been granted the ‘Right to Provide’, or form their own mutuals to provide services, there is still no visibly thriving social enterprise sector. What’s more, a string of recent contracts awarded to the private sector suggest those that do exist are struggling to compete with larger, for-profit organisations. Dr David Jenner, GP and NHS Alliance policy adviser, says “quite simply, they haven’t taken off. The conditions and policies aren’t right.”

Firstly, the loss of NHS pension terms for staff moving to a social enterprise is still “the biggest challenge” facing the model, says Dr Jenner. But for GPs especially, forming  clinical commissioning groups (CCGs) has taken up any spare time and energy they have had over the last 18 months – to expect them to form provider organisations too is asking a bit much.

More widely, there is evidence social enterprises are struggling to win contracts because they lack the start-up funding that their for-profit equivalents have in spades.

In September, news of a £500m community services contract awarded in Surrey was notable not only for its vast scale but also it meant that a bid by social enterprise Central Surrey Health had been defeated. The nurse-led group had been the prime minister’s flagship social enterprise and its defeat by the Virgin-backed Assura Medical was seen as evidence that large capital reserves and experienced tendering teams win contracts. Mutuals, social enterprises and spin-outs may have the coalition’s backing, but when it comes to competing for contracts, they just don’t have the financial clout or tendering experience of NHS trusts or corporate providers. In today’s cash-strapped NHS, commissioners are looking increasingly for providers to invest money in services to bring about real change, and small or newly formed social enterprises can’t always offer that.

That’s not to say that there aren’t some impressive social enterprise success stories. GP Dr Sam Everington’s surgery-come-community centre in Bromley-by-Bow has an annual turnover of around £3.5m and is reportedly used at least once a year by 90% of the local population. Over 30 ministers have visited the site, which is seen as a model for sustainable, holistic, ‘Big Society’ NHS providers. Circle, Europe’s largest health partnership, was arguably the most high-profile ‘social enterprise’ operating in the NHS – although the firm’s private backers and recent float on the stock market mean it is hardly the staff-led vehicle it originally painted itself to be.

An area where true GP-led social enterprises have traditionally flourished is out-of-hours care. But even here, the system is about to undergo major change, with England’s highly variable out-of-hours services about to be unified under a new urgent care hotline, 111. Out-of-hours providers have already warned that bidding for the large regional 111 contracts is prohibitively expensive – meanwhile, large firms like Harmoni and Serco are preparing bids en masse.

As a result, in the North West, a coalition of 10 GP out-of-hours social enterprises have joined forces with NHS Direct and the ambulance trusts to compete for their local 111 contract across Greater Manchester, Liverpool and Cumbria. Another GP out-of-hours provider in Birmingham, BADGER, is planning a similar partnership with ambulance trusts and NHS Direct, but with back-up from private firm Harmoni.

For Dr Jenner, partnering with a private firm “makes sense” but stretches the definition of a social enterprise. “I don’t see lots of profit margins in providing services at the moment, given the current climate. If people look at ways of mitigating that risk with partners who have venture capital, I can see the sense in it. But it then ceases to be a social enterprise to me.”
Limited capital is not the only problem social enterprises face. Public-sector unions and anti-privatisation campaigners are causing them headaches, too; most are concerned that social enterprises remove NHS services from the public sector and offer staff less favourable terms.

Community interest company Gloucestershire Care Services, for example, was recently halted in its bid to take on £100m of community services by a 75-year-old resident claiming it was the first step to privatisation. His successful legal bid blocked 3,000 local clinical staff transferring to the social enterprise in September, and the situation is, as yet, unresolved.

The final worry for social enterprises is that GPs themselves may not realise the benefits of using a social enterprise when they take over as the commissioners of NHS services in 2013. A poll of GPs, conducted earlier this year by the charity Turning Point, found only 9% of respondents would be “very likely” to commission services from social enterprises, compared with 46% who thought they would be “very likely” to commission services from foundation trusts. Add to the mix the fact that any primary care services GPs want to provide as social enterprises will be commissioned by a distant NHS board, not local clinicians, and you have a recipe for further confusion.

However, Bob Ricketts, director of provider policy at the Department of Health, disagrees that the social enterprise model is floundering. “Social enterprises are bound to lose some bids for contracts – it simply means they were beaten by stronger bids,” he says. There are already services worth £900m in social enterprise, he says, and the organisations are still finding their feet. He expects to see more large contracts, of the scale seen in Surrey, up for grabs in 2012 as the first wave of the government’s ‘Right to Provide’ social enterprise contracts expire – how many are won by social enterprises will be a key test of how the model is doing.

On the issue of capital-raising, the Big Society bank is starting to dish out some of the £600m it has in its coffers to help start social ventures, and other banks, such as Unity Trust and The Co-operative, specialise in funding non-profit groups. Social Impact bonds are being trialled in other governmental departments and could make their way to the NHS if successful; and some have even suggested social enterprises should be ‘gifted’ public assets – such as property, to address the financial imbalance. But there is no sign realistically that these will help social enterprises win contracts any time soon.
Dr Jenner says commissioners must offer longer-term contracts to help mitigate the huge risks social enterprises face when starting up. “There needs to be a guarantee that contracts will last long enough to cover start up and tendering costs,” he says.

At the moment the dream of “the largest social enterprise sector in the world” is still that – a dream. There remain fundamental barriers to social enterprises’ formation and growth. Despite the various schemes aiming at getting groups off the ground, experts at Common Capital – a specialist adviser to mutuals – have predicted that only 10% of the NHS market will ever go to social enterprises, with private companies inevitably set to dominate.

Money and support is trickling through to social enterprises hoping to provide healthcare services, but it is unlikely to ever compete with the millions pumped into the UK’s largest providers by private equity investors and shareholders. Besides, with the current government looking for 4% efficiency savings in primary care, creating a provider organisation “is not something that people on the inside will want to buy into”, says Dr Jenner.

With cash-strapped commissioners more keen than ever to see that providers have money available for innovation and service redesign, money – a lack of it – looks set to be social enterprises’ Achilles’ heel.


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