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Long-term promise

Long-term promise
5 November 2011

Mark Hellowell looks into the opportunities clinical commissioning promises for entrepreneurial GPs, private insurance companies and patients…

Mark Hellowell looks into the opportunities clinical commissioning promises for entrepreneurial GPs, private insurance companies and patients…

When, in January, a 367-page tome called the Health and Social Care Bill was published, the private health care sector rubbed its hands. It seemed that the bill would offer plenty of new business in both providing and commissioning hospital care. Nine months on and things look a lot less hopeful for the companies that expected to take large chunks of the hospital care market from NHS providers. However, on the commissioning side, the prospects are much better and since this sector is not yet dominated by big corporates, the opportunity for GPs with entrepreneurial tendencies could be substantial.

Indeed, the poor outlook for private care providers is itself an opportunity. It is not as though the government’s marketisation agenda has collapsed; all the signs are that the Department of Health still wants diversity – an objective its officials have been pursuing since Labour’s NHS Plan in 2000. Although the new economic regulator Monitor will, under revised plans, be forced to consider the benefits of integration alongside competition, as an institution it remains committed to the market. But the role of the existing private healthcare sector in this is likely to be negligible.

All sources of revenue for private hospital groups are in decline. The number of individuals with private medical insurance has fallen 10% in recent years according to healthcare analysts Laing and Buisson. While some private groups have made up for the resulting shortfall in income by treating NHS patients, this is now under threat as primary care trusts (PCTs) enact barriers such as minimum waiting times and other demand-management tricks.

Despite the furore over plans to privatise the NHS, it is quite possible that the proportion of NHS services delivered by private hospital groups will decrease over the next few years, as independent sector treatment centre (ISTC) contracts run their course. The existing private hospital sector is over-leveraged, asset-stripped and risk-averse. Political risk is high as recent months have demonstrated. Investors will not move into the sector unless they see scale, scope and certainty. They won’t see any of these for a while.

For GPs, however, opportunities are much richer. Plans to pass responsibility for rationing care to the most trusted part of the service remain in place, even though GPs will have to work with other clinicians and lay members in clinical commissioning groups (CCGs). These groups will be up and running from April 2013, according to the latest Department of Health communiqué on its reforms. And, despite a ‘rethink’ prompted by public hostility to the original reforms (and a 180-degree ‘U-turn’ by the Liberal Democrats), a bonfire of the bureaucrats, in which 20,000 staff at PCTs and strategic health authorities (SHAs) will lose their jobs, will still take place regardless.

Devolving responsibility to commissioning groups builds on New Labour’s policy of practice-based commissioning (PBC), although the responsibilities for clinicians are much broader, and the role played by financial incentives is greater. While the new groups will be accountable to the central NHS Commissioning Board, there will be considerable latitude to take decisions locally and an expectation that GPs in particular will balance clinical referral decision-making with the financial consequences of those decisions.

There are probably three big opportunities that arise from all this. First, the transaction costs associated with GPs’ new responsibilities may well force them to consolidate, which might lead to the development of bigger corporates in primary care provision in the long term. There has been a strong trend towards consolidation over the last decade, with about 40% of GP practices now having five or more GPs working within them.

A greater number of female GPs, who value the increased flexibility from being part of larger practices, has undoubtedly played a role in consolidation. Additionally, New Labour initiatives, such as the Quality and Outcomes Framework and the encouragement of more community treatment and prevention, have provided incentives for some GPs to pursue economies of scale.

Entreprenurial GPs
The trend towards consolidation will require more large premises, of which there is a dearth in many parts of the country, especially in urban areas. There are a number of property funds that invest in primary care – many of them sprang up to take advantage of third-party equity transactions and the government’s NHS LIFT programme (the primary care counterpart of PFI). Most of these possess developments arms and their success is dependent on identifying practices that wish to expand and help them identify and develop potential sites. Entrepreneurial GPs are likely to want to take advantage of such expansion opportunities.

The second area for budding business people is in supplying services to the new commissioning groups. As noted, the government’s proposals build on previous initiatives such as GP fundholding and total purchasing pilots in the 1990s, and PBC in the past decade, which enabled groups of GPs to take on responsibility for commissioning some services on a voluntary basis. The empirical evidence, much of it assembled by the influential think tank The King’s Fund, seems to suggest that these attempts to get GPs to take responsibility for saving money and re-shaping care have been unsuccessful. PBC, for example, was a voluntary scheme for GPs in which a practice or a group of practices, could ask their PCT to delegate an indicative budget to them, with which they would then use to plan and commission a set of services for the population of patients registered with them.

Zero effect
These groups had many of the same freedoms as the new commissioners will have. They were able to keep any savings they made through managing demand and use the funds to develop other local services and pay themselves to provide them. But its record has been week. An editorial in the British Medical Journal (BMJ) discussed whether PBC was the “sick man of Europe”. A report by The King’s Fund said its success was doubtful and that no empirical evidence of savings or service changes had been produced. Most importantly, it had had zero effect on demand for hospital care.

Plainly, there are opportunities for GPs that can demonstrate good practice to provide support to others, who may lack the skills, resources or time to do this properly. In addition, since the aim is to give GPs incentives, to create new forms of care – preventative care, such as greater control of hypertension, smoking and obesity – opportunities could be substantial. Small groups who can focus on demonstrating the improved outcomes that commissioning groups have an incentive to pursue will stand a good chance in this market. The government has said it wants doctors, acting as normal businesses or mutuals, to take on this work. Over time some of these will become big corporates themselves.

As well as supporting commissioners, there may be opportunities to take over the functions of CCGs where these have been outsourced. But the pickings here may be smaller than was initially assumed when the government first signalled its reform intentions. The amount of money that has been made available to support the commissioning function is tiny – just £35 per patient according to some reports, which places an obvious limit on profitability. Ultimately, there may be opportunities for providers to perform certain ancillary functions – IT and administrative support, say – but GPs themselves may seek to retain the value-added functions such as performance-managing their contractors. After all, they are likely to see this as their core business.

On the other hand, many ordinary GPs may feel remote from their clinical commissioning groups and may lack the interest or skills to engage in commissioning complex secondary and tertiary services. As providers, GPs wanting to provide extended or new services will most probably have to tender for these contracts and that is likely to create a profit opportunity for more entrepreneurial GPs, or investors who fancy the market.

A final area of opportunity lies within GP provider contracts. This has been a nascent market since the Alternative Providers of Medical Services contractual form was introduced by New Labour in the middle of the last decade. Currently, only a small proportion of the general practice budget is spent on such contracts and the market is quite concentrated. However, not so long ago, this promised to be a big and important new market. Even giant US insurance groups like UnitedHealth got interested and set up shop over here (taking on the former editor of the BMJ and Tony Blair’s health adviser in the process). But the game wasn’t worth the candle: the momentum behind the policy dissipated when Blair left Number 10 for the Middle East. Business hasn’t emerged and some major players, like Assura for example, have exited the market in a huff.

Perhaps there is promise here in the longer term. Once the equity and excellence agenda is implemented, the government will start to look at ways of increasing value for money in the general practice budget. And, through the NHS Commissioning Board, it will have centralised control over primary care, while the rest of the budget in increasingly managed locally by the commissioning groups. There will be political risks here.

Concerns have been expressed that the incentives to live within budget may be too strong, such that GPs will make decisions on financial grounds rather than in the best interests of individual patients. The rationing of care that we are starting to see PCTs engage in will not be popular with local communities. Others, however, might argue that that is the whole point of commissioning reform – and entirely appropriate given the scale of the financial challenge facing the health service. The government has been prevented from pursuing its market plans for the hospital care sector due to the cold financial climate and a veritable torrent of political and vested interest opposition. Perhaps the primary care sector will provide more temperate conditions.

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