Feature / The Middle Men

Disputes are a fact of commercial life. They have always existed in the NHS, although the resolution mechanisms have not always been transparent.

Now with the NHS in England going down a more commercial route, there is an expectation that formal disputes will increase – at least, in the short term. And this demands a cost-effective solution for resolving any disputes in a way that enables the two parties to continue afterwards with a constructive relationship. Enter the HFMA’s new mediation service – HCS Dispute Resolution.

To view the HCS mediation brochure click here

The decision to go towards a more market-styled healthcare system is seen in England as having benefits. Commissioners only pay for the activity they receive and providers receive payment for the work they undertake. There are real drivers to change custom and practice and incentives on both sides. Reducing hospital activity can free PCT resources for spending elsewhere, giving hospitals the chance to remove capacity and reduce overheads. Meanwhile, there are incentives for trusts to improve productivity and access times.

The same commercial focus has seen the creation of foundation trusts, widely regarded as having triggered improvements in financial management. And there has also been a move to service-line reporting and patient-level costing, both of which are seen as helping organisations to understand their cost base and identify improvement.

But an almost inevitable by-product of this more business-like approach and rising contractual complexity is an increase of disputes. It is not in the interests of the NHS to see resources tied up in resolving disputes. However, recognizing that disputes are likely to be part of the new commercial reality, the HFMA is launching a high-quality, cost-effective mediation service. Its purpose is to facilitate agreement between organisations and avoid dispute escalation and, in particular, avert the need for expensive court proceedings.

The HFMA service is the first to be launched by the association’s new commercial services arm, HCS, and looks to build on the association’s experience in healthcare. HCS Dispute Resolution will be led by a range of professionally qualified mediators, trained by the Centre for Effective Dispute Resolution (CEDR) – widely regarded as the UK’s centre for excellence for mediation.

The association’s dispute management team boasts years of direct NHS experience at the highest levels, including: Colin Reeves (former national finance director for the NHS), John Flook (former director of finance at Durham and Darlington Health Authority and policy adviser to the NHS Confederation), Jaki Meekings (former director of specialist commissioning for South Central Strategic Health Authority), and others.

Mr Flook (pictured) believes disputes will be a fact of life in the new commercial environment. ‘Data is improving and, as data improves, the likelihood of disputes should reduce,’ he says. ‘But the increasing detail of the tariff and commercial arrangements will create a complexity that will push the other way.’ And he believes that as the national tariff becomes more ‘real’ with local workarounds increasingly outlawed, more of these disputes will start to surface.

Dr Reeves agrees. ‘There is far greater complexity in the new autonomous healthcare environment,’ he says. ‘And while this environment is bringing real potential to drive improvement, there is also a greater chance of difficulties occurring.’

There are certainly signs that disputes are on the increase. For instance, foundation trust regulator Monitor blamed ‘funding constraints in a small number of local health economies, and more activity than was planned in specific trusts’ for the continued rise in doubtful debt provisions made by foundation trusts over the past year. Provisions for non-payment of primary care trust debt reached £67m at the end of 2006/07, compared with planned levels of just £25m.

Meanwhile, an August briefing from the King’s Fund, NHS finances 2006/07: From deficit to a sustainable surplus?, warns that relationships between PCTs and hospital trusts, already ‘often uneasy’, face a testing period in 2007/08 and beyond.

Its research reveals that some 47 PCTs have already initiated some challenge to the figures given them by hospital trusts. And there are disputes beyond payment by results activity too, such as those involving high-cost drugs. With trusts looking to meet and maintain the new 18-week waiting time target and PCTs under pressure to reduce hospital activity, contracts and contract interpretation are likely to be increasingly important.

The new model contract covering acute hospital services sets out the formal procedures that may be invoked by either party to the contract if there is a failure to agree. This, initially, sees the strategic health authority acting as mediator in disputes between NHS trusts and PCTs, while the SHA and Monitor would work in conjunction to mediate disputes involving foundation trusts.

Some question whether the skills needed for mediation exist within strategic health authorities and Monitor, and whether either body could ever be seen as completely neutral. Certainly, the Department of Health has recently unveiled its own dispute resolution service from within its Private Finance Unit, which looks to be targeted particularly on disputes between private finance initiative partners.

The HFMA, however, believes its service offers an independent mediation alternative to these routes and certainly provides a way of avoiding the next step in the contract’s dispute resolution procedures – binding pendulum adjudication under which the unsuccessful party would bear the full costs of adjudication.

Mediation is widely regarded as the best way to resolve disputes. It is voluntary and non-binding (either party can walk away at any point), with parties only bound if a settlement is agreed. The mediator has no power to force the parties to settle a case against their will. This differs from arbitration in which the arbitrator considers the evidence and issues an award, which is enforceable by the courts.

Mediation – the service being offered by the HFMA – has the benefits of flexibility, confidentiality, speed and much lower costs than arbitration or using the courts. It is also seen as particularly useful in circumstances in which the disputing parties need or wish to maintain an ongoing relationship.

Mr Flook believes mediation makes sense for NHS disputes. ‘Mediation offers the last chance to the parties involved to control decisions themselves,’ he says. ‘Under arbitration, once you give control to a third party, one side is likely to feel aggrieved at the end of the process and relationships will, inevitably, get damaged.’

He adds that needing mediation should not be seen as a failure, by the disputing parties or by the strategic health authority charged with oversight. ‘People can hold genuinely different interpretations of contracts and sometimes they just need that independent third party to help them work through it.’ And he says that mediation can help improve understanding around contracts and build firmer foundations for future dealings: ‘Mediation seeks to focus on the future and look forward to future relationships, rather than dwell on history.’

While commissioning contracts are an obvious area for disputes, the HFMA service will not be confined to this area. Contracts with the independent sector, between PCTs and GP practices, across the social care boundary or with other UK nations are seen as possible areas for dispute that might benefit from the HFMA’s service.

The significant financial experience within the HFMA’s dispute management team, coupled with its qualified mediation qualifications, makes it perfectly placed to help in these areas. But it will not simply be confined to finance. The team’s skills will be equally applicable to dealing with non-financial disputes, such as those between employer and employee.

Nobody wants to see disputes rising, but if the NHS wants to benefit from increasing commercialisation, disputes are likely to be a fact of life. And that means a trusted, cost-effective mediation service makes sense.

To view the HCS mediation brochure click here