Feature / Move on up?

PCT community services are looking for new homes and the Department of Health appears to favour vertical integration with acute or mental health providers. Seamus Ward examines the implications.

By the time you read this, primary care trusts should have their strategic health authorities’ approval in principle for plans for the organisational structure of community services. But this is not just another revamp; it could have ramifications for the quality of services patients receive, the efficiency agenda, contractual relationships with commissioners and the development of payment by results.

The change has been prompted by the Department of Health’s transforming community services (TCS) initiative. As a response to the Darzi report, TCS sought to split PCTs’ commissioning and provider functions, giving PCTs a contractual relationship with provider organisations from April 2009. They were to look at structure and assure themselves they had the correct governance arrangements for local needs by October 2009 – by which time they should have expressed interest in new arrangements such as social enterprises. This deadline was extended to the end of March 2010.

Initially, it seemed all possible organisational forms were on the table, including community foundation trusts, social enterprises, care trusts with direct provision, continued PCT direct provision, vertical integration with acute or mental health trusts or horizontal integration with other community providers.

But following the 2010/11 operating framework in December 2009 and guidance on TCS in February, some PCTs’ plans were thrown into disarray as it became clear that the Department favoured vertical or horizontal integration or the formation of social enterprises. Community foundation trusts, continued direct provision and care trusts with provision were ‘not expected to be the norm’. The latter two would only be allowed where strong commissioning existed.

PCTs subsequently revealed they had received further clarification on the guidance, claiming they were told the Department favoured vertical or horizontal integration, and that at least one SHA has mandated vertical integration.

NHS Confederation Primary Care Trust Network director David Stout says some SHAs are ‘encouraging’ vertical integration. But he says PCTs are bringing forward solutions – tailoring services’ destinations to ‘best fit’.

When the process is complete, he expects there will be about eight community foundation trusts. But in most areas ‘bits of services will go in different directions’ as PCTs opt for vertical integration with acute or mental health trusts for some services, horizontal integration with other community providers and social enterprises for others.

He insists it would not be appropriate to place some services in acute trusts. ‘Some community services, where there are district nurses for example, are more aligned to acute trusts than others. Some specialist services might make more sense in local government, for example, such as older people’s services.’

Other PCTs are resisting the break-up of their provider services as they see how the integrated care pilots develop.

Proposals will not be approved automatically. They must pass tests to receive SHA backing (see box above). ‘People are putting in plans. That doesn’t necessarily mean SHAs will agree to them as the proposals will have to pass the assurance tests,’ Mr Stout adds.

The Department insists PCTs should consider the best fit on a service-by-service basis and it is likely that services currently under the community umbrella will be dispersed among other providers. Elements of long-term conditions and urgent care could transfer to acute trusts, alcohol and drugs services to mental health trusts, and health and wellbeing to local authorities, for example.

Vertical integration has its benefits. Integrating services along the patient pathway should mean a seamless service for patients, provide opportunities for the bundling of tariffs along the pathway and give acute or mental health providers greater control over the levers of demand management.

However, some PCT finance directors question whether the benefits outweigh the potential problems. Healthcare Finance understands there have been local debates over the future of PCT-run GP services. There are concerns that if these are integrated with a local acute trust, the GPs will only refer internally. Trusts believe good commissioning should protect against this and are keen to test the potential for demand management.

One PCT finance director has other concerns about vertical integration. ‘History strongly suggests that vertical integration of community services with a hospital leads to a lack of focus and investment in the community services. This happens because there are very limited external drivers,’ she says.

Another adds: ‘Once provider services are part of the acute sector there will be more resistance to tariffs for community services. I am unclear how this change aids the “move services closer to the community” agenda.’

Finance director poll

In March Healthcare Finance ran a mini-survey of PCT finance directors to gauge opinion on TCS. Although the sample (about 25% of all PCT finance directors) is too small to be statistically significant, it may offer an insight into how primary care organisations are approaching the reorganisation.

When asked where their community services would be housed, most chose multiple options. Despite concerns about vertical integration, almost three-quarters said integration with acute trusts was a possibility for some services, while 44% said services would go to mental health trusts.

Just over 40% were considering integrating services with other community providers (including local authorities) and 22% expressed an interest in setting up social enterprises.

Some PCTs are still looking at the Department’s less favoured options: community foundation trusts (25%), continued direct PCT provision (19%) and care trust including provision (11%).

Some felt social enterprises – not for profit businesses run by staff as a community interest company, a company limited by guarantee or provident society – may be too tricky to set up, particularly in the face of union opposition. They could be too small to be sustainable if they focused on single services, though several PCTs are examining the potential of social enterprises for all their community services.

Staff transferred to a social enterprise can retain their membership of the NHS Pension Scheme and PCTs can support the new provider by offering uncontested contracts for up to five years. PCTs could also award social enterprises ‘any accredited willing provider’ status, allowing them to provide services for an indefinite period to agreed standards and price.

Whatever their plans, the majority of finance directors expected their SHA to approve their proposals and, while most believed the new structures would be in place by 31 March 2011, some were concerned about the timetable.

‘We’re looking at where the greatest synergies are, but there is significant concern that the timescale may preclude our preferred options and force us into sub-optimal solutions,’ said one finance director.

For some, delays would be caused by the need for a foundation trust to pass Monitor’s due diligence process. Others have their eyes on the political picture, insisting the outcome of the general election could have a bearing on the formation of the new structures.

One PCT finance director said agreeing the 30% management cost reduction target for provider services plus their contribution to QIPP savings could be problematic.

Vacillation has disappointed some PCT finance directors. ‘Department of Health and SHA guidance has been woeful, resulting in a ridiculous timetable for a decision to be made without contemplating what a change of government might bring, what staff prefer or where services would best fit,’ was a typical comment of those critical of the Department’s changes of mind over the last year.

With the initial work on structure almost complete, finance directors are turning their attention to how the money will flow. Around 70% said they were preparing to move away from block contracting to a tariff mechanism for community services, in line with Department of Health policy. There is some opposition to community tariffs, mostly on questions over data quality, the need to ensure the system would not incentivise activity and the feeling that such a seismic shift should not be implemented in today’s economic climate.

One PCT finance director asked: ‘Why would you move to a PBR-type system just when the growth goes? We are looking for stability now, not fluctuations in contracts.’

However, most are working up shadow tariffs and some are hoping to base their system on outcomes and to support the shift away from hospital-based care.

One director said: ‘We want to incentivise the community provider to reduce acute hospital admissions, to reduce acute hospital lengths of stay and to improve throughput in intermediate care home teams and beds. This will require a move away from simple block contracts. But to date appropriate currencies and prices have been difficult to agree because of poor data and trying to avoid creating perverse incentives.'

PCTs are preparing for big changes in structure, which for most would see them shorn of provider services. What happens next will depend on the outcome of the general election and whether a new government wants to press ahead with change or rein it in.