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Structure options for the ownership of commissioning support units

As published in National Health Executive, 2 November 2013.

The recent suggestion that NHS England could allow Clinical Commissioning Groups (CCGs) to take ownership of the Commissioning Support Units (CSUs) which provide them with support services has prompted two categories of response. Those in the public sector, who believe that the NHS is a vital public service which should be publicly owned, have welcomed the idea. People from the private sector, on the other hand, maintain that only investor owned businesses focused on profit can deliver real efficiency and value for money. Both views reflect that much of the debate about the NHS is driven by passionately held beliefs about principle. Michael Boyd, Partner and Head of the Healthcare Group at business law firm DWF, examines the issue in more detail.

Savings versus quality

Change in the NHS is being driven by the same forces at play elsewhere in the public sector and much of this debate has been discussed already in deciding the future of local authority services. As it stands, the NHS is too expensive but improving cost effectiveness has proved difficult, as saving money can never be the only consideration. Preserving quality in the NHS is key because of patient safety, and this introduces an additional dimension into the debate about optimum structures.

A big part of the solution to the savings versus quality dilemma was the introduction of competition tension within the healthcare economy, where both public and private sectors have a role to play. This is nothing new in the public sector - local authorities, for example, used compulsory competitive tendering and the concept of best value to come closer to the value for money offered by the private sector. Typically, contracts were granted to the private sector, staff transferred across under Transfer of Undertakings Protection and Employment (TUPE) and better value was achieved. Alternatively, where a transfer to the private sector was unacceptable, a semi-public organisation was set up to make changes and come out with value for money somewhere in the middle.

The nature of ownership

Either as a stepping stone to an independent enterprise or in an attempt to establish a more commercial ethos, selected services were placed in a company wholly owned by the council. Some of these companies have been successful but others have failed spectacularly, particularly where the relationship between the company and the council was not carefully balanced and where there were no changes in personnel to reflect the new commercial outlook. The establishment of the company simply created more bureaucracy and less clarity on cost.

This shows that although the nature of ownership is important, choosing an appropriate legal model is not a solution in itself. Autonomy - the intended outcome of the restructuring of CSUs - is useful if it leads to better or cheaper service, but the real question is not which structure will make CSUs more autonomous, but which structure will make them more effective and successful?

Private ownership by investors or employees, where money operates as the main incentive, may be a good model - there is nothing disreputable about this if the position is clear from the outset. If significant capital or investment is required, private ownership is by some distance the easiest structure to adopt.

Many of the new enterprises set up recently in health and elsewhere in the public sector have wanted to maintain a public service ethos and have adopted a legal structure with a commitment to community benefit, rather than a structure driven by profit. Ownership of these new enterprises has often ended up, with support through the “right to request” initiative in the NHS or the Cabinet Office Mutual Support Programme, in the hands of employees. In the best examples, this creates a sense of engagement and responsibility, and a shared and collective accountability for delivering the enterprise’s aims. It is not, however, a model which lends itself to large scale enterprises and there may be an inadvertent tendency, with the best will in the world, for strategy to reflect the interests and beliefs of staff rather than those of customers.

Enterprises like these, which are not driven solely by profit, must have other ways of focusing people’s efforts and holding them to account for their performance.

Foundation Trust programme

The biggest move away from state ownership in recent years in the NHS has been the Foundation Trust programme. If hospitals were not to be owned by the state, then it seemed that their natural home was their local communities, with membership drawn from patients, staff and local people in a structure based on mutual principles. This meant building, through mutual ownership, an accountability to service users. This has not been universally successful but there are good examples, within the Foundation Trust sector and elsewhere in public services, where enterprises have been structured to make the voice of service users effective in improving services. The common feature to all these examples is that success depends on an ownership structure which drives performance.

Applying this logic to CSUs, there is no obvious reason why private ownership could not work, but this would present CCGs (which would be in the position of contract counterparty as opposed to owner) with the challenge of effective contract management, an area where the public sector has not always excelled. If a structure other than private ownership is proposed, the proposal must explain how the structure will drive performance.

Taking ownership

It is hard to see how autonomy alone would have any direct and significant effect on performance. Employee ownership – either on a commercial basis or with a commitment to community benefit - could work, subject to the reservations already expressed. Another model which might be considered is service user ownership – the challenge would be to harness the interest of a group of service users (most obviously CCGs) in a structure in which they influenced the direction and performance of the CSU and also to consider ways of linking direction and performance to the interests of users not of commissioning services but the services commissioned.

Whichever approach is taken to a particular CSU, there are potential advantages in a diverse market of providers if a market is to be created. However, clarity about how ownership will support effective service delivery is a key requirement which needs to be carefully considered and articulated.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.