A Conversation With...

Fully Funded CHC Commissioning in Lancashire and the North-West


A conversation between:
Paul Simic, LCA CEO & David Brownlow, NHS Programme Lead
CHC providers have received letters from their local PCT regarding FFCHC commissioning in their area. A number of providers have asked me to clarify one or two points. I thought the best way to explore the issues was to discuss it directly with the NHS Programme Lead, David Brownlow, and let you in on the discussion. LCA doesn’t always get it right (nor does the NHS) and the issues are complex. In the end, LCA is committed to representing quality providers and to effective partnership working and to constructive dialogue. The vision we are working for is a viable quality care sector delivering 21st century care and getting a fair deal to do so and where it is possible, bringing evidence to bear on key aspects of that dialogue (e.g., costs and impact).
LCA has a position statement re CHC on our website:http://www.lancashirecare.org.uk/members/pages/2445/continuing_health_care_

1. (PS)            David, as you will know, LCA put a lot of resource into challenging the NW procurement of CHC, which has been in train for many months now, and took the matter to the NHS Cooperation and Competition Panel in London after our seminar at the Reebok in spring 2011 at which there was an ad hoc CHC North-West group set up. We think the current process is unfair and is budget-led, not needs-led, and bears no relation to real-world costs or business viability. We fear that though it may or may not deliver short term gain to commissioners it will bring longer-term instability to the market and less choice in quality care to the most vulnerable. We think it is putting providers in a 'Catch-22' situation. What are your thoughts?
 (DB)           As you would expect, I strongly dispute these assertions and commentary. The NW procurement approach, using competition to allow providers to tender their best prices, facilitates providers to determine individual what price they need to ensure full compliance with the contract, fully meet assessed needs and remain viable business. The procurement has delivered a range of prices across the NW, with many providers able to match the lower end prices shared with commissioners as ‘affordability thresholds’ and other providers tendering higher prices where their business demand such. Our numerous discussions with providers confirm that providers have taken their time to consider this all very carefully and have not been rash, but have tendered prices they are happy with. The procurement was initiated, not to deliver lower prices, but to deliver consistency of quality standards, implement the NHS contract and to bring about pricing transparency. As public sector commissioners, it is at the same time an obligation to procure at best value, which for CHC in the NW has been through competition.
2. (PS)            Unfortunately, our case, that CHC fees need to be linked with 'actual costs' (referencing the Laing and Buisson Fair Price 'nursing' rate + the extra cost of CHC patients, including equipment and extra staff time / expertise), was unsuccessful in persuading the CCP to our view.
 (DB)          The Cooperation and Competition Panel spent much time looking at the balance of costs and benefits to both patients and taxpayers and found no detrimental ‘costs’ to either through the NW CHC procurement. It might be helpful if the LCA presented a more balanced view of what has been taking place so that providers can better understand the argument and analysis undertaken by organisations such as the CCP. It may not serve your organisation well to simply state that you could not ‘persuade’ the panel. The panel have a fixed approach to what they are assessing and determining in line with their terms of reference. I don’t see this as a battle or a fight Paul, but organisations coming at this from different perspectives. Commissioners want good quality capacity to meet assessed need. They must also procure this for the best price possible. This is no different from any other public service. It is also in the interest of commissioners to avoid commissioner strategies that could be detrimental to the care homes market to the extent that the market becomes destabilised. I believe that at the present time, allowing providers to propose their own prices, within a reasonably competitive environment delivers both a sustainable market and best value to taxpayers.
3. (PS)           Our view, as we understand things, is closer to the Courts' view of local authority commissioning, which says that "actual costs" must be given "due regard" (see the Pembrokeshire, Sefton and Leicestershire JRs). The apparent disjunction between LA and NHS commissioning may be resolved eventually (one way or the other).
   (DB)         The NW CHC procurement has allowed each provider to take their local costs into full account and give these due and proper consideration when determining their offer prices. This is a very tried and test approach to public and private sector procurement that works.
4. (PS)            To those providers who have asked LCA about whether they have to sign or not, our view remains as set out in the statement on the website above. In brief, it is this: If providers do not sign the contract there is no penalty. As you have said, David, "Nothing will ‘happen to a provider’ not wishing to ‘sign the contract’". Providers will not, however, be on the 'preferred' list, but may still receive placements, because it is down to commissioners' judgement about capacity. They will look to a 'preferred' list first but then will look to other capacity. 'Choice' does play a part even if there is not the same legal framework as with LA funded placements. You have said that commissioners may "continue using those organisations who decide not to sign the framework agreement (but) only where there are capacity issues within the preferred provider list or when a patient's care needs deem it necessary to do so and there are no other providers within the framework, that could provide the care needed on an individual level." Can you expand on this?
(DB)          Just to be clear, commissioners intend to procure new placements from framework providers. Across the NW, 75% of care homes registered with the CQC have participated through the NW CHC procurement to become a framework provider. We have received many contacts from those not coming onto the framework at this time, requesting advice about the next re-opening of the framework agreement, which will take place every 6 months to allow new and additional providers equal opportunity to become a recognised framework provider to NW NHS commissioners. Should a commissioner need to procure care home services outside of the framework, the commissioner is expected by the DH to use the Standard NHS contract for care home services, the terms and conditions of which have been incorporated in the NW framework agreement. Commissioners would prefer to have such contract terms already pre-agreed with providers and prices pre-agreed and transparent, in order to make better use of time when actual placements may need to be considered and agreed. Where Commissioners do need to issue such a standard NHS contract, they are likely to incorporate within this the same service specification and quality standards detailed with the NW framework agreement. It is suggested that it is makes sense for all providers expecting to attract any NHS funded CHC placements, to become a NW framework provider and as a result increase their visibility as a provider on the lists to be held by all NHS commissioners right across the NW.
5. (PS)            Our view is that, given what information we have from the Laing and Buisson 'Fair Price' work (also work done by PSSRU at Kent University on unit costs of care), the threshold figures given across the North-West are invariably too low. They are below extant CHC rates. There is no 'Fair Price' for CHC but it would seem to be a prima facie case that CHC residents will be, as a rule, more expensive to care for than the nursing 'population', so, whatever the CHC rates, they should be appropriately higher than 'nursing'. A reference point of some sort is the Laing and Buisson 'nursing' rate. The September 2008 L&B update gave £589 'floor’ - £665 'ceiling' for nursing care (provincial). To this would need to be added £x for inflation since (at 4-5% pa) to bring it somewhat up to date. So, although there is not a Fair Price for CHC as such, the current Fair Price for nursing, can be seen, not unreasonably, as an indicative floor price when looking towards 'standard' CHC. This is just meant to be a guide. Providers will have their own method of costing their care.
   (DB)       It is important to understand and reflect in advice to your members it is suggested, what the assumptions are within pricing models such as Laing and Buisson. For example, if L&B recommend a ‘fair price’ this is normally based upon a ‘reasonably efficient provider’ have a reasonably sized business, etc, etc. In reality, every business invariably different. Out NW CHC procurement recognises this and where some providers are able to operate more efficiently than others, the NHS would like to reward their efficiency and benefit from the lower costs to the taxpayer. On the other hand, the NW procurement also wished to include those less – efficient businesses as well as those which offer services which do cost more, due to the higher levels of care input to those CHC patients who have higher levels of need. To simply come out with a set price or rate for CHC is not considered to reflect the variability across this care homes business sector. This is not a nationalised service sector, but an independent sector full of entrepreneurial spirit and business differentiation and business leaders very focused on maximising returns, all through competition with each other. As stated before, the NHS CHC procurement has sought to accept and harness this.
6.   (PS)           LCA's advice to providers is that they should make it clear that they are happy to continue taking CHC clients on a case by case basis, at rates they judge are viable. The issue has been raised with us that a provider may sign because they feel they have no choice (effectively, under duress) and have been advised to record on any contract that this is their view.  What is your view of this?
(DB)      A contract signed under duress will not be accepted by commissioners. This is bad advice. Either a provider wishes to enter into an agreement with NHS commissioners or not. If a provider indicates that they have signed under duress, the agreement will not be accepted by the commissioner.
7. (PS)            Our advice to providers is that they should look at each potential resident's needs carefully, on a case-by-case basis, and consider the likely costs associated with meeting those needs. In the end, a provider has to make a judgement as to whether they can meet that person's needs and they have to set it in the context of meeting the needs of all the other residents through running a viable business.
     (DB)          Absolulely!
8. (PS)            Providers should be aware of the impact of accepting residents on fees lower than they judge reasonable ('reasonable' fees include 'profit', on capital and business operation): a) on private payers b) from any future review, by PCTs, of current clients' fees using any new fees as a benchmark; and c) pressures on directors' ability to meet fiduciary responsibilities if placements are knowingly accepted at rates providers or their financial advisors would judge unviable or uneconomic. The Courts fully recognised that businesses have to be viable and this means generating a 'profit' and the banks, clearly, have a view on that viability. The Laing and Buisson model identified a 7% return on capital and 14% on business operation as an element in the Fair Price spreadsheet.
(DB)         Absolutely. The NW CHC procurement needs providers to make an acceptable return on investment to remain viable to continue to be in business to offer capacity to the NHS.
(PS) Thanks, David, for your responses and perhaps we can extend this conversation as
further queries come LCA’s way both in relation to the Lancashire and adjoining
areas but also in relation to other providers and association across the North-West
who look to LCA as a relevant body for representation.
(DB)   It is proper that your members should consult with you. Providers are also free to contact myself or Alison Kerfoot directly if they would like any further clarification about any issues arising from contact with local NHS commissioners. We are and continue to provide such advice and find that this is helpful to many providers.
Broadly and away from the specific issue of FFCHC residents, we think that providers should have a process in place whereby they routinely ask for third-party contributions ('top-ups') for new residents. Lots of care homes, I know, don't like doing it (some 17% currently do in the Lancashire County Council area) but LCA's view is that you have no choice. To remain viable given the drop in Local Authority rates, and the squeeze from CHC funding, this has to be explored. Policy guidance accepts that 3rd party contributions are not just about 'sea-view' extras, they are about meeting core funding. The watchword for new residents in relation to such contributions is 'transparency'. There is some existing guidance (produced by the Social Care Partnership) on this and I'll help further if you want me to.
The ‘Small Print’
Just one bit of 'small print' to finish off with. LCA have looked into the matter in great detail, including detailed expert advice from Brunswicks LLP at the time we took the challenge to the Cooperation and Competition panel, and we have formed a view that we have shared with our members and other providers, in good faith, above and elsewhere. It is not a substitute for businesses using their own judgement, and their own professional advisors, on business-critical decisions.