The OFT will oversee NHS mergers. What does that tell us?


The Office of Fair Trading (OFT) yesterday published guidance on its role in adjudicating the mergers of NHS Foundation Trusts (FTs) and other NHS bodies.

A reading of the announcement, and of the ‘FAQ’ that it links to, reinforces much of what most worries (or if you’re not worried by it, you should be) NHS observers and activists about the way this government views and treats the NHS – and reveals a few new bits of information that do nothing to reduce those concerns.

What’s in a name?

A lot, really. The Office of Fair Trading tells you all you need to know, in a nutshell, about how this government regards health care – a business matter, a financial transaction. A trade, But let’s ‘unpack the nutshell’ a little.

‘It’s independent, Jim, but not as we know it!’

The OFT styles itself as ‘an independent competition authority’. However, for all its supposed independence it seems to have swallowed the government line on what’s good for us hook, line and sinker. Sheldon Mills, the OFT’s ‘Director of Mergers’, is quoted:

Preserving choice and competition can lead to better quality clinical outcomes for patients, as well as providing greater value for money for the taxpayer and commissioners

I don’t know about you, but to me that could be lifted straight from a Tory party campaign leaflet, or any of Andrew Lansley’s statements in the run-up to the Health and Social Care Act (NSCA), or any of Jeremy Hunt’s since.

(There seems to be a lot of it about, this business of entities calling themselves ‘independent’ while pushing a distinctly Tory line, especially where it concerns the NHS!)

The idea that competition is good for healthcare is simply stated (or regurgitated) as fact, with no hint that there are divergent opinions on the matter – and there are many.

It’s just business

In speaking of the entities under its remit, the OFT describes them as

NHS foundation trusts and other businesses.

It’s well-known to those who pay close attention to what goes on in the NHS that Foundation Trusts are indeed intended to be run as businesses (although slightly odd ones). But this isn’t obvious to those merely observing casually. To see it stated so baldly should serve as a wake-up call to anyone who, like me, believes that hospitals should be run on other principles than those of business and profit – and to pose the question as to what the government’s intent is in forcing every NHS Trust to become an FT by 1 April 2014.

What makes a ‘good’ merger?

In its ‘frequently asked questions’ document, the OFT poses itself the question

How will the OFT take into account the clinical and financial circumstances affecting the merger parties?

(emphasis mine)

But the resulting answers do not touch at all on the clinical results of a merger. The only things addressed are effects on competition. The OFT begins its answer

The OFT considers the effect of the merger compared with the most competitive counterfactual [alternative scenario] providing always that it considers the situation to be a reasonable prospect.

The only mention of clinical considerations is that the OFT says it might consider a merger that might otherwise be judged uncompetitive if

one of the merging NHS providers is failing to meet its duty to provide high quality and safe services to patients within the funding that is available..

In other words, if a hospital is failing, a merger might be allowed even though the merger is considered ‘uncompetitive’ – but if a hospital is not failing the clinical consequences for the people it serves are not even a factor in deciding whether the merger can proceed, as long as the competitive aspects are considered satisfactory.

So much for ‘taking into account the clinical circumstances‘. There is no room for consideration of whether a merger might be clinically worse for patients than what they already have, or of other adverse factors such as travel distance if a merged Trust decides to close their local hospital.

No, it seems that the OFT is so sold on the idea that competition is automatically good for patients that nothing else comes into the frame when it will make its decisions.

As if to banish any lingering doubts we might entertain about just what a hospital is, in the OFT’s ‘independent’ worldview, it adds this, when speaking of its criteria for judging the permissibility of a merger:

what would have happened to the sales of the business in the event of its exit

and refers to patients as ‘customers‘.

Apparently, the OFT is so convinced of the idea that competition is automatically good for patients that no other factor really matters, and wider considerations of what is good for patients barely figure.

For example, when listing the factors to be considered when deciding whether to refer a proposed merger to the Competition Commission (CC, which will soon become the ‘Co-operation and Competition Directorate‘ of NHS regulatory body Monitor), the OFT considers

whether an NHS merger between such providers is likely to reduce competition between providers of these services

worthy of its own section in the guidelines. But when it comes to what’s good for patients, only

patients’ willingness to travel

is considered, and only as one of a list of several criteria. Not whether it’s good or better for a patient to have to travel further, but whether they’re willing to do so – as if you have any choice in the matter if you’re ill and the treatment you need is a distance away.

The document does say that it will consider

views of local patient networks, relevant commissioners, and local health boards

but that’s only ‘consider’ – there’s no commitment to respect those views or wishes, and it’s only the views of ‘patient networks’ and not the good of individuals affected.

Since, as we’ve already seen, the ‘clinical and financial‘ circumstances to be taken into account in deciding to approve or block a merger are, in reality, only financial, it’s clear that the wishes of patients are really very far down the list of priorities.

So much for ‘choice’.

The clincher

The FAQ document refers to a decision the OFT has taken with regard to a merger as an example for NHS bodies to use as a guide in considering mergers. This example – decision ME/5351/12 on a proposed merger between Poole and Royal Bournemouth & Christchurch Foundation Trusts – provides a perfect illustration of the lack of genuine concern for patient safety and benefit.

However, since a key concern already outlined above is that a merger might be approved without considering whether it’s good, surprisingly the Poole/Bournemouth decision provides its illustration by not approving a merger. But the point is still clear.

The OFT’s decision acknowledges frankly that not allowing the merger to go ahead is likely to have adverse impacts for patients and potential patients:

absent the merger, each of them would need independently to work closely with their commissioners to establish how they can best achieve balanced budgets whilst causing the least detrimental impact to the delivery of patient services.

In other words, if the two Trusts do not merge, they argue that the only alternative will be ‘damage-limitation’ – finding the ways of meeting budgets that are ‘least detrimental’ (but not not detrimental!) to patient services – or, even more briefly, ‘If we don’t merge, patients will suffer!’

Whether or not this assertion by the Trusts is actually correct, the OFT doesn’t query or contest it.

But in it’s decision, at the end of a very long document, the OFT decides to block it anyway, and refer it to the Competition Commission because it has concerns over the impact of the merger on competition.

It accepts that not merging will be worse for ‘patient services’ – but blocks the merger anyway because competition trumps what’s good for patients.

If there was any doubt that what’s really at the heart of the way the government has ‘reformed’ the NHS via its HSCA 2012 is finance and profit, this surely removes every last trace of it.

Whatever lip service is given to competition as a way of improving patient choice and healthcare standards, when it comes to the crunch under this government and the Act it forced through in spite of outspoken disapproval from patient groups and all professional healthcare bodies, financial and competitive considerations beat clinical concerns and patients’ interests. Hands down. Every time.

It is said, ‘by their works you shall know them‘ and ‘actions speak louder than words‘. This government will say any old thing to shore up its rotten-to-the-core claims that the NHS is safe in its hands and that it has only the best interests of patients at heart – but if you ignore the words of Cameron, Hunt and co and look at what they’re actually doing via their legislation, the truth is inevitably clear:

The Tories hate the very ethos of the NHS and are doing everything they can to turn it into an enterprise devoted to making money instead of institution dedicated to providing the best possible health-care ‘free to all at the point of need’.

(If you want to help defend the NHS against the government’s sometimes obvious and sometimes creeping privatisation, please visit my CCGWatch page and consider making a donation.)

Revised Section 75 regs mire CCGs in a legal minefield

Minefield (n) /ˈmīnˌfēld/: an area laid with explosive devices, intended to prevent incursion or protect a valuable target

I’ve spent a pleasant couple of hours reading through the government’s hurriedly-drafted amendments to its ‘Section 75’ (S75) regulations. These new rules, which the government tried to slip through Parliament without debate or vote, were designed to force the new Clinical Commissioning Groups (CCGs) to invite private providers to bid on any NHS contract, were blocked by Labour with the assistance of a brave LibDem MP (I know, there aren’t many these days).

The government ‘paused’ its legislation with a promise to rewrite it to calm the fears of LibDem objectors, with health minister Norman Lamb claiming that the government took the objections extremely seriously and was committed to honouring its 2012 promises that CCGs would not be forced to include private providers unless they felt it best for the population they served.

In spite of this statement, many expected that the government would simply look for ‘better’ wording that would allow the LibDems to acquiesce while retaining its core aims.

They were right – and wrong.

The government has amended a few of the technical terms in its ‘secondary legislation’ – but it has also turned the regulations into self-contradictory mess that is designed to achieve its ends through fear of challenge and litigation rather than by plain fiat.


The new S75 regulations – a legal minefield designed to steer CCGs toward privatisation

The main change to the wording on competition looks ok on the face of it, albeit that the distinction is subtle. Instead of saying that CCGs must not engage in ‘anti-competitive behaviour’ that is

not necessary for the attainment of intended outcomes which are beneficial for people who use such services

section 10 of the regulations says that CCGS

must not engage in anti-competitive behaviour unless to do so is in the interests of people who use health care services for the purposes of the NHS

So, you would think that, instead of having to show that they’re declining a competitive process because there’s no other way to meet the needs of patients, CCGs now only need to demonstrate that it’s in their best interests. But a sub-paragraph of the same section still says:

(2) An arrangement for the provision of health care services for the purposes of the NHS must not include any term or condition restricting competition which is not necessary for the attainment of-
(a) intended outcomes which are beneficial for people who use such services

So the rules are contradictory. CCGs will still be extremely wary of limiting competition because the self-contradictory nature of the regulations results in a minefield of potential legal challenges.

A well-known NHS campaigner once told me that

the only thing the NHS is more afraid of than lawsuits is the risk of lawsuits

and the new regulations are designed (or turn out through sheer shoddiness and incompetence, or both) to be so self-contradictory that the only ‘safe’ decision a CCG can take is to include private bidders by default.

There are several ‘mines’ of this type in the minefield.

With regard to the inclusion of private bidders, the regulations still include the most critical provision:

(2) The relevant body must—..(b) treat providers equally and in a non-discriminatory way, including by not treating a provider, or type of provider, more favourably than any other provider, in particular on the basis of ownership.

In other words, excluding private providers because they are privately-owned is strictly forbidden.

Section 3 of the regulations says that, in procuring services, CCGs must

provide best value for money in doing so.

‘Best value’, by any genuine and rational definition, is not merely a question of ‘lowest price’. Best value for an NHS service should take into account such factors as the benefits of retaining expertise and infrastructure in public ownership, avoiding the risk to services and skills if a private provider goes out of business or simply decides that it’s no longer profitable to continue providing services, and preventing the fragmentation that must inevitably be a consequence of NHS services consisting of a series of private companies rather than a national, integrated body, and many other factors.

But by insisting that decisions ‘in particular’ cannot take account of ownership, the new regulations effectively strip all of these considerations out of the decision-making process – and turn ‘best value’ into ‘lowest price’. Any attempt to do otherwise will be subject to overturning by Monitor or legal challenge by would-be private providers.

There are other provisions of the regulations which reinforce the right of private providers to be included in any bids, whatever other parts of the new rules might say:

Award of a new contract without a competition

5.—(1) A relevant body may award a new contract for the provision of health care services for the purposes of the NHS to a single provider without advertising an intention to seek offers from providers in relation to that contract where the relevant body is satisfied that the services to which the contract relates are capable of being provided only by that provider.

So, the softening of one part of the regulations is completely offset by point 5, which says that the only reason a CCG can award services without either issuing a tender or going to the ‘any qualified provider’ (AQP) marketplace is if there is only one provider capable of providing the service in the first place. Since this would be true of almost no conceivable health services, in effect the regulations mean that all services must be competitively sourced – just without actually saying so in as many words.

Point 7 states:

a relevant body may not refuse to select a provider that meets the criteria established by the relevant body for the purposes of that decision, except where to do so would mean exceeding a limit set by the relevant body on the number of selected providers.

So, CCGs cannot impose a selection criterion to exclude privately-owned companies – and cannot exclude any companies that meet its selection criteria. This is a long-winded way of saying ‘private providers must be included’.

The regulations, in one stroke, still rip the NHS wide open to private providers and load the dice in their favour by making cost the only factor. As private providers will not be bound by the fair, national wage structures that NHS providers must adhere to, they will be free to cut wages and numbers to enhance profits while still undercutting NHS providers.

Once again, the government is creating a ‘race to the bottom’ whose only beneficiaries will be private shareholders.

As a sop to the LibDems and an attempt to deflect criticism and resistance, the new rules contain a new provision that completely contradicts the above regulations. Section 15 states that

(2) Monitor may not direct a relevant body under paragraph (1) to hold a competitive tender for a contract for the provision of health care services for the purposes of the NHS.

But this is completely contradicted by the earlier points already mentioned and by section 14, which says

Monitor may declare that an arrangement for the provision of health care services for the purposes of the NHS is ineffective

if a contract does not meet the conditions outlined above. It goes on to specifically and separately state that contravening item 10.2 is a reason for Monitor to declare a contract award ‘ineffective’. Item 10.2 is the section that says that:

(2) An arrangement for the provision of health care services for the purposes of the NHS must not include any term or condition restricting competition which is not necessary for the attainment of—

(a) intended outcomes which are beneficial for people who use such services

So, Monitor – the regulatory body – cannot insist that a CCG invites competition for a contract – but it can cancel any contract that is non-competitive (unless the CCG can demonstrate the strict ‘necessity’ of non-competition for the delivery of a service, which is basically impossible).

The government’s original secondary legislation under S75 was criticised for being vague, shoddily written and for forcing CCGs to advance the privatisation of the NHS.

The only substantive change in the amended regulations is that the government uses shoddiness and vagueness to create a minefield that is designed to scare CCGs away from any course of action that does not include private providers – and to tip the scales in favour of those private providers.

Private providers will have deeper pockets than CCGs and will have far less fear of legal expenses. CCGs are intended to feel that their only course is to play safe and include private providers in every tender, because the various contradictions in the revised regulations make it impossible to be sure that any other decision won’t be overturned either by Monitor, or in court at significant expense.

True to form, the government is resorting to weasel words, subterfuge and superficial changes to try to defuse opposition enough to get its way.

The intent and the threat of the original legislation has not changed one jot – and all those who love the NHS need to make their voice heard to make sure that the amended version is blocked even more emphatically than the first one.