How can we help you?

In July this year the Department for Health and Social Care (DHSC) published its response to the February 2022 supplementary consultation on the Provider Selection Regime (PSR) that has been developed by both the National Health Service (NHS) England and the DHSC and proposes a new set of rules which would govern the purchasing of healthcare services.

The PSR is designed to be a set of flexible arrangements that support the NHS ambition for greater integration and collaboration between NHS organisations and their partners. One of the main aspects of the PSR is the departure from the requirement under the current procurement rules that all contracts for NHS services should be advertised and awarded through competitive tendering and processes.

It was agreed that this approach created barriers to integrating healthcare services and disrupted stable collaborations with existing trustworthy providers causing legal and administrative costs and uncertainties – to the detriment of overall service provision..

The PSR will be introduced onto the statute books via regulations made under the Health and Care Act 2022. Once the PSR is in force, it will replace the Public Contracts Regulations 2015 and the Procurement, Patient Choice and Competition Regulations 2013 for the procurement of healthcare services by relevant authorities.

What is the PSR?

The supplementary consultation regarding support and implementation of the PSR opened on 21 February 2022 and concluded on 28 March 2022. During this period, a total of 124 responses were received. DHSC also held webinars to engage with respondents. DHSC's subsequent response to the consultation covered seven areas:

1. The Scope of the PSR 

DHSC expressed appreciation for the positive feedback received from the majority of respondents regarding the suggestion to incorporate CPV codes into the PSR. This inclusion aims to provide clarity on which services fall under the jurisdiction of the PSR. 

Some respondents noted there were services without a specific code. Given the international nature of the classification system, the DHSC acknowledged there were some services procured for the health service in England that do not clearly align with a specific code. In response to these concerns the DHSC will include more generic CPV codes so that certain services that do not clearly align with a specific CPV code will still fall within the PSR. 

2. Mixed procurement under PSR

Some respondents felt the definition of 'healthcare' for defining the scope of the PSR did not include services such as community health, substance misuse and sexual and reproductive health. Unsurprisingly, these respondents suggested that these examples of services should be included. In response to these concerns the DHSC makes it clear that these services are in scope and therefore can be purchased under the PSR in a standalone manner.

The DHSC addressed responses regarding procurements that blend healthcare and social care elements, such as services for homelessness, domestic abuse support, and rehabilitation. They also acknowledged instances where healthcare services were combined with non-social care services like IT and digital solutions. In response, the DHSC clarified their intention that the PSR could be utilised to procure healthcare services alongside goods and services that fall outside its scope, but only when the primary focus remains on healthcare.

3. Defining a ‘considerable change’

The feedback received following NHS England's initial consultation on the PSR largely supported the idea of allowing decision-making bodies to maintain existing arrangements in specific situations. In seeking input through the consultation, the DHSC explored the concept of using a combined threshold that encompasses both a fixed change in contract value (exceeding £500,000) and a percentage change in contract value (25%) as the criterion for defining a 'considerable change'.

  • 48% of respondents agreed that a 'considerable change' should require meeting both the fixed amount and percentage criteria. The DHSC clarified that such a change would only occur if it substantially altered the contract's nature, particularly when it involved delivering different services. 
  • 44% of respondents disagreed with the £500,000 threshold, citing concerns that minor changes in large contracts might trigger PSR provider selection. The DHSC clarified that both criteria must be met for a 'considerable change' and thus retained the £500,000 threshold.
  • Opinions on the 25% threshold were mixed, with some suggesting a 50% threshold for consistency with the PCR 2015. The DHSC rejected this idea, aiming to keep the 25% threshold to encourage consideration of new providers and adaptability to market developments.

4. Establishing lists of providers to offer patient choice

DHSC proposed that where decision-making bodies decide to offer patients a choice of a limited number of providers for services for where patients do not have a legal right to choose, they must use prescribed decision-making criteria to select the provider(s) from which patients can choose.

Where decision-making bodies do not intend to limit the number of providers from which patients can choose, the decision-making body may purchase the service from any provider that meets the standard qualification criteria without a provider selection process.

5. Contract variations

62% of respondents agreed with DHSC's proposed list of contract variations which would not necessitate the reselection of a provider using the PSR (such as using decision-making circumstance 2 (award to the most suitable provider without competitive tender) or decision-making circumstance 3 (competitive tender) to select a provider).

It again became apparent that there was a lack of clarity in regard to the percentage (25%) and fixed amount (£500,000) thresholds (both of which must be met for a contract to be varied to the extent that  a new selection under the PSR should be undertaken). Respondents stressed that for a contract to be deemed as having varied "considerably" the cumulative change in the lifetime value of the contract should exceed both the fixed threshold (£500,000) and 25% or more in of the original lifetime value. DHSC made it clear in their response to the consultation that this is something that is consistent with their proposal and something they will take forward.

6. Transparency requirements

As stated, the aim of these transparency requirements is to ensure that the outcomes of decisions are made public and that sufficient scrutiny is applied to ensure the PSR is followed in good faith. Respondents expressed some concern that publishing the decision-making body's rationale for selecting a provider could lead to publishing commercially sensitive information. In response to this the DHSC has made it clear that the decision-making body will not be required to publish confidential or commercially sensitive information in order to comply with the PSR.

Respondents were also concerned about the administrative burden of the transparency requirement. As a result, DHSC are proposing that the Intention to Award Notice will include a statement explaining the decision-making body's rationale for choosing the selected provider with reference to the relevant key criteria.

7. Independent review of decisions

The DHSC have recognised that there is potential merit in introducing a greater degree of independence into the review of decisions made under the PSR. To this end, DHSC and NHS England intend to establish a panel, chaired by an independent person, who can look at and advise on issues relating to patient choice regulations (that will be made under new patient choice provisions inserted by the Health and Care Act 2022) and the PSR.

What is in the consultation response? 

Pending approval through parliamentary procedures, the DHSC intends to implement the PSR by the end of this year.

Until this implementation occurs, healthcare contract awards continue to adhere to the existing guidelines, specifically the Public Contract Regulations 2015 and the Procurement, Patient Choice, and Competition Regulations 2013. Consequently, if any healthcare procurement process is initiated under the current regulations, it must be finalized following those same rules.

What's next?