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The Future of Public Service Mutuals is in the Balance

by Craig Dearden-Phillips 19/09/2016

This week we heard that SEQOL, the Public Service Mutual offering integrated health and social care services in Swindon is to close following the loss of their core contract to the NHS. This brings to three, if you included Sirona CIC and Spiral CIC, the number of Public Service Mutuals that have, in the last six months, been cut off at the knees by contract losses. What looked like exceptions is now looking worryingly like a trend.

So what sense do we make of this? There are two possible takes on this. One is that it is inevitable that not all Public Service Mutuals will succeed in the market. Some will inevitably lose contracts due to a failure to improve productivity or commercial capability. Not all Public Service Mutuals will have the leadership, finance or inventiveness to survive in harder times.  

The other is that what we are seeing here isn’t some process of natural selection, led by the market, but a by-product of the wider efforts of the NHS to save its own services, in the name of integration and efficiency.  

Let me explain. In most parts of England, there is now something in place called a Sustainable Transformation Plan (STP). These were ordered to be drawn up when it became clear that the Five Year Forward Plan (the idea for integrated health and social care services led by the NHS CEO Simon Stevens) wasn’t making fast enough progress. Each area had to come up with its own STP quickly. The approach of many STPs is to put all health and social care services under the effective control of NHS Trusts, often in disregard of the lamentable record of most Trusts in both community health, preventative health and social care.

All of this has taken place in the context of the majority of NHS Trusts falling into significant deficits, even the better ones, due to the pressures on costs and number of people using the NHS. Likewise, Councils have been struggling with social care, with 26% fewer people now in receipt of council-funded care than was the case 5 years ago, according to a recent Kings Fund report. The net result has been public bodies that, five years ago, were comfortable (if not happy) to see the formation of break-away organisations, now looking upon those same companies as sources of much-needed funding for their core operations.   

Unfortunately, the fact that many of the PSMs have vastly improved the services from where they were in public sector doesn’t appear to be counting for much in these decisions. The PSMs, particularly those in health, seem to be falling victim to larger forces which are sucking them back into the NHS. 

Of course, this isn’t the only trend. The other is private competition. In some parts of the country, notably Bath and Gloucester which was won by Virgin from Sirona, a different dynamic is in place.  Here we see private operators promising significant investment in new delivery models which the PSMs cannot, pound for pound match, even if they had reasonable financial backing.    Other PSMs we know have had similar experiences bidding against the private sector which uses its financial power to offer benefits to public commissioners which, in the short-term, prove difficult to resist. This includes low-balling on price, knowing that this will eliminate the current competition well before the next tender, at which point, as an incumbent, it may be easier to improve margins.    

So how do we respond to all of this? It is important, even when faced with larger factors, not to accept defeat. Some PSMs continue to thrive and see off competition. It is clear that, particularly in social and healthcare services, that neither the public or private sector have an offer that cuts through current problems either. Also we have, in effect, a new Government which may, possibly, have a different approach to public policy than we have seen the last six years which has been, on the one hand, to encourage PSMs but without much thought to how they develop as long-term providers. Compared, say, to the support given to Academies and Free Schools, the offer to PSMs has been minimal.

But this may change over time. We must remind Government that if it wants proper reform it has to back those delivering it, as it has in education.

From their own point of view, PSMs have to carry on proving their value, as many do every day, taking nothing for granted, improving their offer and commercial capability. There are plenty of inspiring examples of organisations that are growing fast and looking forward five to ten years with confidence: CHCP CIC, Bevan Healthcare, Provide CIC, Community Dental Services CIC – to name just a handful.

Back to where I started, I am, like many, spooked by what has happened to SEQOL, Sirona, and Spiral, not least because of the deterrent effect it may have on others looking down this path. I suspect that the outcomes in at least two of those cases were not particularly fair. And I think the conditions leading to it are prevalent across England. However, I don’t think it is inevitable either and my guess is that most PSMs will survive. Whether they will be joined by more in the future is very much, at this point, a decision for Government.  

But the future of Public Service Mutuals as a significant element in public service reform is very much in the balance.  

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