Virgin ousts Sirona CIC in Bath & Avon – Is this the beginning of the end for Public Service Mutuals?

by Craig Dearden-Phillips 19/08/2016

Today it was announced that Virgin is the preferred bidder for a £500m, seven year contract to provide community health services.

This means the ousting of incumbent Sirona, which was set up five years ago as an employee-led, Public Service Mutual (PSM), operating as a community interest company (CIC).

It’s too early at the moment to comment on the specifics of this tender – how close it was, what Virgin are offering and whether the commissioning process has been fair to all.

But what we do know is that one of the leading PSMs, working alongside a host of local VCS and NHS bodies, has lost in a major competition with the public sector.

So is this the beginning of the end? 

I would argue not. It’s important, at these times, to remind all that many of the PSMs have successfully defended contracts and continue to grow at an impressive rate. 

Only recently, I was celebrating a brilliant contract win by Community Dental Services against both public and private sector competition in Essex.    

There will, in a competitive situation, always be times when the PSM sector loses.

However, I am worried by the Sirona loss. 

It sits beside a number of recent, less publicised difficulties for PSMs operating in the healthcare sector undergoing massive consolidation under local ‘Strategic Transformation Plans’ (STPs).  

The STPs are leading to either rapid marketisation, for which many PSMs remain under-prepared, or, worse still, a level of uncertainty about the future shape of NHS organisations which makes planning extremely difficult.    

At its worse, this chaos, coupled with the financial incentives created by local NHS deficits, can lead to very odd decisions like the contract withdrawal suffered by Spiral CIC, a nationally renowned services, with Fylde NHS Trust, which had gaps to plug.

But it’s not just the environment that worries me.  

The PSMs themselves have, since their formation, evolved at quite different paces. The most successful are quick off the blocks in reforming internal culture away from public sector norms, rapid to win new contracts to guard against future loss and are investing early in new care models that use ICT and behaviour change approaches to best effect.   

Ironically, Sirona was one of this leading group and it remains to be seen if they can survive in some form as a smaller concern.  

Behind the group of pace-setters is a long-tail of organisations, large and small, that have been slow to move the NHS workforce forward, have failed to build new business and have not invested in tomorrow’s business models. 

There hasn’t, in all PSMs, been the quality of leadership, commercial skills or simple ambition required to become the best.  

Which, perhaps, is inevitable, given that it is only a few years since these bodies left the mainstream NHS. It is this long-tail that will be most vulnerable to future bids by the likes of Virgin and others who can offer all of these things based on a strong balance sheet and track-record in other sectors. 

I write today confident that today’s story will be the first of many. Too many PSM organisations have assumed they are well-placed and therefore not had a hard enough foot on the pedal on either growth or change.   

Is the slow decline of the PSM sector at the expense of Virgin and other inevitable?

Definitely not.  

The most successful PSMs, like City Partnerships, Community Dentistry Service (CDS), Chime CIC and Provide CIC, show that when an organisation really pushes its innovative and commercial potential to the next level, it can defend and win territory.    

These organisations combine hard-nosed commercialism with social mission in the right ways.  

They know that to deliver on the social side they have to be commercially superior to all-comers.   

They work with banks or social investors to get the funds they need to succeed. 

This stands in contrast to a slight sense of entitlement you sometimes come across in which people assume that being ‘for social good’ exonerates the organisation from the need to be the strongest performer on all counts.

So, whilst the Sirona loss isn’t the beginning-of-the-end, it is probably the ‘end-of-the-beginning’

What do I mean? 

The PSM sector is still quite young. These organisations were born a maximum of 5 years ago. They have had to grow up very quickly. Some are not really making it to ‘adulthood’ as mature organisations.  

Most are at the end of their period of grace as preferred providers and are now facing the full storm of private competition (and often being caught short).     

My hope out of all this is that the 100 or so PSMs that have been born since Sirona was formed early in this decade will smell the coffee and do the following things quickly:

  1. Strengthen their SMT Boards with people with genuine commercial track-records rather than public-sector types who, through no fault of their own, are entirely unprepared for the ferocity of competition when it comes alone.
  2. Collaborate with social investors to develop innovative new services, to improve their businesses and get the funding on board that makes them credible to commissioners.
  3. Accelerate change within the workforce so the organisation is made efficient: more empowerment for staff, fewer, better managers, more appropriate Terms and Conditions to reflect the new world.
  4. Diversify away from the key founding contract so that losing it isn’t going to be fatal to the venture going forward.
  5. Invest as much time and energy into becoming a commercial success as being ‘social’ in purpose – this only means anything if you exist in the first place.

Stepping Out helps PSMs who want to make the most out of their potential, socially and commercially. 

We do this through the Big Potential Fund (on which we are a core Provider) so if any of this resonates, whether you are a PSM or charity, please contact me personally.



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