IS deal includes minimum income guarantee

The deal governs NHS-commissioned activity in 10 independent sector providers (ISPs) until the end of 2021/22. It also offers a surge safety net for the health service. The agreement was announced on 10 January, and NHS England and NHS Improvement said guidance would be issued soon on the funding of the deal and pricing.

Further information has emerged with the publication of a letter from NHS chief executive Amanda Pritchard (pictured) to health secretary Sajid Javid asking for his consent to the deal, and seeking ministerial direction. In the letter, Ms Pritchard acknowledged that the agreement carried risks regarding value for money.

In return for ISPs’ commitment to make their resources available at short notice if the NHS locally is under threat of being overwhelmed, ISPs asked they are guaranteed a minimum income, and if a surge is activated they are paid on a not-for-profit cost recovery basis.

Normally, the NHS pays only for activity that is carried out, she noted, but agreeing to the minimum income guarantee meant a material risk that it pays for activity not delivered. In mitigation, sensible steps had been taken, she said. The guarantee has been set at 90% of the value of NHS work delivered in the relevant facilities in the best four weeks between October and December 2021. The NHS will reimburse ISPs for work valued at more than the guarantee.

The NHS will also pay ISPs a 10% premium on the standard NHS tariff for work above the value of the income guarantee, with further premia for more complex activity, such as cancer treatment. Ms Pritchard said this would incentivise ISPs to deliver care they would not normally do because they believe it is not profitable at standard tariffs.

Overall, though, the minimum income guarantee is below a reasonable assumption for NHS-commissioned activity during the winter, she added. It is estimated payments will total between £75m and £90m a month – roughly equivalent to the value of elective activity delivered by broadly the same group of ISPs in the final quarter of 2020/21.

In the event of a surge being triggered – when the ISPs would stop all private work – the NHS estimates this would cost the taxpayer around £175m a month. Ms Pritchard said this is significantly more expensive on a per-bed basis than at an NHS site and there would be less certainty of staffing capacity. There would be an additional risk in terms of maximising the use of the extra capacity due to the logistical challenge of moving patients to ISP sites. These risks would be mitigated by requiring seven days’ notice and sign off by NHS England and the relevant region.

Mr Javid subsequently issued a direction to take forward the scheme, acknowledging the issues the scheme causes under Managing public money regulations.

He added: ‘As we continue to respond to the Covid-19 pandemic, in particular the emergence of the Omicron variant, I believe the need to protect NHS services and prevent a further reduction in NHS capacity are compelling reasons to justify their [the arrangements] introduction. The government is fully committed to ensuring the NHS has access to all the resources it may need to respond to the ongoing wave of infections caused by this new variant.’