R (QSRC Limited) v National Health Service Commissioning Board (NHS England) and another [2015] EWHC 3752 (Admin)

Summary

The claimant, a healthcare services provider, applied for judicial review of a decision by the defendant commissioning board, NHS England (NHSE), to refuse to enter into an interim contract with it for specialist services pending a national procurement exercise on the basis that it was not an "existing provider" of healthcare services.  The court held that the decision was not unlawful.  Although the claimant was an existing provider under Monitor's Guidance, NHSE had provided objective justification for its decision and had complied with the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 (No 2), SI 2013/500, regulation 3(2).  

Background

The claimant is a healthcare services provider of specialist "gamma knife surgery treatment" at University London College Hospital NHS Trust (ULCH), delivered at the National Hospital for Neurology and Neurosurgery (NHNN).  The claimant did not hold an NHS standard contract for this service, but rather this service was funded by the former PCTs under "individual funding requests" (IFRs).  The claimant argued that PCTs had funded or agreed to fund over 50 patients for treatment by the claimant at NHNN.  Following the dissolution of the PCT in April 2013, responsibility for commissioning this service transferred to NHSE.  Pending its completion of a new procurement process for this service, the claimant anticipated that it would be awarded an interim contract with NHSE to continue providing treatment to patients until the procurement exercise was completed.  NHSE decided not to commission the claimant for the service on an interim basis. It argued that two hospitals already provided this service under NHS standard contracts and that these hospitals already fully met the demands for this highly specialised service within the locality. In the proceedings NHSE relied on Guidance issued by Monitor in relation to the commissioning of Radiosurgery Services which stated that interim services should be procured from "existing providers" - which NHSE argued the claimant could not be on the basis of its funding through IFRs alone – unless objective justification could be provided for the decision not to award to an existing provider.  The claimant challenged NHSE's decision on the basis that it had failed to comply with regulation 3(2) of the 2013 regulations by treating some providers more favourably than others.  

Key issues

The court's involvement was purely concerned with the legality of the decision not to agree an interim position, rather than to rule in respect of long-term provision of NHS-funded gamma knife treatment.  The court also drew out from evidence that NHSE has inherited a range of contractual arrangements following the dissolution of the PCTs and accepted that finalising these arrangements would take time.  Firstly, the court examined what is meant by "existing provider" within the meaning of Monitor's Guidance.  It accepted that, on a simple interpretation of the Guidance, the claimant must be deemed to be an existing provider despite not holding an NHS standard contract.  On this basis, NHSE would have been expected to procure services from the claimant unless they could provide objective justification for their decision not to do so.  The court therefore examined whether NHSE had provided such objective justification. NHSE's reasons were that a) awarding a contract to another provider, when two hospitals already fulfilled current demands, would have exacerbated the problem of oversupply in the area whilst failing to address the issue of undersupply outside London, and b) there were at least 9 other potential providers in the locality that did not hold NHS standard contracts over which the claimant would receive preferential treatment. The court accepted these reasons as objective justification.  Significantly, the court applied regulation 3(2) of the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 (No. 2) (SI 2013/500) and held that awarding a contract to the claimant over the other potential providers would amount to unequal treatment and would therefore breach regulation 3(2).  The claimant's application was therefore dismissed.  

Implications of the decision

a)    Interpretation of regulation 3(2)

The decision offers the first interpretation of regulation 3(2), and actually offers two separate applications of the regulations.  Firstly, the claimant challenged on the ground that NHSE's refusal to contract with it on an interim basis was a breach of regulation 3(2) as it alleged that the two hospitals with NHS standard contracts received favourable treatment.  This was not accepted by the court.  Secondly, the court accepted as a reasonable justification for not following the Monitor Guidance NHSE's contention that such a contract, were it to have been awarded to the claimant, would itself have breached the regulations as it would have amounted to preferential treatment of the claimant over at least 9 other potential providers in the locality. 

b)    Status afforded to Monitor's Guidelines

In its judgment, the court stated that Monitor's Guidance "changed the landscape…in relation to the way the issue of other providers needed to be addressed" (para.101). The court acknowledged that, until the Guidance was issued in April 2014, it was a legitimate position for NHSE to take that a provider engaged simply through IFRs would not have been a party with which it would be obliged to treat.  In this sense, the Guidance has changed the status that "other providers" – meaning those who provide services under other arrangements than an NHS standard contract – are afforded.  However, the court emphasised that the Guidance "is not to be read as statute and must be read in its proper context…and, whilst persuasive, [it] is not prescriptive." (para. 90) The court also highlighted that the Guidance's "expectation" is not phrased in mandatory wording, thus allowing some level of discretion beyond its wording. 

c)    Implications for future decisions

The decision provides a basis on which NHS commissioners may be able to objectively justify a decision not to award a contract to a provider whilst complying with the regulations.  Indeed, the decision may allow NHS bodies to use compliance with the regulations itself as objective justification for refusing to contract with a provider.  The decision also offers a clear interpretation of "existing providers" within the meaning of Monitor's Guidance, albeit that the Guidance was service specific and not the general Statutory Guidance.  The court did not confine its interpretation of "existing providers" to subcontractors, which had been the position in the case which gave rise to the Guidance in question, but also included those who provide services under IFRs albeit at more than a marginal level.  However, the approach set out in this case may also be relevant to CCGs considering options at the expiry of existing Independent Sector Treatment centres.  In circumstances where such contracts come to an end and are not put out to fresh competition, this case at least raises the argument that refusing to offer a continuing contract on the same basis as contracts for other NHS providers in the same locality would be open to challenge.