The Provider Selection Regime – First Panel Decision

On 15 May 2024, the Independent Patient Choice and Procurement Panel handed down its first decision as to compliance by a relevant authority with the Health Care Services (Provider Selection Regime) Regulations 2023 ("the regulations").

By way of background reminder, the Regulations came into effect on 1 January 2024 to govern the procurement of health care services, and to allow a more flexible approach to the award of contracts for those services carved out from the main procurement legislation . It sets out a framework for how decisions as to the award of healthcare contracts should be made, and allows relevant authorities to make direct awards of contracts without needing to follow full competitive procurement procedures in certain cases. The Regulations set out a process for provider selection decisions to be reviewed, initially internally and, if necessary, via escalation to an independent panel. The panel is known as the Independent Patient Choice and Procurement Panel (“the Panel”) and this is the first decision that it has published since the new regime came into existence.

The provider selection process

The relevant authority under scrutiny was NHS North East and North Cumbria ICB (“the ICB”), which had embarked on a provider selection process to identify a supplier for its online ADHD assessment, diagnostic and management service. 

The ICB’s incumbent provider for these services was Psychiatry UK Limited. It dealt with referrals from some 1,850 patients in 2023/24 and the contract value was in the region of £1.1m. The contract was due to expire on 31 March 2024 and the ICB decided to award a new contract to Psychiatry UK to follow on directly from the expiry of the existing contract.

The ICB relied in this regard on its ability to make a direct award under the Regulations where it believes that an incumbent provider is satisfying its existing contract and is likely to deliver services to a sufficient standard under a new contract for the same services. This is known as Direct Award Process C, and can only be used where the new contract is not materially different to the existing contract. The ICB published a notice of its intention to award on 26 March 2024 and launched the required 8-working day standstill period.

The challenge

On 28 March 2024, an alternative supplier of ADHD services, The Owl Centre Ltd (“TOC”) wrote to the ICB to request an internal review of the decision, asserting that it had not been taken in compliance with the rules on Direct Award Process C. The ICB conducted this review and wrote to TOC on 4 April 2024 to confirm that it intended to uphold its decision.

TOC therefore requested that the Panel review the selection decision. In accordance with its published case acceptance criteria and eligibility requirements, the request was accepted by the Panel which requested submissions from both parties. In the meantime, the ICB agreed not to sign the new contract with Psychiatry UK.

TOC’s submissions focussed on the ICB’s duty under Regulation 4 to ensure that when procuring health care services, it should act with a view to (a) securing the needs of the people who use the services, (b) improving the quality of the services and (c) improving efficiency in the provision of the services. TOC asserted, among other things, that a direct award approach for a contract of this magnitude led to a heightened risk of failure and lacked competitiveness in terms of both cost and ensuring optimal patient care and that Regulation 4 had been breached as a result. Alternatively, TOC asserted that Direct Award Process B should have been used. Direct Award Process B is available in respect of services where patients have a right to choose, and allows the relevant authority to award multiple contracts to allow patients to benefit from that right.

The ICB provided evidence of its decision-making process and confirmed that its desire to award the contract to Psychiatry UK stemmed from a wish to ensure continuity of services while it reviewed its ADHD service specifications for the entire ICS. It noted that it intended to conduct a new process for alternative arrangements from 2025/26 and that the recent introduction of the Regulations meant that it hadn’t had time before 31 March 2024 to carry out a full assessment of potential alternative providers. The ICB confirmed that it intended to use Direct Award Process B at that stage, but hadn’t had time to revise the specification to adapt to a patient choice model yet.

The ICB also confirmed to the Panel that it was aware of patients’ individual right to choose, but that this could still be achieved via the fact that potential new providers of ADHD services could apply to be accredited via an online platform. Once accredited, those providers would also be able to receive referrals from GPs.

The Panel’s decision

The Panel found that the service is one where patients have the legal right to choose their provider . In light of that, the Panel considered whether it was possible for a relevant authority to use Direct Award Process C, or whether it had no choice but to use Direct Award Process B and give contracts to all capable providers. Given the clear wording of the Regulations, it found that in this situation, the relevant authority was required to use Direct Award Process B and was not permitted to use Direct Award Process C to award only one contract to a sole provider.

The Panel therefore concluded that the award of the proposed contract to Psychiatry UK would be in breach of the Regulations and recommended that the ICB abandon the current provider selection process. It noted that in the meantime, patients would be able to continue to use any other provider who holds a contract for these services with any other ICB in the county.

Commentary

This is a perhaps unsurprising decision from the Panel given the clear wording of the Regulations which state at Regulation 6(4) that “where the proposed contracting arrangements relate to relevant health care services in respect of which a patient is offered a choice of provider… the authority must follow Direct Award Process B”. The ICB’s protestations that it hadn’t had time to implement a new process given how recently the Provider Selection Regime came into effect appeared to carry no weight at all. It is helpful to see how quickly the Panel is currently able to turn around review decisions following a referral, and this will no doubt be the first of many decisions we see being handed down over the next few months.

Our series of videos on the Provider Selection Regime is available here.