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Mental health hospitals step into new commissioning territory

The NHS reforms implemented on 1 April mark a major move towards centralisation of procurement of secure and other specialised mental health hospital services in England, which is now one of the tasks of the new NHS Commissioning Board under what promises to be a highly centralised commissioning regime.  

 
Under the reforms, the new centrally-based NHS Commissioning Board takes over all secure commissioning: a task formerly undertaken on a regional basis. The Board will also hold commissioning responsibility for an expanded range of so-called prescribed services many of which had been (up until last month) commissioned on a local basis via the now defunct Primary Care Trusts (PCTs).
 
Services which will now be commissioned on this central basis will include: adult eating disorders; mental health for deaf adults; gender identity disorders; severe obsessive compulsive disorders; severe personality disorders; neuropsychiatry services; and tier 4 child and adolescent mental health services. The move will have the effect of significantly narrowing the range of mental health services which will be left to the newly emergent Clinical Commissioning Groups (CCGs), which have replaced PCTs.
 
Writing in a new report from healthcare intelligence provider Laing & Buisson, Mental Health Hospitals & Community Mental Health Services UK Market Report 2013, healthcare economist William Laing has said that the centralisation move means both NHS and independent sector providers of secure and other specialised services will face a step-up in existing pressures on both prices and operating margins, as variations in pricing become transparent.
 
What it means in practice, according to Laing, is that a single agency – the NHS Commissioning Board – will for the first time have an England-wide picture of pricing and service standards. With this information at its fingertips providers can expect to see a much greater scrutiny of prices, performance and value for money, undertaken by experienced former regional commissioners who have been recruited by the Board. It is already understood that mental health leads at the Board intend to look to each provider to sign a single, England-wide contract offering a consistent national price for each particular specialist service. Having carried out this process, the Board will then seek to rationalise price variations between different provider organisations.
 
With NHS purchasing accounting for 87 per cent of independent mental health hospitals’ revenue, the Board has acknowledged that the move to consistent pricing across the specialised services portfolio has significant inherent risk with the potential to “destabilise providers”, but the Board will work to avoid this.
 
Laing says: “This process clearly represents a threat to those independent sector providers with outlying prices, though the quid pro quo is that NHS providers will – according to the assurances of the NHS Commissioning Board – be subject to the same financial disciplines, meaning that independent sector providers stand to gain volume as long as they are able to operate more efficiently than the NHS.”
 
Other non-specialised mental health services, including non-secure, step-down and community based mental health care, will be commissioned by the new Clinical Commissioning Groups, where providers will typically have to form new relationships with the CCGs and whatever commissioning support agencies they take on. Few predictions can be made about how CCGs will step up to their task.
 
Elsewhere in the new study, Laing & Buisson reports that the independent mental health hospital sector, which was until recently an area of rapid, has now ground to a halt as NHS funding has plateaued. It generated revenues of GBP1.14bn in 2012 (2011: GBP1.13bn) with a portfolio of 9,916 beds as of January 2013. Of this market value, secure treatment accounted for approximately GBP500m in 2012 (for medium and low secure combined). Acute psychiatric treatment accounted for approximately GBP300m with brain injury making up a further GBP100m. The report claims that these figures have remained consistent for the past three years. The GBP1.14bn generated by the independent sector represents 30 per cent of the GBP3.8 total UK expenditure on mental health hospitals, nearly all of it funded by the NHS.
 
The four largest providers – Partnerships in Care, Priory Groups St Andrews and Cygnet Healthcare – operated 42 per cent of independent mental health hospital beds as of January 2013, generating an estimated 58 per cent of sector revenue in 2011. By this measure, it has a similar market concentration to that of the acute medical/surgical hospital sector.
 
The great bulk, 87 per cent, of all independent mental health hospital revenue is generated via contracts with the NHS. A further six per cent is paid via PMI and seven per cent comes from self-payers. These operators are therefore highly dependent on continued NHS outsourcing, to the tune of GBP989m in 2012.
 
Significant changes in the way in which the NHS will commission these specialist services going forward comes on the back of “erratic” decisions reported by many providers in the latter part of 2010 and 2011. These same providers have reported a hardening of occupancy in 2012 and early 2013, though overall occupancy is down from past years at typically between 75 and 80 per cent.
In a new departure, the report raises the prospect of much greater involvement of the independent sector in community based mental health services. The report estimates that independent providers currently generate revenues of about GBP100m a year from community mental health services, being just 3 per cent of total NHS spending of about GBP3.6bn. Hitherto, independent providers have focused almost exclusively on hospital treatment, especially for “difficult to place” patients. But government moves to promote “parity of esteem” and greater choice in mental healthcare mean that they – and other healthcare providers, could diversify into community mental health in the medium term future.
 
These government moves include: the extension of payment by results to mental health services – which is expected to happen first for community based services; and the extension of the Any Qualified Provider principle to mental health, in particular the government’s intention to give mental health patients the right to choose from any provider in England when they are first referred to see a specialist in secondary care, starting in April 2014. This is a degree of choice hitherto reserved for elective surgery patients and reflects the government’s commitment to the “equality of esteem” objective. As such, it promises to stimulate new entrants into the community-based mental health market.

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