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OFT to rule on key pathology mergers as another project collapses
16 October, 2013 | By
James Illman,
Sarah Calkin
Fresh evidence has emerged of the impact competition probes are having on plans to
reconfigure services after Office of Fair Trading investigations were cited as barriers to two major pathology reorganisations.
OFT investigations have been cited as a factor in at least one of the three trusts
involved withdrawing from a reorganisation of pathology services in Bristol and North Somerset, as well as up to £750,000 extra being added to the costs of a proposed service reconfiguration in the East of England.
The revelations come as the OFT prepares to make two rulings on pathology service
mergers, which experts say are likely to set precedents.
HSJ has learned the OFT will announce if it will refer a joint venture between the University College London Hospitals and the Royal Free London foundation trusts and a private firm to the Competition Commission on 8 November.
It will also rule on the East of England reconfiguration, although no date is known.
It is feared these rulings could further undermine already laboured attempts to reform
the sector.
Two flagship regional reorganisations have been derailed in the Midlands in recent months and
Portsmouth Hospitals Trust pulled out of a joint venture with two neighbouring trusts. However, the OFT was not mentioned as a factor in these three cases.
The OFT has a duty to investigate mergers and refer them to the commission if it
rules they could result “in a substantial lessening of competition”.
Monitor
published a briefing note in June which warned the pathology sector could be especially susceptible to competition rules as trusts looked to merge services in line with the recommendations of the 2008 Carter review of pathology.
The Competition Commission can ultimately block mergers. Its decision on the proposed
merger between Royal Bournemouth and Christchurch Hospitals and Poole Hospital foundation trusts is due by Monday and is widely expected to block the plans.
Andrew Taylor who was the founding director of the Cooperation and Competition Panel
and is now a partner at Aldwych Partners, told HSJ even if the watchdog did not block the pathology mergers, it could make stipulations that could undermine joint venture business models.
He said it would be “surprising” if the London project was referred as it involved
only two trusts and had a limited impact on competition. However, the size of the East of England Transforming Pathology Partnerships project, which involves seven trusts, meant it was “more likely” to be referred, or at least have a limit imposed on its size.
The Severn project, covering Bristol and North Somerset, all but collapsed after
University Hospitals Bristol Foundation Trust and Weston Area Health Trust withdrew support. Weston is continuing discussions with North Bristol and will take a final decision this year.
North Bristol Trust said it would construct its new 5,000 square foot pathology laboratory
with the support of Public Health England alone.
A
paper to South Gloucestershire Council’s overview and scrutiny panel revealed both trusts that withdrew were concerned centralising services would realise insufficient savings and noted that the prospect of a review of the proposals by the OFT had
introduced “additional complexity” to the project.
The two Bristol trusts have just faced scrutiny by Cooperation and Competition panel,
now part of Monitor, over a series of service swaps in the city.
University Hospitals Bristol deputy chief executive Deborah Lee said the trust continued
to support the principle of a single pathology service but could not proceed as the business case would not realise the required 4 per cent efficiency savings.
Hugh Risebrow, managing director of private pathology provider Synlab’s UK operation,
said all trusts considering reorganisations were considering the OFT investigations.
He insisted providers could still get economies of scale by partnering through alliances
not based on geographical lines.
“What the OFT is doing is not unreasonable,” he said. “They are trying to stop regional
monopolies.”
The OFT declined to comment.
Readers' comments (11)
Not so long ago, in repsonse to a question, the DoH could see no problem having huge, regional monopolies AND competition. Presumably they saw competition to set
up the monopolies but did not see past that. Are the private providers being examined as well lest they beocme the mega-monoplies in some regions.
Rationalisation of Pathology services is not rocket science, it's mainly about the fear factor of Trusts which have for too long used the direct access profits to
subsidise inefficient Pathology delivery.
There are substantial savings to be made for the health economy as a whole so why doesn't the Government encourage and progress this, instead of rack up the set up costs for Trusts and providers who are trying to do the right thing.
The recent VAT rulings on non recovery also won't help anyone but the Treasury.
The usual three steps forward followed immediately by two steps back policy of health service development in UK.
Surely the NATIONAL health service is by its very nature a monopoly. Why are we wasting yet more time and money wringing our hands over this?
Its over 5 years since the Carter report, does anyone think the private sector would spend this long dithering over business devolopment.
Absolutely right. The sale of monopolies was an 18th century practice, discontinued because of its inefficiencies.
OFT was not a factor in Portsmouth Hospitals withdrawal as it was approved by co-operation and competition panel some time ago. OFT "flexing their muscles" over
pathology consortia is a recent thing. Pathology reconfiguration was a DH work stream. There is even a letter from David Nicholson that actively encourages Trusts to work together to share pathology services. There is a growing awareness in the NHS that Acute
Trusts need to collaborate or die in order for us to improve services in primary and community care without additional money. If the OFT continues to behave in this way it is a barrier to reform.
The usual three steps forward followed immediately by two steps back policy of health service development in UK.
Surely the NATIONAL health service is by its very nature a monopoly. Why are we wasting yet more time and money wringing our hands over this?
Its over 5 years since the Carter report, does anyone think the private sector would spend this long dithering over business devolopment.
I have a completely non-evidence based theory that anyone ordering a blood test should be required to take it themselves. It would reduce the amount of pathology
needed at a stroke
The real barrier to reform is the inability of NHS organisations to successfully deliver large change programmes which achieve cost and time as well as improved
quality and safety goals.
The writing was on the wall for Severn Pathology (covering Bristol, North Somerset and South Gloucestershire) in July 2012 when its Advisory Panel, Chaired by the Department of Health's Dr Ian Barnes said:
“The Advisory Panel recognised the effort in producing the detailed financial work produced as part of the business case. However, they were disappointed that not all the financial/pricing work was complete in time for the meeting which had significantly constrained
the Panel’s ability to test the competitiveness of the Severn Pathology offer to prices emerging elsewhere. They noted the need to have this work completed as a matter of urgency to enable UH Bristol and Weston Area Healthcare Trust representatives to produce
their own business cases which would enable their Trust Boards to
evaluate the option of divesting in Pathology services. Based on the financial information presented to the Panel it was evident that the reconfiguration of pathology services as currently modelled would not come close to achieving the savings targets that
had been specified by the current and future commissioners at the outset and throughout this Review.”
http://tinyurl.com/na4vk48
The OFT can't be blamed for the consequences of Severn Pathology's inability to produce a business case supported by evidence that it would meet financial criteria set out at the start of the programme.
It is always very easy for someone like the infamous Daphne to throw stones from the sidelines.
There are substantial opportunities to make savings in Pathology, it is crucial to ensure that the quality of clinical delivery is maintained.
The transformation programmes that have been implemented so far have all recognised the need for clinical excellence, TATs and quality assurance are all contracted to.
The train has now left the station and Pathology will inevitably be rationalised to a level that is cost effective for the NHS as a whole, at present the taxpayer is overpaying for many basic services and inefficient services are being protected.
Histopathology services are directly proportionate to the no. of consultants available.
Don't confuse this with the other 99.9% of tests undertaken in the mainstream Pathology labs.
ANONYMOUS | 16-OCT-2013 8:45 PM The "infamous" Daphne invites you and your colleagues to come out into the open and present to the public your current plans to spend
our taxes to deliver value for money, high quality, safe pathology services for Bristol, North Somerset and South Gloucestershire.
You say that the pathology transformation programmes implemented so far have recognised the need for clinical excellence. Is there any evidence that they managed to deliver it? If they have, great – some best practice to share.
I am sure you are right to say that the taxpayer is overpaying for many basic services and inefficient services are being protected. One way to progress this is to present the evidence to the taxpayers and enlist their support for pathology rationalisation.
However the obstacle is the tendency of the NHS to only want to engage with members of the public who tell it what it wants to hear and to impose a model of public engagement where no disagreement is allowed. If the NHS cannot deal with question and challenge
in a constructive manner, which has been my experience and that of other members of the public, it shuts down opportunities for meaningful public involvement.
This denotes a culture of insecurity and immaturity in some parts of the NHS. It is not a culture that will easily sustain it in the face of potential competition from private pathology providers.
You point out that the train has left the station and pathology rationalisation is inevitable. The question is what sort of rationalisation is now achievable because University Hospitals Bristol boarded the train and has decided to get off and Weston Area Health
Trust hasn't decided whether to stay on board.
The Severn Pathology Programme was initiated in early summer 2010. Two years later in July 2012 the organisations involved had not produced a business case and model which demonstrated that required savings could be achieved.
In a letter to the NHS of 10 May 2006 introducing The NHS in England: the Operating Framework for 2006/7, the then NHS Chief Executive, Sir Ian Carruthers, stated ”Service or organisational reconfiguration in the NHS has too often in the past failed to deliver
the required quality and cost improvements. Proposals must have rigorous business cases with integration and benefits plans and clear accountability so that quality and financial improvements are realised.”
This statement is as true now as it was then. I have never seen any NHS business plan for service change which meets Sir Ian's criteria. If my referring to such matters is perceived as “throwing stones from the sidelines” it is an example of the defensive culture
of the NHS which is an obstacle to progress. Real progress is achieved when leaders have the skills and courage to take stakeholders (including the public) with them to achieve change, not try to control them.
I am unclear what prompted your advice not to confuse histopathology with 99.9% of tests undertaken by mainstream Pathology Labs. There is no confusion. My previous comments refer to pathology services as a whole, not selected bits of it.
"I have never seen any NHS business plan for service change which meets Sir Ian's criteria". In my previous job, I saw a lot of business cases for pathology reconfiguration
which met Sir Ian's criteria. Most of them are not in the public domain because Trusts were rightly nervous about sharing all of their cost and activity data with the private sector (which doesn't play by the same rules). Most went to Part 11 of the Trust
Boards. I would urge people not make general comments from the Bristol experience. The point about histopathology is that it is currently the most "labour-intensive" and least automated pathology service. Advances in genomics will revolutionise histopathology
anyway but there can be no reason not to share existing automated blood sciences and microbiology assets which are largely underused, without any detriment to patient care.