Whitehall’s spending watchdog has called for NHS England to consider taking some administrative services back in-house after finding failures in its contract with Capita that put patients at risk of serious harm.
The National Audit Office outlined severe service failures that came about after Capita took over primary care support services and launched a transformation programme that aimed to cut costs for NHS England by 35% from the first year of the contract.
Failures included incorrectly notifying 87 women that they were no longer part of the cervical screening programme, and processing problems that delayed practitioners from working, causing loss of earnings.
In a report published today, the NAO is critical of NHS England’s failure to recognise the complexity of its contract with Capita and of the limits on its ability to hold Capita to account and to intervene to prevent issues from snowballing.
The public body was, for example, “contractually unable to stop Capita's aggressive [primary care support] office closure programme, even though it was having a harmful impact on service delivery”.
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In August 2015 Capita entered into a seven-year contract, worth £330m, to provide nine services to 39,000 GPs, dentists, opticians and pharmacists.
The outsourcer closed 35 out of 38 regional support centres, despite being aware that its customer service centre was struggling to meet demand.
In September 2016 NHS England placed five of the nine services in a formal rectification process, including the customer support centre, medical records service and patient registration service. It also had to embed an “expert management team” in Capita, to work alongside operational staff and provide oversight and support.
NHS England made savings of £60m in the first two years of the contract, in line with expectations, and performance in some areas has improved. But the NAO said widespread failures are still being experienced.
Its report said: “NHS England’s decision to contract with Capita both to run existing services and also simultaneously to transform those services, was high risk.”
It said both Capita and NHS England underestimated the complexity of the contract, which incentivised Capita to close services to minimise its losses – which it expected to be £64m over the first two years of the contract, with plans to recoup in later years. Problems were compounded because the services were “incompletely understood” and “being outsourced for the first time”, the report added.
Amyas Morse, the head of the NAO, said: “Neither NHS England nor Capita fully understood the complexity and variation of the services being outsourced. As a result, both parties misjudged the scale and nature of the risk in outsourcing these services.
“While NHS England has achieved financial savings and some services have now improved, value for money is about more than just cost reduction. It is deeply unsatisfactory that, two and a half years into the contract, NHS England and Capita have not yet reached the level of partnership working required to make a contract like this work effectively.”
Now that the financial objective of outsourcing these services has been secured, the auditors called for NHS England and Capita to “secure stable and sustainable service delivery while supporting the transformation of services”. They said both parties are now much better informed about the services and challenges they face.
One of their recommendations is to “determine whether all current services within the PCSE [Primary Care Support England] contract are best delivered through that contract or whether some should be taken in-house by NHS England”.
They also called for performance indicators and targets to be agreed with Capita.
A Capita spokesperson said: “As today’s NAO report concludes, the complexity of the support services being let by NHS England was not fully understood when the contract was signed.
“The report notes that several organisations and legacy issues all contributed to underperformance. It has been acknowledged that performance has improved and Capita will continue to work with all parties to address the remaining service issues. We have accepted accountability for not meeting our high standards of service previously.
“Our new chief executive has made it clear that Capita previously has taken on some contracts that contained too many unknowns. Our new strategy will ensure we focus on doing fewer things better and securing business that we know can be delivered well.”
Meg Hillier, chair of the Public Accounts Committee, responded to the report: “Trying to slash costs by more than a third at the same time as implementing a raft of modernisation measures was over-ambitious, disruptive for thousands of doctors, dentists and pharmacists and potentially put patients at risk of serious harm.
“Neither NHS England nor Capita properly understood the scale of the challenge before agreeing the contract and are still in dispute over future payments. Yet again this is poor contracting by government with one of its major suppliers and it must learn lessons.”
The report closely follows a damning review by two parliamentary select committees into Carillion’s “almost inevitable” downfall, which slammed the outsourcer’s bosses for prioritising their own financial gain over concerns for their workforce and service delivery.
After Carillion went into liquidation Capita issued its own profit warning in January, though the Cabinet Office stressed that it was not at risk of collapse.