Alliancing is for everyone

We meet with Monitor staff to update them on alliance contract developments and to ensure we are cognisant of all potential issues. The most recent meeting on 11 February 2014 was with Catherine Davies, Executive Director for Co-operation and Competition and Jonathan Blackburn, Legal Director, Competition.

In the discussion, the following important points were emphasised relating to procurement and competition regulations and national policy [Please note, this represents LH Alliances’ summary of the meeting only and is NOT an official Monitor position]:

• Monitor is supportive of new ways of contracting where these are compatible with the Procurement, Patient Choice and Competition Regulations and will deliver better outcomes for patients.
• Monitor does not have a preference for particular contracting models or a view on which models are likely to be best for patients.  The Substantive Guidance document The Procurement, Patient Choice and Competition Regulations: guidance and hypothetical case scenarios published Dec 2013 includes “contracting an alliance of providers” as one of the innovations that Clinical Commissioning Groups may wish to consider [see page 34].
• Commissioners should use the framework of the Regulations to decide what approach is likely to achieve the best outcome for their local population. The Substantive Guidance provides advice on this. Commissioners should ensure their rationale is available.
• Commissioners and providers need to make sure that whatever contracting models they use, patient choice is protected where required. This is important where a referring party is part of the alliance. For example, patients requiring an elective referral should be offered choice for their first outpatient appointment for consultant-led care.
• Transparency between members is a core principle of an alliance. However, if data is likely to be commercially sensitive the commissioner should collect the data from each provider individually rather than share it between all the providers.
• Commissioners and providers should be careful to make sure that any collaboration between providers that belong to an alliance for a particular service does not make it easier for them to coordinate how they deliver other services, where this would reduce the incentives they have to improve those other services to attract patients.
• If the commercial framework for the alliance means moving away from tariff then this must follow the rules for Local Payment Variations.

LH Alliances will continue to keep Monitor informed of all developments we are involved with. We always advise clients to be robust in meeting all statutory and regulatory requirements. Please see Monitor’s website for latest publications.

We need mature approaches to business relations and great leadership whatever contracting method is used. People are already starting to use risk sharing approaches and whole system incentives. We can accelerate progress by taking a tried and tested model and adapting it.

Our strength in health and social care is partnership and cross organisational dialogues but these are often separate from contracting and commercial arrangements. Alliance contracting brings these together.

Yes a pooled budget arrangement is the usual way to finance an alliance contract.  There is an agreed financial envelope for an alliance contract which includes the cost of providing the services and the pre-agreed gain share element.

A lead provider model is not an alliance approach.  An alliance is a partnership of equals where all parties have the same level of influence in the decision making process and no one party is judging the performance of another and allocating rewards or penalties.

However, one of the parties to the alliance may be a group of similar providers. This is common with GPs or with smaller, local third sector organisations. In these situations we say that those groups must be represented by a ‘single voice’ at the Alliance Leadership and Management Teams and it is for them to decide how to achieve this. Where the ‘single voice’ is not a legal entity (eg. not a partnership, formal joint venture, special purpose vehicle for a consortium, etc) then there will be multiple signatories to the alliance contract even though there is a collective representation.

The starting point is the commissioners’ set of strategic objectives or outcomes, developed with wide engagement with those they are buying services for. This gives a strong mandate.

In addition, the commissioners’ values or principles are important elements. Public sector commissioners have a duty to promote social value through the Public Services (Social Value) Act 2012 so this will need to be considered in choosing providers who are aligned.

If a procurement exercise is to be undertaken, it must include criteria and processes that test the providers’ alignment with those objectives, outcomes and values. What are the providers’ business drivers? Do they align with your values and objectives? Can you do business with this organisation?

If the alliance is being put together with existing providers as the decision has been made that they are the most capable of achieving your objectives, then you still need to check alignment. As with building trust, be honest about alignment and, even more so, the misalignments.

There is interesting research into alignment in health alliances which highlights key features of alliances which have managed to align effectively: leadership credibility and stability; trust; and proactive approaches to communicating as vital for success.

Alliance models put in place a risk management process in the same way other organisational arrangements do to ensure all risks are identified, scored, monitored and mitigated.  Financial risk and its impact on the alliance members is a key risk and the scenarios of overspend need to be identified early on with a plan in place. Open book accounting will help clarify where pressures are coming from.

If previous experience has highlighted weaknesses in the system (failing to resolve overspends satisfactorily) then this provides an ideal opportunity to consider what would a satisfactory way of resolving overspends look like to all partners, to describe this in as much detail as possible and construct a process to follow if and when this problem arises again.

The no blame culture is important. If any of the performance against the outcomes is off track (including the cost one) the first question should be ‘how do we fix this?’ Second question is ‘what can we learn from this?’ Time spent on identification of blame, raising, recording and handling disputes is wasted time.

The starting point in alliances is to give each member the benefit of the doubt and any ‘failure’ will be a collective one. This is described as ‘Your success is my success; your problem is my problem’. The experience from New Zealand’s health alliance contract is that the first question asked when there is a problem ‘How can we help?’. See page 19 of the King’s Fund report on Canterbury’s integrated care case study.

Of course, there is a provision in an alliance contract for addressing ‘wilful default’. This separates out poor performance despite trying one’s best from deliberate action. In these circumstances the provider demonstrating wilful default can be excluded.

This depends on what you are seeking to achieve, the strategic objectives and time period. The gainshare and painshare should be designed to provide fair reward for effort and to drive the behaviours you wish to see.

An overall principle is to keep it simple. A small number of core outcomes and measures is far better than many measures that are peripheral to the main aims and purpose of the services.

There should be simplicity in the measures and thresholds, avoiding the arguments over 94.49% versus 94.51%. We have seen the outcomes used to trigger large gainshare payments in multimillion dollar contracts in other sectors and they are surprisingly unsophisticated. It is about everyone aligned to the spirit of the outcomes and why they have been chosen.

A second principle is to have a blend of outcomes and measures and ensure their interdependency so that there is no incentive to sacrifice performance in one to achieve better performance in another.

A technique that we recommend is to use ‘I’ statements. For instance the difference between ‘I was offered choice about …’ and ‘People are offered choice about ….’ is in how you would measure successful achievement.

Payment processes should be designed to suit the local landscape of providers. If it makes sense locally to nominate one provider as the “paying agent” for all or some of the others and everyone agrees this is the best solution then that can be arranged. Alternatively commissioners can pay each provider directly according to instructions from the Alliance Leadership Team.

The length of the contract should depend on the commissioners’ strategic objectives and the outcome metrics it is hoping to see delivered through the contract.

A shorter term contract presents higher risk (of losing the contract in the shorter term) to providers and so forces them to load up the costs of any investment they have to make in buildings and equipment necessary to deliver the services over the shorter period. If one of your objectives is to secure better value for money and to see fixed costs being taken out of your local health and social care economy, then a longer term contract provides the security necessary to enable providers to do that by investing in new technology and changing their staff establishment.

For example, if acute trust reconfiguration is one of the strategic objectives then a longer term (five or seven years) is advisable to provide the acute trust with the timescale necessary to enact the necessary changes of gradually closing buildings and redeploying staff whilst new buildings and skill development takes place in community settings.

Alliance contracts tend to be longer term and more strategic because it is recognised that achieving strategic change across organisations requires long term partnership working and alliance contracts are designed to support exactly that.

An alliance that is developed to deliver strategic objectives which have been assessed by commissioners as necessary for their local communities is more likely to withstand national policy and political changes as well as reduced funding.

Where personalisation is a priority, this should be one of the shared strategic objectives which is then expressed in performance metrics within the performance framework. We have experience of building an increased use of personal budgets as a key result area.

Alliance contracts have greater flexibility and evidence shows innovation and quality are improved more quickly through this contractual framework, personalisation should benefit from these features.

Open book accounting is a core principle for an alliance contract. Transparency about financial matters is pivotal to being trusted and having trust in others. Regular review of finances against target is a key component of driving value for money. However, it is important to recognise competition law and that there may be financial information that should not be shared between providers. They may lay themselves open to charges of price fixing or other advantages that contravene the law. Clauses and provisions are included in the alliance contracts we have used that address these.

An innovation, by definition, is new. However, alliance contracting is only new to health and care services in the UK. The methodology is well established in other sectors and in other countries. There are hundreds of project alliances that have or are taking place. They have, in the main, delivered outstanding results. There are a smaller number of service alliances, the most well- known ones in health being in New Zealand. Accountable care organisations in USA are very similar to alliance contracts – with multiple parties jointly responsible, with aligned incentives and sharing risks. These provide evidence that the mix of elements that make up alliance contracting do create innovation and achieve the desired outcomes.