Commissioning Health Care Services in England: The new PSR regime

Following a lengthy consultation process, the Health Care Services (Provider Selection Regime) Regulations 2023 (the “PSR”), were laid before Parliament on 19 October 2023. The PSR has been designed to introduce a flexible and proportionate process for deciding who should provide health care services. In the words of the Department for Health and Social Care, the aim of the PSR is to “move away from the expectation of tendering for healthcare services in all circumstances towards collaboration across the health and care system” and to “remove the bureaucracy and cost associated with the current rules.”

The PSR came into force on 1 January 2024. For the procurement of health care services, it replaced the Public Contracts Regulations 2015 (the “PCR”) and repealed the National Health Service (Procurement, Patient Choice and Competition) (No 2) Regulations 2013.

Scope: who does the PSR apply to?

The PSR applies where a relevant authority procures relevant health care services for the purpose of the health service in England, whether alone or as part of a mixed procurement. This can be broken down into three broad questions:

1.      What is a relevant authority?

The defined term of ‘relevant authority’ includes NHS England, Integrated Care Boards, NHS trusts, NHS foundation trusts, local authorities, and combined authorities. It is worth noting that the PSR also applies when relevant authorities are subcontracting health care services or when health care services are being arranged between two relevant authorities. For example, if NHS England is arranging for an NHS trust to deliver the services.

2.      What are relevant health care services for the purpose of the health service?

Broadly speaking, services arranged by the NHS (in relation to hospitals or ambulances, for example) will fall within scope. However, ‘health care services’ and the ‘health service’ are formally defined within the PSR in accordance with the following pieces of legislation:

• Section 150 (1) of the Health Care and Social Care Act 2012 which defines ‘health care’ as: “all forms of health care provided for individuals, whether relating to physical or mental health.” Although this defines ‘health care’, the PSR provides that ‘health care services’ should also be defined in accordance with this definition; and
• Section 275 (1) of the National Health Service Act 2006 which defines ‘the health service’ as: “comprehensive health service designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness.”

The PSR narrows the interpretation of these definitions by covering only ‘relevant’ health care services that fall within one of the CPV codes set out in Schedule 1. NHS England has usefully clarified that if a CPV code is available and it has not been listed within Schedule 1, the services are not within the scope.

3.      What constitutes a mixed procurement?

Recognising that health care services are often procured alongside other services like IT services, the PSR enables relevant authorities to procure in-scope health care services alongside any goods or services that are out of scope, provided that:

1. the main subject matter of the procurement is health care (i.e., the health service element must be more than 50% of the value of the contract); and
2.  the other goods or services could not reasonably be supplied under a separate contract.

The new provider selection processes: what are they?

The PSR introduces three Direct Award Processes, the Most Suitable Provider Process, and the Competitive Process.

The Direct Award Processes

Direct Award Process A: This applies when the existing provider is the only provider that can deliver the health care services due to the nature of the services. The services which could fall within this category include 999 emergency ambulance services and NHS urgent mental health crisis services.

Direct Award Process B: This applies when patients have a choice of providers, and the number of providers is not restricted by the relevant authority. The services which could fall within this category include eye health or podiatry services.

Direct Award Process C: This applies when the proposed contracting arrangements are not changing considerably, and the existing provider is satisfying the existing contract and is likely to satisfy the new contract to a sufficient standard.

The Most Suitable Provider Process

To follow this process, relevant authorities must be satisfied that (based on the key and basic selection criteria) they can identify the most suitable provider without running a competitive process. It is worth noting that the statutory guidance warns relevant authorities against using this process unless they are confident that they can, acting reasonably, clearly identify all likely providers capable of providing the health care services.

The Competitive Process

This process involves running a competitive process to award a contract. It generally operates in the same way as standard procurements in terms of developing specifications, advertising the opportunity etc. Relevant authorities are free to design and run the competitive process in any way that they choose, so long as it complies with the requirements of the process and the procurement principles of the PSR.

What about contract modifications or urgent awards?

The PSR allows certain modifications to be made during the term of the contract/framework agreement without reassessment of the existing provider. For example, if the modification is clearly and unambiguously provided for in the contract/framework agreement. However, amendments that make an existing contract/framework materially different in character are not permitted.

The PSR also allows relevant authorities to award contracts urgently and to make contract modifications (without limitation) to address immediate risks to patient or public safety. This option may be used where there is an unforeseen emergency or a national crisis, for example. It is worth noting that relevant authorities are expected to limit the contract or contract modification term to that which is strictly necessary. If relevant authorities expect this to be longer than 12 months, they must record and justify why.

Next steps:  understanding the changes

The PSR applies to in-scope health care services arranged on or after 1 January 2024 and it also applies to contract modifications, regardless of whether the contract was originally awarded under the PCR. Relevant authorities and providers of health care services must ensure they understand the changes to the way health care services will be commissioned.

In addition to consulting the PSR and corresponding statutory guidance, reference should be made to the NHS England toolkit here.

Article co-authored by Kaela Murie, Trainee Solicitor at CMS