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Capita cost-cutting on NHS England contract 'put patients at risk' – spending watchdog

Outsourcing badboy staring at £3m compensation payout

A botched £330m seven-year NHS contract with Capita to outsource back-office support for 39,000 GPs, dentists and opticians was today savaged by the UK government's spending watchdog over its "potential to seriously harm patients".

In 2015 Capita won the primary care support services contract to administer payments to GP practices, opticians and pharmacies, run pensions, and oversee the national performance list of primary care practitioners, promising to slash costs by one-third.

"Failure to deliver key aspects of the end-to-end service, delivered by Capita and other organisations, impacted primary care services and, potentially, put patients at risk of serious harm," said the National Audit Office (NAO) report.

For example, 87 women were notified incorrectly that they were no longer part of the cervical screening programme; processing issues led to an estimated 1,000 GPs, dentists and opticians being delayed from working with patients and some of these practitioners lost earnings. No actual harm to patients was identified.

Earlier this year, the NAO criticised NHS England and Capita over the backlog of 162,000 undelivered items of clinical correspondence. The primary care support services agreement failed to make forwarding the correspondence a contractual obligation.

Prior to the contract award, primary care support services were commissioned locally by primary care trusts – delivered by 1,650 staff from 47 local offices.

Services were supported by a 20-year-old IT system that NHS England considered unsustainable and in urgent need of replacement. It decided to outsource the service as it lacked the necessary skills to transform services through better use of IT, the NAO said.

"NHS England's decision to contract with Capita both to run existing services and also simultaneously to transform those services, was high risk," the report added.

"Capita was incentivised through the contract to close existing services to minimise its losses but the interaction between running, closing and transforming services was more complex than Capita or NHS England had anticipated."

No new government contracts have been awarded to Capita since its profit warning in January. The firm reported a pre-tax loss of £515m for the full year 2017 in April.

Meg Hillier MP, chair of the Committee of Public Accounts said:

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, opticians 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.

NHS England has so far saved £60m in the first two years of the contract as the financial risk of increased costs sits with Capita, which has made a £125m loss over this period.

So far NHS England has deducted £5.3m from payments to Capita as penalties for poor performance but expects it may have to pay up to £3m in compensation to primary care providers.

Amyas Morse, the head of the NAO, said:

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.

A Capita spokeswoman sent us a statement:

“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.” ®

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