The New NHS Standard Contract

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• The New NHS Standard Contract

Legal Structure Morgan Cole
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Introduction

• Us and our role
• Why use the new contract?
• Legal significance
• Contract law
• Consortium agreement
• Services contract structure
• How to tackle it

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Why use the new contract?

• Benefits to Commissioners
• Certainty over service provision
• Performance regime
• Avoids battle of the forms
• Benefits to Providers
• Input into activity planning, certainty of
  business
• Cashflow (paid in advance)
• Certainty over payments (Tariff)

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Legal significance

• NHS Contracts
• Contracts between NHS parties that are not
  enforceable in court
• Contracts between PCTs and FTs/IS
• Enforceable in court
• New era potential for litigation

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Contract law (1)

• You start negotiations with a provider and
  submit a draft contract to them. They send you
  their comments on the draft and you have a few
  meetings to bottom out the issues. You dont
  quite do that and time runs out and you need them
  to deliver services. They start delivering
  services and send you an invoice which refers to
  their terms and conditions.
• Q Is there a contract?
• Q If so, which terms and conditions apply?

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Contract law (2)

• Contracts can be
• Implied through a course of dealing
• Oral
• Entered into by e mail
• Required elements
• Offer
• Acceptance
• Consideration
• Intent to create legal relations (implied in B2B
  contracts)

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Contract law (3)

• Tips
• Complete the blanks
• Delete DN and
• Agree the contract
• Get both parties to sign
• Comply with the conditions precedent
• Then and only then commence service delivery

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Two contracts

• Consortium contract
• To place the PCTs into consortia and appoint a
  lead PCT to contract with the Provider
• Services contract
• To be entered into by the lead PCT (Co-ordinating
  Commissioner) and the Provider

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Consortium Contract (1)

• Simple, few pages
• Most Providers will have contract co-ordinated by
  single commissioner in each SHA area
• Purpose
• Reduce the number of contracts to negotiate (the
  lead commissioner signs up for all others)
• Clarify roles and responsibilities of
  Commissioners
• Give Providers comfort re the commissioning
  arrangements

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The Consortium Contract (2)

• A consortium is formed
• Each Assoc Commnr appoints the Co-ord Commnr to
  execute and manage the main contract
• Each Assoc Commnr agrees to pay the provider
  directly for its services or pay the Co-ord
  Commnr
• Each Commnr indemnifies the others

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Consortium Contract (3)

• Commissioners in a consortium should meet early
  (NB 28 Feb deadline) and agree
• The terms of the consortium agreement in
  principle
• The mandate of the co-ordinating commissioner and
• The parameters of its authority to negotiate
• The Co-ord Commnr should
• only sign the final services contract once it has
  shown the final draft to the consortium and the
  consortium members sign the consortium agreement
  appointing the Co-ord Commnr to enter into the
  services contract.

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Consortium Contract (4)
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Consortium Contract (5)

• A Consortium Constitution is needed to support
  the operation of the Consortium Contract.
• This will set out how the members of the
  Consortium make decisions on matters concerning
  them all, how often they meet, the quorum for
  their meetings, and similar organisational
  matters.
• The nature of the Consortium Constitution will be
  for local agreement.
• Guidance is provided in the Consortium Contract
  Guidance Notes.
• It is important for the success of the Consortium
  that there is dialogue and interaction between
  the Co-ordinating Commissioner and the
  Associates.

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The Services Contract Structure

• Some parts are mandatory and non variable (Eg.
  most of clauses 1-60)
• Some parts are mandatory but variable locally
  (Eg. Sched 3 activity plans)
• Some parts are non-mandatory and variable locally
  (Eg. Sched 2, Pt 4 Essential Services)
• See colour coded step by step guidance notes

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The Services Contract Mechanics

• Effective Date (cl 2.1)
• Transition (cl 2.4)
• Conditions Precedent (Sched 4)
• Services Commencement Date (cl 2.2)
• Expiry Date (cl 2.3)
• Longstop Date (Sched 4)
• Extensions (cl 2.5-2.8)
• Termination (cl 35)

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The Services Contract Payment

• Provided the Provider delivers activity to the
  Activity Plan, Commissioners must pay (Cl 7.1)
• National Tariff, or
• Agreed prices for non-tariff work reflecting
  reasonable margin
• In advance 1/12th of expected annual contract
  value (and where no expected acv within 30 days
  of receipt of monthly invoice)
• Reconciliation account and reconciliation payment
  follows

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The Services Contract Policy

• National info requirements (cl 29)
• Performance (cl 32)
• Clinical quality (cl 33)
• Managing activity and referrals (Sch 3, Pt 1)
• Year end adjustments for activity (Sch 3, Pt 1)
• 18 week performance controls (Sch 3, Pt 1)
• Year end adjustments for C Diff performance
  against targets (Sch 3, Pt 1)

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The Services Contract Reviews

• Contract review (cl 8)
• CC and P to meet at least monthly to review
  performance of the contract
• Clinical Quality review (cl 33)
• CC and P to meet at least monthly to consider Ps
  Clinical Quality Performance Report
• Capacity review (Sch 3, Pt 1)
• If P cannot increase capacity to meet incd
  demand and unable to meet 18 weeks and locally
  defined criteria are met, P can require CC to
  attend Capacity review to consider constraints on
  P and whether P is delivering most efficient care
  pathways. If so, no financial adjustment

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The Services Contract Variations

• The Services Contract allows certain provisions
  to be varied by agreement once the Contract has
  been signed.
• These are essentially the provisions where there
  is an element of local agreement they are set
  out in Schedule 21.
• Variations to other provisions of the Services
  Contract will need Secretary of State / DH
  consent.
• Service Variations can be agreed without SoS/DH
  consent using the procedure in Schedule 6.
• Changes to Activity Plan volumes can be agreed
  without formality.
• Other Service Variations generally require 6
  months notice, unless otherwise agreed.
• The Agreement can be terminated voluntarily by 12
  months notice in relation to all or any part of
  the Services.

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Practical Stuff

• Read the contracts and guidance
• PCTs call meetings of your consortia
• PCTs agree the consortium contract in principle
  and the parameters within which the CC may
  negotiate
• All agree a timetable for negotiations to end
  before end Feb 08
• CCs keep the consortia informed of progress
• CCs send activity plans to Ps
• Conduct productive and focused negotiations
• CCs send final draft contract to consortia for
  approval
• Consortia enter into consortium contract
• CCs and Ps sign services contract
• All comply with conditions precedent and
  transition arrangements
• Services Delivery

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Help?

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• gayle.curry_at_morgan-cole.com
• bruce.potter_at_morgan-cole.com
• jason.richards_at_morgan-cole.com
• Tel [phone]
• www.morgan-cole.com