The new Provider Selection Regime for the procurement of health care services

After two years of waiting and two consultation exercises, the draft Health Care Services (Provider Selection Regime) Regulations 2023 (the “PSR”) have now been published. A copy of the PSR and associated statutory guidance can be found here

The PSR are due to come into force on 1 January 2024, giving authorities that will be subject to them only 2 months to prepare for implementation.

Which services are covered by the PSR?

The PSR apply to the procurement by “relevant authorities” of “relevant health care services". 

“Relevant authorities” for this purpose are: 

• NHS England
• Integrated care boards (ICBs)
• NHS trusts and foundation trusts
• Local authorities or combined authorities

In broad terms, “relevant health care services” are services arranged by the NHS such as hospital, community, mental health, primary health care, palliative care, ambulance, and patient transport services for which the provider requires Care Quality Commission (CQC) registration, as well as services arranged by local authorities focused on substance use, sexual and reproductive health, and health visits. A full list of the relevant health care services is provided at Schedule 1 of the PSR. 

Which services are not covered by the PSR?

Goods and services that are not health care services in scope of the PSR must be procured in accordance with the existing wider public sector procurement regime under the Public Contracts Regulations 2015 (“PCR”) (which are due to be replaced by the Procurement Act 2023 in October 2024).

Examples of procurements not in scope of the PSR are:

• goods (e.g., medicines, medical equipment)
• social care services
• essential and advanced pharmaceutical services arranged under the terms of the Community Pharmacy Contract Framework
• non-health care services or health-adjacent services (e.g., capital works, business consultancy, catering, hospital administrative services, hospital bedding services or public health marketing campaigns) that do not provide health care to an individual.

Mixed contracts 

When a contract comprises a mixture of in-scope health care services and out-of-scope services or goods, relevant authorities may only use the PSR to arrange those services when both of the below requirements are satisfied:

• The main subject-matter of the contract is in-scope health care services
• The relevant authority is of the view that the other goods or services could not reasonably be supplied under a separate contract.

The main subject-matter of the contract is determined by the component that is higher:

• the estimated lifetime value of the health care services

or

• the estimated lifetime value of the other goods or services.

A more flexible procurement regime 

The PSR has been designed to give relevant authorities greater flexibility in selecting providers for relevant health care services than is currently provided for by the existing rules under the PCR.  The processes relevant authorities can choose from under the PRS are as follows:

1. direct award processes (direct award process A, direct award process B and direct award process C);
2. the most suitable provider process; and
3. the competitive process.

Note that direct award process C allows authorities the flexibility to award a new contract to an existing provider when its contract is coming to an end in circumstances where the existing provider is satisfying the existing contract and likely to satisfy the new contract, and the proposed contracting arrangements are not changing considerably from the existing contract. This effectively removes the need for an authority that is content with service provision it is receiving to continue with the existing contracting arrangements without the disruption of a new procurement process.

How does an aggrieved provider challenge?

Unlike the remedies regime under the PCR, the PSR does not offer a direct route for aggrieved providers to challenge the decision of relevant authorities through the courts.

The only route to challenge set out in the PSR is by way of representations to the relevant authority during the standstill period. The authority is required to review its decision-making process and then consider whether it enters into the contract anyway, re-runs the procurement or abandons it altogether.

If a provider is still unhappy, the provider can then make further representations to a specially appointed independent expert panel (the PSR Review Panel which is to be established by NHS England) which will consider the relevant authority’s compliance with PSR and make recommendations back to the relevant authority who must then make its decision.

If the provider remains dissatisfied and ultimately wants to pursue matters through the court, the route for this will be through judicial review.

Transitional arrangements

The PSR confirms that for all procurements started before 1 January 2024, relevant authorities should continue to comply with the PCR. Procurements will have started where a contract notice has been published, expressions of interest have been sought or where unsolicited expressions of interest have been responded to.

For more information please contact Kris Kelliher, Partner, Devonshires

kris.kelliher@devonshires.co.uk