NHSC Hospitals Forum Partnership Activities on Healthcare .../media/Confederation...• Kent, Surrey and Sussex • North West Coast • South West Peninsula • West of England •

Working to deliver change…

Finnamore Limited

NHSC Hospitals Forum

Partnership Activities on Healthcare Groups

20 June 2013

Source: Finnamore

Page 2 Copyright © 1992-2013 Finnamore Ltd www.finnamore.co.uk

Content

Introduction to Finnamore – Finnamore’s Activity and Expertise1

International Examples that could be applied to the UK3

2 Overview of Finnamore’s Step Change Model

Copyright © 1992-2013 Finnamore Ltd Page 3

1. Finnamore’s Activity and Expertise

Source: Finnamore



PerformanceImprovement

Finance andCommercial

OrganisationalDevelopment

HealthImprovement

Prev

entio

n Well-being

Health ServicesPr

even

tion W

ell-beingHealth Services

Quality and Safety

Finance Productivity

Strategy

Source: Finnamore



Healthcare Groups• Calderdale and Huddersfield• North Mersey• Yorkshire and the Humber

Academic Health Science Networks• Greater Manchester• Kent, Surrey and Sussex• North West Coast• South West Peninsula• West of England• Yorkshire and the Humber

Collaborative Networks• Sheffield Adults and Children’s Provider

Boards• Hampshire commissioners and providers• Berkshire pathology network

Joint Ventures• Cambridge University Hospitals NHS

Foundation Trust and John Laing Investments – “The Forum Project”

Mergers• West Sussex


2. Overview of Finnamore’s Step Change Model

Source: Finnamore


The current structure of healthcare provision in England is unsustainable• Short term: £15bn to £20bn or more savings required due to the recession• Long term:

- Investec projects the UK will be spending 37% of GDP on healthcare by 2050- Growth driven by demographics, advances in technology, life style illnesses and rising

consumer expectations- This is not sustainable

Therefore, healthcare provision needs to be redefined• The NHS needs to innovate on a large scale in order to achieve the substantial improvements

in quality and productivity• Healthcare organisations need to be able to collaborate effectively in a competitive world• The healthcare group is a business model innovation that could enable large scale

improvements• Henry Ford: “A faster horse”

2. Overview of Finnamore’s Step Change Model: Context

Source: Finnamore


The Exam Question• If the status quo is unsustainable and mergers have a chequered record on delivering benefits,

what are the options in between?

Approach• We worked with a group of CEOs and held a number of workshops. We undertook research

(UK and international) and stakeholder interviews.• CEOs were Mike Farrar, Bill McCarthy, Mike Deegan, Diane Whittingham, Adam Cairns and

Steven Michael• Funded by the two SHAs

Outputs• The report (and summaries of it)• HSJ article and Reform event• Regional events• Now being taken forward by specific partnerships/ healthcare groups• Follow on work for Y&H SHA on vertical integration

2. Overview of Finnamore’s Step Change Model: the Healthcare Groups Project

Source: Finnamore


• Form should follow function

• Start with the business objectives and benefits you wish to achieve

• Wide range of possible benefits: -- Tactical and strategic- People and culture; systems and processes; clinical and financial

• Can apply to all services – back office, clinical support and clinical

• Clarity on business objectives and benefits can then drive decisions on organisation form,governance, processes and so on

• Henry Ford again – “I will build a car for the great multitude. It will be so low in price thatno man making a good salary will be unable to own one.” That objective drove decisionson design, production, materials and famously the range of colours!

2. Overview of Finnamore’s Step Change Model: Start with the End in mind

Source: Finnamore


It is important to establish:

• Clear lines of managerial and clinical responsibility- Who has patient safety responsibility?- Who has I&E responsibility?- The regulatory issues

• The healthcare group will require sufficient coherence in good times and bad- A failure regime will be required- How will losses as well as profits be shared?- What operating mechanisms will be needed?- Monitor / NHS England/ Department of Health involvement?

2. Overview of Finnamore’s Step Change Model: Accountability

Source: Finnamore


2. Overview of Finnamore’s Step Change Model: Governance Options

• Federated group• Operational franchising• Co-ownership• Shared leadership

• The forms are not mutually exclusive. For example, outsourcing contracts could be used within differing organisational forms.

• They can be end points in themselves, or steps on a journey.

Organisational forms

• Direct outsourcing• JV outsourcing• Collaboration

Contractual forms

Source: Finnamore


• Direct outsourcing, where specific services are run by external parties under license

• JV outsourcing, which is a joint venture between a Trust or Trusts and an external organisation or company

• Collaboration between Trusts either through collaboration committees or a third party to manage the collaboration.

• Collaboration through Shared leadership at the executive, clinical, or managerial level

• The introduction of a Federated group that takes collective decisions on behalf of its members in specified areas

• The use of Operational franchising to outsource the running of one or more Trusts

• Development of Co-ownership to allow greater employee involvement and a more co-ordinated approach.

• NHS organisations, such as NHS Trusts and Foundation Trusts

• Care Trusts, NHS-local authority collaboration forms• Social Enterprises, businesses for social purposes • Partnership arrangements, such as contractual and

limited liability partnerships• Limited companies, corporate entities limited by

shares or guarantee

Organisational forms

Contractforms

Legal entity forms

Legal entity forms are considered as

mechanisms for delivering

organisational forms or collaboration in specific functions.

2. Overview of Finnamore’s Step Change Model: Options for Provider Collaboration

Source: Finnamore


Direct outsourcing involves the direct subcontracting of a service to a third-party company ororganisation, either private or public sector. There is a degree of overlap with operationalfranchising. However in this model direct outsourcing tends to be mode specific and focussedaround a particular service.

The third party provider is given responsibility for the services under a SLA, but accountabilityremains with the Trust.

Examples include back office function outsourcing via SBS, NHS Hounslow outsourcing ITservices to Capita, pathology services provided by another Trust and sub-contracting electivesurgery to the IS.

Direct outsourcing

2. Overview of Finnamore’s Step Change Model: Direct outsourcing

Source: Finnamore


The service is subcontracted to a JV / partnership between an NHS and private sectororganisation, with the NHS Trust being the buying party.

The third party provider is given responsibility for the services under the SLA. Butaccountability remains with the Trust.

Examples include the Property Company model (JV with facilities management outsourcingcompany) and GSTS Pathology (JV with Serco plc).

JV outsourcing Example: GSTS Pathology

GSTS Pathology is a 50:50 JV between Guy’sand St. Thomas’ NHS Foundation Trust andSerco Plc, a private company specialising inbusiness process outsourcing. The work wassupported by Finnamore and the goal of thejoint venture was to build on the world classclinical pathology expertise found in Guys & St.Thomas NHS FT, allowing it to grow anddevelop further.

2. Overview of Finnamore’s Step Change Model: JV outsourcing

Source: Finnamore


15

Shared leadership This model consists of organisations whoshare leaders or managers, e.g. a sharedCEO.

It can also represent a continuum ofintegration options, from a temporary sharedCEO brought in to manage short-term change,through to the integration of servicemanagement teams for specific services.Clinical responsibility for the services remainwith the individual Trusts.

Examples of the shared leadership model atboard level are Imperial AHSC, HerefordshirePCT with Herefordshire Council and Virgin andStagecoach.

2. Overview of Finnamore’s Step Change Model: Shared Leadership

Source: Finnamore


Operational (whole hospital) franchising

• Responsibility is delegated for the running of a whole (or potentially partial) organisation to thefranchisor, usually through an operating licence or contract for a fixed period.

• A NHS Trust ‘shell’ is likely to retain property, staff and ultimate accountability; contracting directfrom the CCG to the Franchisor is also possible. Likely that protected assets and services couldnot be franchised.

• Hinchingbrooke is the first UK example where a private sector organisation has been awardedan operational franchise. Previously the management, but not the operations, of Good HopeNHS Trust were franchised to a private company.

• Service franchising can be:- simple landlord and tenant basis, with contracts for support services; or- by a more comprehensive operating agreement which may include performance

requirements and, potentially, a profit share.• Examples, of service franchising include Moorfields at …and Christies at …

Service franchising

2. Overview of Finnamore’s Step Change Model: Operational Franchising

Source: Finnamore


Federated model

Within the Federated model, individual entities act in co-operation and delegate theresponsibility for certain functions to the group. It is essentially a large JV. Examples include:

• Academic Health Science Centres• Cancer Alliances in London

2. Overview of Finnamore’s Step Change Model: Federated Model

Source: Finnamore


Form• UCL Partners comprises University College London;

University College London Hospitals, Moorfields EyeHospital and Royal Free London NHS Foundation Trusts;and Great Ormond Street Hospital for Children NHS Trust.

• UCL Partners is a company limited by guarantee.• Each partner retains sovereignty; UCLP Ltd board

comprises chairs and CEOs of the four Trusts, the UCLVice-Provost (health), the UCL Research Dean and theManaging Director of UCL Partners.

• There is an independent Chair.

Federated example: UCL Partners Function• The UCLP strategy will harness

the opportunities to ‘translate’research progress into healthcarebenefit to develop a robustbiomedical science infrastructure.

• UCL Partners aims to manageinformation and improve efficiencyby integrating:- the R&D offices,

strengthening the clinicalresearch facilities;

- clinical trial networks; and- and building on intellectual

property and industryactivities by creating a jointcommercial office.

2. Overview of Finnamore’s Step Change Model: Federated Model – an Example

Source: Finnamore


Co-ownership model

Increasing staff involvement and motivation may enable NHS organisations to find morecreative ways to maintain and improve patient care on tighter budgets, as finances becomemore constrained in the public sector.

The co-ownership model is where employees benefit from a substantial, but minority, stake inthe business. One option is for the shares to be held by a third party, paying dividends toemployees. The other option would be to award shares to employees to reflect performance.

An example is Circle where 49.9% of company is owned by staff and shares are issued eachyear based on performance. Its form is designed to foster a culture of clinical leadership andshared accountability.

2. Overview of Finnamore’s Step Change Model: Co-ownership Model

Source: Finnamore


Legal entity forms can be considered asmechanisms for delivering organisational formsor collaboration in specific functions. Themodels include:

• NHS organisations• NHS Trusts• Public benefit corporations:

•Foundation Trusts•Community Foundation Trusts

• Public benefit corporations•PCTs•NHS Care Trusts

• Partnership arrangements• Partnerships• Limited liability partnership

• Social Enterprises• Company Limited by Guarantee• Industrial and Provident Community

Benefit Society (BenCom)• Industrial and Provident Society (Bona

fide co-operative)• Community Interest Company (CIC)• Charitable Incorporated Organisation

(CIO)

• Companies limited by shares

• Charities

2. Overview of Finnamore’s Step Change Model: Legal Entity Forms

Source: Finnamore


The preferred model (or combination of models) should be driven by business objectivesand benefits

There is an opportunity to consider a phased change where the group transitions from one model to another.

Criteria to assess the models:

Strategic Alignment

Service quality

Financial performance Proximity

Board governance

Leadership effectiveness

The geographical proximity ofthe member locations.

The effectiveness of existingleadership across the potentialgroup.

The current service qualitywithin the organisations.

The extent of strategicalignment between theorganisations.

The board governance and itsperformance.

The financial performance ofthe group.

2. Overview of Finnamore’s Step Change Model: Selecting an Appropriate Local Model

Source: Finnamore


Two Foundations Trusts• Can form a joint venture (federated model)• Under competition law such a collaboration may be viewed as a merger (!) – talk to CCP earlier

rather than later

One Foundation Trust and One NHS Trust• Can enter into contractual arrangements• But can not enter into a JV for NHS services• NHS Trust can enter into a JV only if arrangement qualifies as “income generation scheme”.

This implies that DH approval is required for the setting up of a company, which cannot be anLLP; goods or services must be marketed outside the NHS and it must be profitable and theprofit used to improve services.

• Possible work around of third party holding shares on behalf of NHS Trust, but this has viresissues.

2. Overview of Finnamore’s Step Change Model: Regulation is important

Source: Finnamore


Governance arrangement

Organisation type

NHS Funding Private FundingFinancialregulation

Quality regulationPatient Non

Patient Patient Non Patient

Contractual

FT OK OK Capped OK Board On FT

NHS Trust OK OK Capped OK Board On NHS Trust

Competition regulation

Market referral -choice

OK (OFT) OK

JV

FT OK OK Capped OK MonitorOn the JV?

NHS Trust Not OK Not OK Capped OK Provider Agency?

Competition regulation

CCP –Merger control

OK (OFT) OK

Approvals required and limitations/ risks for corporate and contractual relationships betweenTrusts and FTs:

Note1. Subject to legislation, private patient income cap may be lifted2. Subject to legislation, competition authority will go to Monitor, include private patient market (transfer from OFT)

2. Overview of Finnamore’s Step Change Model: Regulatory Environment


3. International Examples that could be applied to the UK

Source: Finnamore


3. International Examples

a) University of California Health System / San Francisco Medical Centre – line ofjoint accountability into an overseeing individual.

b) University Healthsystem Consortium (UHC) across the USA – an affiliation ofuniversities and medical centres.

c) Iowa Healthcare Collaborative – a collaboration of healthcare providers,consumers, insurers, purchasers and government officials.

d) SelectCare by Medica - a managed care organisation of clinicians, hospitalsand other healthcare providers.

Source: Finnamore


3. International Examples: a) University of California Health System / San Francisco Medical Centre

Form• This model is different from the others presented

below, in that the CEOs from each hospitalultimately report into a group hospital President.

- Overarching President of the University ofCalifornia (UC)

- Hospital CEOs report into their respectiveChancellor for their local universities.

Function• The UC Office of the President (UCOP) facilitates

best practice and change amongst all of theconstituent universities and medical centres.

• UCOP has no direct line responsibility.• Accountable to the President.• It is involved with procurement initiatives.

Contracting• In the NHS this would create a new overseeing

individual to which group members report.

Source: Finnamore


3. International Examples: b) University Healthsystem Consortium (UHC)

Function• UHC’s mission is to advance

knowledge, foster collaboration,and promote change.

• UHC provides benchmarkinginformation for members:

- Clinical and operationalperformance improvement

- Quality and safety- Supply chain optimisation- Revenue enhancement

Form• University HealthSystem Consortium (UHC) formed in 1984. Alliance of 107 medical

centres and 220 of their affiliated hospitals. Represents approximately 90% of the USA’snon-profit medical centres.

Contracting• Membership on a subscription basis, with different levels of access to benefits.• UHC owns Novation, a group purchasing organisation.• Marketplace@Novation is an e-portal for collaborative procurement.

Source: Finnamore


3. International Examples: c) Iowa Healthcare Collaborative

Function• IHC’s focuses on four areas:

- To align/ equip physician andhospital communities withsound approaches for improvingquality and value.

- To promote responsible publicreporting of comparativehealthcare performance.

- To engage the entire communityin dialogue.

- To raise standards of care.

Form• A collaboration of healthcare providers, consumers, insurers, purchasers and government officials.• IHC is a provider-led and patient-focused non-profit organisation.

Contracting• IHC established as a partnership between the Iowa hospital Association (IHA) and the Iowa

Medical Society (IMS) in 2004.• Staff from supporting organisations donate time and sit on various committees.

Source: Finnamore


3. International Examples: d) SelectCare by Medica

Function• On a subscription fee, SelectCare provides

members to a network of:- Nearly 20,000 primary care physicians- More than 23,000 specialists and 240

hospitals- More than 3,000 behavioural health

providers- More than 900 chiropractors

Form• SelectCare is a Preferred Provider Organisation (PPO) for third party administrators managed by

Medica, which provides private health coverage for 1.4 million members in the USA.• A PPO is a managed care organisation of clinicians, hospitals and other healthcare providers who,

together with a 3rd party administrator, provide health care at a reduced rates to clients.

• Membership is for third party administrators and self-insuredgroups who have access to a wide range of services across thenetwork. In addition, members enjoy discounts through negotiatedrates between Medica and the healthcare providers.

• SelectCare also offers flexibility in the choice of ancillary networksthat can be added into the membership package.

Source: Finnamore


Contact Details

Bruce FinnamoreEmail: [email protected]

Mobile: 07831 441 415

Tormarton OfficeSomerset HouseChurch Rd, TormartonSouth GlosGL9 1HT

Tel. 01454 218900

mailto:[email protected]�

Documents

NHSC Hospitals Forum Partnership Activities on Healthcare .../media/Confederation...• Kent, Surrey and Sussex • North West Coast • South West Peninsula • West of England •