NAO blasts commissioning of collapsed United Care Partnership

A failed healthcare partnership in Cambridgeshire forgot about budgeting for VAT liability and wasted £8.9m of NHS money, the National Audit Office has found.

A scathing report from parliament’s spending watchdog said the £800m, five-year Uniting Care Partnership contract with Cambridgeshire and Peterborough Clinical Commissioning Group started in April 2015 “but collapsed after only eight months because it ran into financial difficulties”.

Uniting Care was a partnership between Cambridge University Hospitals NHS Foundation Trust and Cambridgeshire and Peterborough NHS Foundation Trust formed to provide older people’s and adult community services, including acute mental health services and emergency care for those aged over 65.

The report found the CCG had sought to change its service provision because it was “one of the most financially challenged in the country”.

Uniting Care’s business case set out estimated net savings of £178m by 2020, to be achieved mostly by reducing inappropriate emergency hospital admissions and emergency attendances.

The two trusts chose to form a limited liability partnership to meet the CCG’s requirement for contracting with a single entity, but neither side “made proper arrangements to fund the ensuing VAT liability”.

This oversight meant that NHS subcontractors were no longer able to recover VAT on the services they provided but “the partnership had not factored these additional costs into its contract price”.

Auditors said the final contractual terms “left the CCG exposed to significant unintended risks and potential costs”.

They added: “The CCG and Uniting Care Partnership differed in their understanding of the extent that the contract clauses allowed Uniting Care Partnership to negotiate additional funding after signing the contract.

“In addition, gaps in the procurement advice received by the CCG meant that it failed to secure a parent guarantee from Uniting Care Partnership, leaving it more vulnerable if the contract failed.”

Uniting Care’s bid was for £726m “some 3.5% below the CCG’s maximum contract price, despite increasing demand for services.” and neither side could assess whether this was viable due to data limitations.

One month into the contract, Uniting Care Partnership requested £34m of extra funding for the first year, equivalent some 21% more than the contract price for that year and the deal collapsed when the CCG could not provide this.

"Neither the Department of Health, nor NHS England, nor Monitor was responsible for holding a holistic view of the contract, or assessing whether the anticipated benefits would merit continued support of this innovative approach,” auditors found. “The wasted cost to the NHS of the contract set-up and bidder costs was £8.9m.”

NAO head Amyas Morse said: “This contract was innovative and ambitious but ultimately an unsuccessful venture, which failed for financial reasons which could, and should, have been foreseen.

“Limited oversight and a lack of commercial expertise led to problems that quickly became insurmountable.”

A CCG statement said: “The CCG accepts the findings of the report in full and the suggestions it makes for the CCG and the wider health system.

“It is clear that there was a wide disparity between the CCG’s contract expectations and Uniting Care’s expectations of income. The CCG recognises that there were too many outstanding issues at contract signature and that there were also gaps in the procurement advice the CCG has received.”