The NHS is in the middle of the transition from a publicly funded and publicly provided health service towards a publicly funded but increasingly privately provided service. It is thus following the course adopted in social care, with the closure of local authority owned care homes and the contracting out of service provision to commercial, charity, and other voluntary sector providers.

The management costs for commissioners involved in running the new model successfully are very substantial.  I have previously written about the costs involved in running tender processes, and warned that the NHS has not budgeted for the management costs involved in such processes.  However, the disclosure that Harmoni had been failing to provide sufficient doctors to staff its out of hours contract in north London raises an entirely different problem.

Outsourcing services successfully requires considerable investment in performance management by commissioners. There is little point in running a complex tender process to select the best provider, and then offering a 100 page contract which carefully defines the obligations that the provider is taking on if NHS commissioners do not actively ensure that the provider delivers what it promised.  This is true “performance management,” namely checking that the quantity and quality of services delivered by a provider meets the legal obligations set out in the contract.

This work is tedious, difficult, confrontational at times, and, it involves treating the contractual obligations as the minimum acceptable performance rather than a target to be aimed at. NHS commissioners have been hugely variable in their ability to spot difficulties and react appropriately. The contracts contain complex mechanisms which enable commissioners to impose financial penalties—fines—on providers who do not deliver in accordance with their contractual obligations.  It also involves spending money on lawyers to advise on the options available when performance is not delivered and assist with notices imposing contract sanctions.  None of this comes cheaply.

The carefully drafted contract terms are only of very limited use if the commissioners do not actively monitor performance and are prepared to use sanctions provided in the contract to drive compliance. If commercial providers know that they will not be performance managed by commissioners if they breach the contract they will, of course, promise unachievable levels of service in a tender for an unrealistic price in order to gain the contract, knowing that no one will hold them to their promises once the contract has been signed. Hence proper performance management is essential in order to deliver any validity to the tender process as well as ensuring that the public get value for money.

Information monitoring, of itself, is wholly insufficient.  There are a growing number of examples of commercial providers to the NHS, delivering the information that commissioners expect.  Unless NHS commissioners have the resources to look behind the figures to see whether there is any reality to the reported service levels, there is an incentive to provide false data.  Following the debacle related to the Cornwall out of hours contract, the National Audit Office recommended that out of hours contracts should be reviewed so that financial incentives are linked more clearly to quality requirements. It also called for greater protection of whistleblowers, saying that they had an important role in highlighting concerns about the provider, Serco. But all this comes at a cost to the NHS.

However calls for this work to be undertaken by the National Audit Office are likely to fall on deaf ears if the reality is that there are insufficient staff at NHS commissioners to be able to undertake this work.  Who is going to ensure that providers deliver on their promises if all the relevant staff are tied up in managing compulsory tender processes and the rest have been made redundant as part of the £20bn Nicholson challenge?

The recent well publicised pressures in A&E departments may, in part, arise from the public’s lack of trust in GP out of hours services. It would be easy to attribute blame to the providers of GP out of hours services and even to the 2004 GMS Contract (although there were always quality problems with the deputising services that were used before 2004), but a significant responsibility must lie at the door of NHS commissioners who have failed properly to manage the performance of providers of out of hours services. The political problem is that investing in performance management means investing in “pen pushers” who do not treat anyone. The political fashion for pretending that the NHS can operate without NHS managers is, of course, ludicrous.  However, unless the NHS invests considerable sums in performance management of all the new contracts which are coming into existence, debacles like those in north London and Cornwall are inevitable.

David Lock is a barrister and QC, No5 chambers. He is a board member of Brook Sexual Health, a member of the BMA Ethics Committee, and a Honorary Professor at University of Birmingham.

Competing interests: I am a member of the Labour Party and Chair the West Midlands Branch of the Labour Finance and Industry Group. I am due to become a non-executive Board Member of Heart of England NHS Foundation Trust which is due to commence on 1 June 2013. My wife is a doctor who is employed by Worcestershire Partnership NHS Trust.