Failings of the purchaser-provider split.

Strategy and implementation Health authorities have been working hard on developing health strategies and health programmes. Much of this work can come to naught. Towards the end of the financial year the contracting process takes over. Large sums of money are exchanged between purchasers and providers without explicit or detailed cognisance of the health strategy or programmes. Similarly, general practitioner (GP) fundholders are negotiating to resolve minor operational issues for their patients and are not necessarily working towards the same strategic objectives as health authorities are. To a certain extent there is an inevitability about this. The people who do the implementation should also be responsible for the strategy formulation. This is not necessarily the case within health authorities, GP fundholders or Trusts. Acute sector funding pressures The current contracting arrangements allow National Health Service Trusts several attempts at establishing their contracting revenues for the subsequent financial year. Initially, they formulate first-cut prices, and they then enter detailed negotiations with health authorities and GP fundholders. These run to the deadline for signing. Last-minute negotiations can see considerable sums of money switching between provider and purchaser with no explicit relationship to strategic needs or the 'cost equals price' maxim. The emphasis is only on signing the contract by the set deadline. While these negotiations are being undertaken, second-cut prices are produced to maintain an expected revenue for Trusts. Some providers still assume that cost pressures can automatically be passed on to purchasers with no notice before the start of the financial year. If providers are dissatisfied with the proposed settlement with purchasers, they still have recall to regional conciliation. If this conciliation has a record of arbitrating 50/50, then one could say it is in Trusts' best interest to go forward to conciliation to maximize their expected revenue. Indeed, this process could lead to the inflation of an opening figure for contract negotiation from Trusts. Such regional conciliation does not necessarily seem to take account of the fact that the resource envelope for health authorities is limited. Conciliation in favour of providers creates overspends for health authorities who, just like Trusts, also have financial duties to satisfy, such as ensuring that expenditure does not exceed cash limits. Clinical practitioner involvement The amount of involvement of clinical practitioners in these contracting negotiations is slight. There is also a varying amount of input by clinicians into the proposed service agreements and monitoring arrangements. …