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NHS England’s £330m cost-cutting deal with Capita 'put patients at risk'

Botched deal to deliver back-office services and transform 20-year-old IT system slammed by National Audit Office


A 330 million deal between NHS England and Capita to outsource administration and transform services, in part due to a legacy IT system NHS England considered unsustainable, had the potential to seriously harm patients.

The National Audit Office (NAO) slammed the seven-year deal struck in 2015 with Capita, a professional services firm, to undertake the duties of a newly formed unit named Primary Care Support England (PCSE) - all while cutting costs by 35%.

The NAO said neither NHS England nor Capita "fully understood the complexity and variation" of the service, which involved performing a range of back-office functions to support around 39,000 primary care practitioners including administering payments to GP practices, opticians and pharmacies; delivering pensions, ordering supplies and moving patients' medical records.

The NAO concluded: "The service to primary care practitioners, including Capita's delivery of PCSE, has fallen a long way below an acceptable standard. This had an impact on the delivery of primary care services and had the potential to seriously harm patients."

The report highlighted one instance of 87 women incorrectly told they were no longer part of the cervical cancer screening programme. Capita says the wrong letter was sent by mistake following an incorrect mail merge, and that the women affected were promptly issued correction letters.

NHS England undertook these back-office functions in April 2013, having previously been performed locally by primary care trusts, which were abolished in an NHS restructuring. These services, comprising 1,650 staff across 47 offices, were fragmented, and lacked coherent leadership or standards, according to the 51-page report, leading to variation in delivery.

Moreover, NHS England felt the 20-year-old IT system running across 82 databases was in urgent need of replacement, with the organisation concluding it "did not have the necessary skills in transforming services through better use of IT"; deciding to outsource the service to a private company.

As part of the deal, NHS England hoped to instigate digital transformation and deliver high-quality support services, all while reducing costs by 35% in the first year - aims the NAO branded "ambitious". The objectives involved moving services from 38 sites across England to three, opening a national customer support centre, and introducing an online portal to provide access to manage PCSE services, among others.

The terms of the deal also aimed to invest in new, modern information technology and updated processes.

"Neither NHS England nor Capita fully understood the complexity and variation of the services being outsourced," said Amyas Morse, the head of the NAO. "As a result, both parties misjudged the scale and nature of the risk in outsourcing these services.

"While NHS England has achieved financial savings and some services have now improved, value for money is about more than just cost reduction. It is deeply unsatisfactory that, two and a half years into the contract, NHS England and Capita have not yet reached the level of partnership working required to make a contract like this work effectively."

In February 2018 there were seven severe service failures recorded against performance indicators, while NHS England applied 5.3 million in contract penalties between January 2016 and April 2017.

NHS England has made savings, in line with expectations, of 60 million in the first two years of the contract, as the financial risk of increased costs sits with Capita who have made a 125 million loss over this period, according to the NAO.

A Capita spokesperson said the report concluded the complex nature of the support services outsourced by NHS England was not fully understood at the time the contract was signed.

"The report notes that several organisations and legacy issues all contributed to underperformance," she said.

"It has been acknowledged that performance has improved and Capita will continue to work with all parties to address the remaining service issues. We have accepted accountability for not meeting our high standards of service previously.

"Our new Chief Executive has made it clear that Capita previously has taken on some contracts that contained too many unknowns. Our new strategy will ensure we focus on doing fewer things better and securing business that we know can be delivered well."

This isn't the first time Capita has failed to deliver on a major government IT contract. In 2014 the Ministry of Defence (MoD) came under fire for wasting millions of pounds on the delayed deployment of an online recruitment tool for the military. The system, which was run by Capita, only went live in 2017 - five years after the deal was first signed, and was reportedly riddled with bugs.

The company, described as Britain's biggest outsourcing company, has failed to win a single government contract since it issued a shock profit warning in January that subsequently wiped 1 billion of its share values in one day. Only last month the ailing professional services firm also declared a pre-tax loss of 513 million for 2017.

IT Pro approached NHS England for comment.

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