Hospital subcontracts give Pharma, MedTech and Devices companies a lucrative route to market

Much of the work I’m doing all over the country at the moment is around the potential for hospitals to subcontract work out to general practice, usually through a limited company GP Federation or limited company for a primary care network.

It’s a great opportunity for Pharma, MedTech and Devices companies to get involved and it isn’t a new thing – over the last 10-12 years we’ve seen hospital work being subcontracted to general practice. Often, it’s a way to stop wasting general practice appointments where the patient is asking if we can speed up their outpatient appointment or diagnostic test.

Instead, the time is used to get the work done in general practice using a hospital subcontract where the hospital usually pays 70 to 80 per cent of the NHS payment system tariff to general practice and retaining the remaining 20 to 30 per cent for themselves, but obviously having none of the actual work.

Read my blog on how industry can help drive patients toward an early diagnosis here.

Subcontracting doesn’t mean a reduction in budget

The Operating Framework for 2024/25 and the Revenue and Financial Planning Guidance 2024/25 which was published at Easter, both touched on this topic.

They said that when it comes to contracting hospital trusts, the contract default between integrated care boards (ICBs) and providers for most planned elective care – which includes ordinary day cases and outpatient procedures as well as first outpatient appointments but not follow-ups (which are in the block contract) – will continue to be ‘pay unit prices for activity delivered’.

That basically means they will stick to tariff prices.

That keeps the door open to the subcontracting route as a first outpatient appointment or a diagnostic test will be on the NHS payment system tariff.

The key to this is that the ICB commissions the hospital and passes the money through a contract to the hospital to deliver care. The hospital will then break that budget into departmental sums of money so each department gets a budget.

A subcontract means the budget to the hospital remains the same. There’s no reduction in budget or in the contract value as primary care is being subcontracted to deliver part of the hospital contract.

It’s a great deal for general practice

So in effect, the hospital keeps 30 per cent of tariff without the work. Meanwhile, general practice is being properly reimbursed for the work, which often works well for them. They’ll take on the additional work and create the capacity with the money needed to pay people to deliver it.

This, therefore, remains a very good route because there are no changes in the operating framework, the revenue financial planning guidance or the primary care network DES that would otherwise get in the way of it.

We also need to keep in mind that where hospitals have 6, 12 or 18-month backlogs, they’re not actually earning the first outpatient appointment tariff because they’re not able to deliver the work.

A subcontract, therefore, increases their capacity and will bring them that additional income.

Less agency staff or reliance on locums is also a bonus

There’s another key point to this as well – reducing NHS expenditure on agency staff, more commonly known as locums and/or bank staff, has become a target for ICBs this year.

The revenue and financial planning guidance says the agency spending of each ICB, its partner hospital trust and foundation trust, should not exceed the system agency expenditure limit set by NHS England in each financial year.

The overall intention is to reduce aggregate agency spending for all trusts to a total of 3.2 per cent as a proportion of the total NHS pay bill. And that assumes that pay inflation is in line with the current planning assumptions they’ve been given.

Again, the route of hospitals subcontracting will support this because they won’t be paying out for costly agency staff. Instead, they will subcontract to general practice which means it’s a more cost efficient practice to pursue.

This is another really good route to a conversation between the Pharma, MedTech and Devices industry and the NHS. If industry has an opportunity to optimise a patient – or to get diagnostics delivered faster, which in turn helps them optimise a patient – then there’s a route to a conversation about how you deliver your project.

I’m doing a number of industry projects that are working on hospital subcontracts right now. So if you are interested to know how I am making this work from an industry side, do get in touch.

Scott McKenzie helps pharmaceutical, medical technology and appliance firms get their products and services in front of the right NHS decision makers. He helped to land no fewer than 53 new projects with the NHS in 2023 alone and has now developed a 12-month mentorship programme that helps individuals and teams get straight to the heart of the challenges of selling to the NHS. If you want to get your products fully embedded into treatment pathways, Scott can help. Get unprecedented access to key customer insights, proven tools, resources and strategies plus 1-2-1 coaching and decision-maker introductions to finally get your project over the line. Find out more here.