Dealing with Contractor Market Volatility Topic Group Day Two - - PowerPoint PPT Presentation

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Dealing with Contractor Market Volatility Topic Group – Day Two

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Overview of dealing with supplier instability in HCC

Paul Drake

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Questions to be addressed

• 1. How effective is Hertfordshire County Council’s due

diligence activities?

• 2. How does the council practise good quality contract

management to identify potentially serious issues early?

• 3. What happens when a supplier fails or becomes

increasingly unstable?

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A typical procurement cycle

Pre- procurement market engagement Procurement process Contract management Re-procure or decommission

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How often?

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HCC’s response to contractor volatility

• Not one size fits all
• Routine actions such as:
• Contacting sector colleagues to share knowledge
• Contacting regulatory bodies
• Close monitoring of ‘industry’ media and financial media
• Understanding what the alternatives might be in the market
• Understanding what alternatives council resources might

provide

• Considered and proportionate response aimed at protecting service

users and continuity of service

• Whole organisation involvement
• Lessons learnt

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Case study features

• Vulnerable client group or specialist service
• Hard to replace contractors
• Market disruption
• Urgent response required
• Not “Carillion” instant failure
• Creative solutions needed
• Longer term plans to be put in place following initial

urgent response

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Allied Healthcare: A Case Study of Contractor Volatility

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Purpose of this session

• To understand Allied Healthcare performance

prior to its collapse.

• To identify the key actions taken by HCC to

successfully manage the provider failure.

• To consider lessons learnt for how HCC could

prevent a similar provider failure in the future.

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Homecare, a Fragile Market

10.00% 8.90% 5.30% 8.00%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Homecare Care Home Services with Nursing Care Home Services without Nursing All Care Services

National Vacancy Rate: Care Sector

38.70% 33.90% 30.70%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% Hertfordshire Eastern Region England

Care Sector Turnover Rate 4,000 social care vacancies in Hertfordshire

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Homecare Provider Handbacks: November 2017—March 2019

262 560 5 100 200 300 400 500 600 2017 2018 2019

• No. of HCC Homecare Service Users

Affected by Provider Handbacks 801 HCC Service Users affected 13 providers handed back some

• r all of their HCC

Service Users

8 85 69 47 47 26 1 8 10 8 487 5

• No. of Service Users Handed Back Per

Provider

Springwell Cuffley Care Carewatch FIRST Special Seven HeavenScent Real Care Caremark Chiltern Bluebird St Albans AC Homecare Allied Healthcare Haven Homecare

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Contracts Terminated / Handed Back

Provider Date informed Date of transfer Reason for handback / closure Contract area No of Service Users New provider

Caremark Chiltern 13/03/2018 13/06/2018 Provider unable to continue to provide service out of franchise area Dacorum 8 Caremark Dacorum Bluebird St Albans 24/04/2018 27/07/2018 Provider chose not to extend contract or bid for framework St Albans 10 Various AC Homecare 14/08/2018 17/08/2018 Care workers found to be working without DBS

• r training

Welwyn Hatfield 8 Caremark WelHat & Destiny Special Seven 05/09/2018 22/10/2018 Handback following

• ngoing quality

concerns St Albans & Dacorum 20 Various spot providers and T24 Allied Healthcare 05/11/2018 06/12/2018 Council took back contracts due to concern over financial failure Lead – Hertsmere, North Herts, St Albans, 3 Rivers Spot – Stevenage Flexicare = Hertsmere, N Herts 487 Abbots, Alina, Anchusa, Helpers & Herts at Home

Homecare Provider Handbacks: contd.

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Performance Monitoring

• 8 PAMMS assessments published

during Q3.

• 5 Good rating, 3 were Excellent.
• 3 of these were first time PAMMS

assessments.

• Of the 5 providers that had been

assessed during 2017-18, 2 had previously been rated as Requires Improvement.

PAMMS Monitoring

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Delayed Transfer of Care – bed days lost waiting for Homecare

4,997 4,933 7,296 10,525 8,346 4,160 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Apr - Dec

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Allied in Hertfordshire: 2017—2018

22 78 60 10 12 3 1 21 20 40 60 80 100 Extremely Satisfied Very Satisfied Quite Satisfied Neither Satisfied nor Dissatisfied Fairly Dissatisfied Very dissatisfied Extremely dissatisfied Not Recorded*

Quality Monitoring Officer feedback of 207 Allied SUs, April—November 2018.

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 23/04/18 30/04/18 07/05/18 14/05/18 21/05/18 28/05/18 04/06/18 11/06/18 18/06/18 25/06/18 02/07/18 09/07/18 16/07/18 23/07/18 30/07/18 06/08/18 13/08/18 20/08/18 27/08/18 03/09/18 10/09/18 17/09/18 24/09/18 01/10/18 08/10/18

% of planned versus delivered calls over 1 hour late.

2 4 6 8 10 12 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

Complaints & Safeguardings Herts Valleys (Blue=Complaints, Red=Safeguardings)

1 2 3 4 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

Complaints & Safeguardings E/N Herts (Blue=Complaints, Red=Safeguardings)

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Allied in Hertfordshire: 2017—2018 Contd.

2000 4000 6000 8000 10000 12000 14000 16000 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Hertsmere North Herts St Albans Three Rivers Total

Allied Mainstream Care: Hours Delivered in Lead Areas December 2017—September 2018.

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May 2018: Provider Failure Avoided

• Allied notifies market it is in financial difficulty.
• Narrowly avoids financial collapse by entering

into a Company Voluntary Agreement. Over 600 HCC service users receiving care from Allied

Immediate Response:

• Start to create Herts at Home, aiming

to support all service users.

• RAG rating service users.

Medium-term Response:

• Reduce Allied placements.
• Continue developing Herts at Home.
• Draft a mobilisation plan.
• Re-think our future response.

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Commissioning Action Taken

• Weekly/bi-weekly branch visits from April 2018.
• May – plan agreed with other major providers to prepare

a response in case of Allied failure

• Est. 6 weekly strategic meetings with Allied—focus on

recruitment and capacity.

• Promised a business improvement plan would be

launched in October 2018.

• November 2018: branch visits less welcoming and a

need to help manage the branch manager.

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Operational Actions Taken

• Daily automated report run showing Allied

healthcare users and level of care.

• RAG rating exercise of all Allied service-users to

collate: – Time critical medication. – Dementia. – Unbefriended. – Double-up care. – Increased surveillance of safeguarding.

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Interventions by CQC & DoH

• Early November 2018: CQC officially warns Local

Authorities about Allied’s future.

• Early to Mid-November 2018: DoHSC trying to hold

Local Authorities in line to prevent them precipitating collapse

• 16th November: official notification that Allied are

seeking to sell their contracts.

www.hertfordshire.gov.uk

Allied in Hertfordshire: Winter 18/19

• November 18:

– 489 service users & 200 staff. – 1 branch office (Stevenage) & a hub (Letchworth): head office in Stafford. – 2 flexi-care sites (Letchworth & Borehamwood). – Small number of live-in care packages. – Reduced management structure in the Herts office.

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Timeline of HCC’s Response

6th Dec: Phased transfers complete 16th Nov: Allied decides to sell its contracts

28th Nov: Phased transfers start

16th Nov onwards: HCC presence at branch office 22nd & 23rd Nov: Partial service failure St Albans

14th Dec: End of Allied payroll

16th Apr Allied Informs HCC

• f CVA application

16th Apr onwards: HCC accelerates contingency plan including formation

• f Herts @ Home,

identification of additional agencies and planning division of contract areas

20th Nov: HCC Terminate Allied Contracts

CB5 CB6

Slide 22 CB5 Lets add the May CVA notice here, and that we then brought other providers together to hatch a plan and accelerated establishment of Herts at Home at that point

Chris Badger, 08/03/19

CB6 Addiin the operational response in MAy as oputlined in slide

Chris Badger, 08/03/19

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The HCC Response

• Agreed contract end date of 6th December.
• Divided up the Allied block between Abbots,

Alina, Anchusa, CBU, Helpers & Herts at Home.

• Rapid mobilisation of Herts at Home.
• Regular meetings on Business Continuity

footing

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Main Outputs

• All service users received a new provider and

had continuity of care.

• Only 3 calls missed out of approx. 40,000 during

transition period.

• 200 Allied staff subject to TUPE, 95% retained

(had expected 70%).

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Lessons Learnt: What worked well

• HCC took decisive action which incoming

providers found helpful and described as ‘setting a positive tone.’

• Swift response led to retaining 95% of the care

workforce through TUPE transfer

• Risk assessment of all service users to identify

the most vulnerable and prioritised accordingly

• Communicated effectively within the
• rganisation, with wider system partners and

providers and with service users.

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Lessons Learnt: How Could we Prevent a Similar Provider Failure?

• Monitoring

– We need to ensure that we deploy resources in a way which prioritises the monitoring of hard to replace providers. – We need to financially monitor providers, establishing early warning systems and understanding group ownership risks. – We need to monitor how the business is ran, in addition to the

• utputs it produces.
• Contracting

– Create a contractual duty to prevent market failure amongst lead providers. – Providers should be under the same KPIs and those KPIs should be more robust.

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Contingency Planning: What is already in place?

• Market Resilience network with Local Authority

colleagues across the ADASS Eastern Region

• Director of ACS chairs quarterly Market

Resilience and Quality Board- includes CCGs, CQC and Hertfordshire Care Providers Network

• Hertfordshire Service Quality Improvement

Group meets bi-monthly to share monitoring and quality reports across health and social care partners

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Contingency Planning: How do we manage the domiciliary care market?

• Care hours divided between Lead and Spot

providers

• Establishment of Herts @ Home to give

additional assurance of capacity to step in where providers are failing

• Programme of planned and unannounced

monitoring visits

• Quarterly forum for Lead Providers to meet with

commissioners to discuss monitoring data

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Contingency Planning: Proposal for new strategic lead provider contracts

• County divided into 9 service areas
• Limit for lead providers to 3 areas – to ensure at

least 4 major providers

• Growth of Herts @ Home to provide further

assurance

• Stronger KPIs and targets around market share
• Equalisation of payment formula across Lead

and Spot providers

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thank you

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Case Study – Herts at Home

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Background

• In 2016 Adult Care Services began to look at practical ways to

mitigate risk of provider failure and statutory position of County Council being “provider of last resort”.

• However, no in-house residential care services or domiciliary care;

but large in-house supported living and day service operation in- house.

• Mismatch as most provider and market failure risk is in residential

and domiciliary care.

• Solutions that didn’t destabilise the existing provider market or

impact on care workforce needed.

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Developing the strategy

• Options were looked at in detail in 2016-17 to respond where it

wouldn’t be possible to transfer services between existing providers if one was in difficulty. This is the key risk of provider failure.

• Strategy is focused on tiered response depending on scale of

failure and care services provided.

• Boils down to two options historically: support a transfer between

providers or bring in-house, back to the County Council. Third “spoke” was developed.

• Feasibility work was undertaken in ACS to look at creating a new
• ption that would be able to offer an alternative if necessary and

help mitigate a key risk in the Corporate Risk Register of not being able to respond effectively to market or provider failure due to entire reliance on external providers.

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What is Herts at Home?

• Herts at Home Limited is wholly owned by Hertfordshire County

Council set up initially to take on services because an existing provider is unable or unwilling to continue with the service (this may be for financial reasons, concerns around quality of care, or because a provider is withdrawing from the whole market or a particular service area).

• Hertfordshire County Council is the only shareholder and controls

the Company by appointing directors and through a scheme of delegation.

• Board is comprised two senior officer nominees from the County

Council; Director of Heath and Adult Care in Buckinghamshire, and the Accountable Officer for NE Herts Clinical Commissioning Group.

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• Herts at Home is registered with the Care Quality Commission (CQC).
• Company vision: Herts at Home Limited will strive to ensure every

customer is supported to live the life they choose so they can lead happy and fulfilling lives.

• The Company operates on a commercial trading basis with a public sector
• ethos. It aims to operate in a way that is similar to any other external

provider although its primary focus is not trading to maximise profits. No more than 20% of business can be outside of the arrangements with the County Council.

• Herts at Home’s employees are employed by the Company, not the County

Council and the Company has its own terms and conditions.

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Timeline

• December 2017 - Cabinet agrees to establish a Local Authority Trading Company

(LATC) and approves outline business case.

• June 2018 - Settle (formerly North Herts’ Homes) give the County Council notice

they wish to stop delivery of care services in 5 flexi-care services for older people.

• November 2018 – Cabinet approves transfer of 5 Settle services and detailed

business case to Herts at Home in February 2019.

• November 2018 – CQC issue notice on Allied Healthcare. Herts at Home asked to

work with other providers as part of contingency plans.

• December 2018 – Transfer of 2 flexi-care services and support at home in

Letchworth to Herts at Home from Allied Health Care.

• February 2019 – Transfer of 5 flex-care services from Settle to Herts at Home.

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Fast Facts

• Eighty staff transferred from Allied Healthcare under TUPE to the Company
• n the 6 December 2018.
• Further 55 staff transferred from Settle under TUPE to the Company on 29

February 2019.

• Managing Director seconded to the Company from the County Council after

external recruitment campaign and external Registered Manager appointed in December 2018.

• Company income is projected at £3.6m pa in first year of trading.
• Offices temporarily located above the registry office in County Hall,

Hertford.

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Services transferred

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Funding

• Cabinet agreed to meet the initial funding requirement of Herts at Home (operating

“buffer” and operating funds) through a mixture of equity and debt.

• Initially, £400,000 funding was approved: 35% share capital purchase of £140,000

and a short-term loan to the company of £260,000 (65%) at 7.5% pa interest; to be drawn as necessary.

• To date the loan has not been drawn and initial costs incurred by the Company

(primarily in relation to transfer of services from Allied Healthcare) have been met through winter contingency funding and contract income.

• The Company receives payments under contractual agreements with the County

Council for the provision of flexi-care services and support at home. Currently there is just one private funder.

• Any annual surplus made by the Company is to be either returned to the County

Council, invested in services under the direction of the County Council, or used to reduce the rates charged by the Company under the contract with the County

• Council. This reflects the Company’s primary function to stabilise services not to

generate trading surpluses.

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Current activity

• Post-TUPE review of staff resources and staffing requirements:

training, support, care plans, agency use, and recruitment needs.

• Liaison with three landlords (Settle, Clarion, Howard Cottage) to

develop partnership, agree SLAs, practical matters relating to

• peration of flexi-care buildings.
• Preparation for CQC inspection and delivery of service reviews and

improvement plans.

• Implementation of IT system for scheduling and rostering of staff,

records management, care planning etc.

• Re-location to more permanent office accommodation.

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Future

• Increase staff recruitment activity and begin to grow operational

capacity.

• Work with the County Council on developing innovative approaches

to support at home and specialist care at home.

• Work with the County Council to identify how Herts at Home can

plan for future work related to provider or market failure.

• Consider any new requests from the County Council (either short or

medium term) and assess new business propositions.

• Consolidate and develop the Company’s operating infrastructure,

staff team and governance arrangements.

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Case Study: Healthcare Environmental Services

Matthew King Head of Waste Management and Environmental Resource Planning

www.hertfordshire.gov.uk

Context

• LACW arisings ~ 530k tonnes pa
• 2018/19 Waste budget net £44.5m
• Clinical waste disposal services are statutory and cost

HCC circa £75k pa in disposal

• Clinical waste volumes c. 220 tonnes pa (low volume

but high costs per tonne)

• 3 streams of clinical waste
• Offensive
• Infectious
• Sharps
• Collections by WCAs from households and businesses

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Contract

• Risks of limited market and provider size identified and

led to development of a Framework contract.

• 3 year (+ 1) contract term
• Awarded in June 2016 to start in September 2016 to;

Healthcare Environmental Services (HES), Tradebe and Grundon

• Contract worked in that order with all ‘call-offs’ for

services going to MEAT on framework (HES) during the contract period.

www.hertfordshire.gov.uk

Background

• HES provided a good service under contract to the council for 2 years
• In October 2018 media reports began appearing pointing towards a

stockpiling of NHS anatomical waste from contracts held by HES in Scotland to dispose of healthcare wastes.

• The council sought assurances that the issues being reported would not

affect the council’s contracted service – these assurances were provided.

• Site visits by officers were undertaken, and other councils using the

service confirmed no issues were being experienced

• Additional financial checks were carried out by the council at this time to

check for any indicators of financial problems

• Preparation for contingency steps commenced

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Contractor Failure

• In early December 2018 further news stories emerged

about the company’s difficulties and scheduled collections from council sites began to be missed

• Further checks carried out with other councils

indicated similar issues with HES contracts were being experienced

• Financial checks began to indicate cash flow problems

and a high probability of failure

• Continued attempts to liaise with the company were

made but did not make progress.

• Once HES were in breach of contract officers began

the formal process of terminating the contract and moving the service to another provider to maintain service continuity.

• Temporary storage was put in place pending a

replacement provider taking on the service

Healthcare Environmental Services ‘closes down’

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Interim Contractor

• The next placed Framework contract suppliers

were unable to accept the call-off requests for services to Herts due to changes in the market capacity

• Novus Environmental (a local contractor from

Royston) were appointed through a STA on 19th December 2018 following termination of the HES contract on 18th December 2018

• Collections from the Waterdale Transfer

Station commenced immediately

• The actions taken ensured no disruption to

district and borough council waste collections and close liaison with the Environment Agency ensured no issues were raised in terms of Environmental compliance.

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Resulting issues

Contractor Failure

Shortage of disposal capacity Nationally Competition from NHS and other Local authorities for proximate capacity Budget pressure - Increased Costs (£30k for 19/20) Future pressures – aging population with more self- medication in the home

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Next Steps

• The 13 month interim contract will allow time for

the market to stabilise.

• New Framework discussions to include local

NHS bodies and other regional local authorities to ascertain interest and optimise VfM.

• Re-procurement will take place in summer 2019

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thank you

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thank you

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• Check which entity we are in contract with
• May get approached to novate to new entity
• Consider if we have grounds for termination and if we want to

exercise them?

• Was consent required to change control? If we were not

asked, termination may be possible

• Decide quickly, making payments or delaying decisions could

mean waived termination rights

• Consider any staff, pension, assets, data, subcontractors etc.

issues that need to be addressed

Contractual options when a company gets taken over

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• D. CONTROL OF THIS CONTRACT
• 15. ASSIGNMENT AND SUBCONTRACTING

15.1. The Contractor shall not sub-contract the whole of the Services. The Contractor shall not sub-contract a part of the Services without the prior written consent of the Council (such consent not to be unreasonably withheld or delayed). 15.2. If the Contractor should sub-contract the provision of any part of the Services to any person, neither that nor the Council’s consent to that sub- contracting under Clause 15.1 above shall relieve the Contractor from any liability or obligation under this Contract and the Contractor shall be responsible for the acts, defaults or neglect of any Sub-Contractor or agents in all respects as if they were the acts, defaults or neglect of the Contractor. 15.3. Where the Council has consented to the use of a Sub-Contractor or Sub-Contractors, such Sub-contract(s) shall reflect the same terms of this Contract and for the avoidance of doubt the Sub-contract(s) shall not contain any terms which are incompatible and/or conflict with this Contract. 15.4. The Council may, as a condition of giving its consent under Clause 15.1 require the Contractor to procure from that Sub-Contractor any direct warranties, indemnities or guarantees from that Sub-Contractor in relation to their provision of the Service and performance of their obligations under the Sub-Contract. For the avoidance of doubt, this may also include a requirement for the Sub-Contractor to grant licences or sub-licences in favour

• f the Council in respect of any land, premises, Intellectual Property Rights or software which are necessary to provide or which benefit from the

Services. 15.5. The Contractor shall not be entitled to assign, novate or otherwise transfer the Contract or its rights and obligations thereunder without the prior written consent of the Council and such consent shall be at the absolute discretion of the Council. 15.6. The Contractor shall not without the prior written consent of the Council change or replace any sub-Contractor that it has appointed to provide any part of the Services. Any consent required from the Council in accordance with this Clause may be withheld at the Council’s absolute discretion. 15.7. Any breach by the Contractor of Clauses 15.1 to 15.6 shall constitute a substantial and material breach of Contract by the Contractor. 15.8. The Council may, in its absolute discretion, novate or assign this Contract or any part thereof and will give written notice of any such novation or assignment to the Contractor. This Clause in this Contract executed by the Contractor shall stand as the Contractor’s consent to any such novation or assignment. 15.9. In the event the Council consents to any assignment, sub-contracting, novation or other arrangement under this Clause 15, it shall be entitled to require and the Contractor shall pay the reasonable administrative and legal costs to the Council of formalising this change, including without limitation relating to the new contractual relationship between the Council and the Contractor or any third party. For the avoidance of doubt, any such costs may be set-off pursuant to Clause 14 from sums due to the Contractor.

Contract clauses