Commissioning Skills Development. An introduction to Performance Management and Decommissioning. Page 1

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1 Commissioning Skills Development An introduction to Performance Management and Decommissioning Page 1

2 Agenda pm Welcome & aims of session pm Presentation: Effective performance management and proactive negotiation pm Presentation: Managing provider relationships well pm Exercise 1: Identifying joint goals pm pm pm pm Wrap up Tea & coffee break Presentation: The challenge of decommissioning: minimising the risks Video: Decommissioning (West Sussex Hospital closure) Page 2

3 Welcome! Today s workshop will enable us to... UNDERSTAND... How to be proactive in managing performance Key elements for successful contract negotiation and relationship management What to consider when planning to decommission services BE ABLE TO... Identify and enable the key elements of good performance management Draw up a negotiating plan to help manage performance Analyse and develop action for managing provider relationships effectively Scope a decommissioning initiative Page 3

4 Effective Performance Management Page 4

5 The commissioning framework PLAN Engage: Communication and Change Management Analysis & Prioritisation Market management Implement Manage OUTPUTS Commissioning Strategy Plan/QIPP Plan, with prioritised opportunities for improvement and subsequent operating plan Pathway Strategies, with plan of market and non-market Interventions that will bring them about Providers in place to deliver pathway strategies Effective delivery of services and strategy Page 5

6 Manage PLAN Manage ˆ Manage Performance ˆ Manage Provider ˆ Manage system Monitor relevant metrics (including activity, cost, quality, outcomes, patient experience) and manage variations Develop strong provider relationship management (e.g. regular feedback, joint objective setting, continuous improvement) Monitor changes to the provider market, level of competition and identify opportunities for change Page 6

7 Icebreaker The highs and lows of performance management What you ve seen work well and/or what you ve seen go badly 10 minutes Page 7

8 Managing Performance The key components 1. Management ability - providers 2. Management ability - commissioners 3. Commissioner-provider interface Overall approach to performance management Systems to assess and monitor key metrics Multi disciplinary expertise Strong negotiating skills Knowledge of providers business plans/strategies Knowledge of the service being provided Detailed knowledge of the contract Understand the provider interdependencies Clear governance structures and regular meetings Recording and follow up of actions agreed Good communication including alerting each party to potential business changes Page 8

9 Managing Performance The key components 4. Relationship management Nurturing trust and commitment Recognising mutual objectives, priorities and differences Consistency of approach 5. Contract administration Monitoring of key performance indicators Contract compliance payment/reporting procedures 6. Nurturing improvement and innovation Effective relationships Structure of the contract and contractual incentives Motivational culture in both parties organisations Page 9

10 Managing Performance The key components 7. Managing changes and risks Change control procedures Mutual commitment to meeting evolving requirements Risk share / reward proportionate 8. Handling problems Early diagnosis Shared development of potential solutions Clear dispute resolution and escalation procedures The greatest likelihood of success will only be capable of being realised if each and every one of the components are actively managed in an integrated way Page 10

11 Good contracts: regimes & levers Termination Contract Award Mobilisation Ramping Up Services Performance Poor Performance Dispute Resolution Change Mechanism Breaches Termination Page 11

12 Good Contracts Strong Contract Regimes and Levers Contract Award Mobilisation Ramping up Services Performance Poor Performance i. Mobilisation milestones and timetable ii. Statement/ Checklist of Readiness iii. Audit rights prior to commencement iv. Transitional agreements between incoming and outgoing provider i. Agreeing ramp up profiles ii. Increasing robustness of KPIs iii. KPI moratorium in early period i. KPIs ii. CQUINs iii. Clinical Indicators iv. Quality metrics v. Service metrics* vi. Productivity metrics* vii. Local targets* viii. PROMs* ix. Patient experience x. Reporting Regime i. Warning notices ii. Remedial notices iii. Corrective action plans iv. Financial consequences deductions / withholding payment v. Agree Performance measures, data capture information provision and timetable xi. Provision for transparency xii. Service monitoring meetings xiii. Outcome based service specifications xiv. Performance improvement metrics over time Page 12

13 Good Contracts Strong Contract Regimes and Levers, cont d... Dispute Resolution Change Mechanism Breaches Termination i. Escalation ii. Arbitration iii. Triggers i. Benchmarking ii. Flex points / triggers iii. Financial changes to the contract Material i. Termination ii. Change by agreement i. Voluntary by Commissioner ii. By agreement by both parties iii. Provider default Non-Material iv. Force majeure Relies on Performance regime v. Partial termination vi. Exit plans vii. Compensation in above scenarios Page 13

14 Good contracts Contract award Service commencement Contract expiry/ termination Pre contract award planning Post contract award planning Mobilising Ramp Up Delivery Wind down Handover Planning for Performance Management Manage service delivery and performance Negotiating the win win Build in escalation structures Contract administration & governance Seek improvements & ensure integration Monitor performance regularly and throughout Plan for post expiry/ termination Evaluate success and failure Framing the incentives & consequences Manage changes on a timely and effective basis Manage mobilisation & exit plans Ensure there is a feedback loop Managing contract breaches Identify lessons learnt Manage contract relationships Negotiating team Operational and technical contract management teams Overlap and alignment here is key Page 14

15 Proactive performance management Engage: Communication and Change Management Analysis & Prioritisation Market management Implement Manage Analysis of incumbent provider performance Signalling of intentions, agreement of common baseline/ data Negotiate contract and agree provider development plans Ongoing performance evaluation and management Conduct regular feedback sessions Develop provider management plan Develop, agree & communicate common goals Monitor provider performance via balanced scorecard Address & resolve disputes (contractual, otherwise) Implement continuous improvement programmes Page 15 Note: detailed process flow maps contained in Guidance on the NHS Standard Contract for Acute Services 2010/11, DH 2010

16 Structured negotiation management 1 Analytics Review and overall Fact position Base Assess power balance Develop negotiations strategy Prepare for negotiations Conduct negotiations sessions Follow-up & provide feedback Analyze data Define strategy approach Identify tactics Define team roles Prepare for contingencies Assess strengths and weaknesses Relationship positioning Identify negotiation elements Define and prioritize goals, objectives, risks and trade-offs Structure negotiation teams Define themes and messages Stick to the game-plan Negotiate toward your goals Know your contingencies Feedback to suppliers, progress and next steps Feedback to stakeholders Refine strategy Re-iterate for further rounds Preparation Execution Page 16 Source: Procurement Solutions proprietary model

17 Managing provider relationships well Page 17

18 Brainteaser What is provider relationship management? 5 minutes Page 18

19 Provider relationship management the proactive management of an ongoing business relationship to improve cost, quality and value added to the business. The focus is on overall relationships between the supplier and the buying organisation rather than a focus on a specific contract. [The approach] is to develop a structured understanding of the nature of relationships that exist between your organisation and the supplier. Page 19

20 Provider relationship management Provider relationship management is related to other performance management activities A single provider, over the longer term (i.e. across multiple contracts/ initiatives) Understand the type of relationship required Identify goals of relationship from provider and commissioner perspective Understand the quality of the relationship and where it needs to be Be consistent in your interactions with the provider to achieve the quality of relationship and the relationship goals Page 20 Provider relationship management Contract/ performance management Market management Individual contracts with the provider Measure performance/kpis and analyse provider performance Identify provider problems and manage risk under a standard and common process Source: Adapted from A.T. Kearney Training Academy All providers within a market Signal intentions to market and develop alternative providers Analyse pathways and bundle/release tenders Monitor pathway performance and coordinate provider dependencies across pathways

21 Provider relationship management The type of relationship required will depend on the initiative Market Non-market Business Impact of Initiative Opportunity Actively Procure Transactional Spot Purchase Strategic Partner Bottleneck Seek alternative initiative Requires non-market interventions and a high degree of strategic relationship management High Defined Low Alternative providers Service definition Supply market complexity Low Vague High Page 21

22 Provider relationship management The goal of a strategic relationship is to create value for both parties To create significant and sustainable value that neither commissioner nor provider could achieve on their own Innovate with Service innovation and integrated delivery Produce innovation new, speed to market Strive for excellence Quality of performance health outcomes, access Operational effectiveness Page 22 Source: Adapted from A.T. Kearney Training Academy

23 Provider relationship management Six tools for success 1. Management structures 2. Communication 3. Culture 4. Trust 5. Handling problems 6. Assessing the relationship Page 23 Slide 23

24 Provider relationship management Management Structures 1. Management structures Management and governance structures at all levels within each organisation: Strategic Business Operational/user Arrangements for providing reports and information Regular meetings Recording and follow up of actions agreed Strategic: Board/senior management Operational: users and recipients/ deliverers of service Business relationship manager/ contract manager Page 24

25 Provider relationship management 2. Communication Communication Communication levels should run horizontally and vertically Strategic level Commissioner Senior Management Provider Board Business level Contract Managers Management Operational level Users/Recipients Delivery of service Avoid diagonal line or leapfrogging communications Page 25 Slide 25

26 Provider relationship management 3. Culture What Helps Co-location Similar expectations Let s do it approach Clear view of who does what Joint management approach Good communications Compatible personalities What Hinders Different working practices Lack of joint objectives Over-zealous policing Overlapping roles Large independent monitoring teams Resistance from organisation Failure to deliver commitments Culture the set of shared attitudes, values, goals, and practices that characterises an organisation or group Page 26

27 Provider relationship management 4. Trust Partnership Change & flexibility Collaborative working Improve the relationship Share assessment and management of risk Information sharing Open book No surprises Adversarial Negotiation/consistent poor performance Confrontational relationship Apportion blame Assess and manage your own risk it s your problem Information protected One gains at expense of the other Unexpected problems These behaviours will help to build Trust Page 27 Content provided by PricewaterhouseCoopers

28 Provider relationship management 5. Handling problems Dispute resolution Regular reviews Early identification Contingency plans Agreed procedures Problem escalation Changes to contract Page 28 Content provided by PricewaterhouseCoopers

29 Provider relationship management 6. Assessing the relationship Trend in provider performance The length of the contract and opportunities to grow the business Clash of corporate cultures Mis- or no alignment of relevant goals and/or planning horizons Risk of provider withdrawing co-operation as a result of commissioner testing value for money through procurement on open market Lack of perceived or actual competition, reducing provider s appetite to perform to highest standards Knowledge that the commissioner is reliant or critically reliant on the provider for a significant proportion of its business Page 29

30 Relationship management The Intelligent Commissioner Provider Interface DEMAND INTERFACE SUPPLY Commissioner Board Commissioning Director/Manager Strategic Business Need Operational Business Need SRO Performance and Contract Management Director Strategic Business Level Provider Board Operational Directors Public Health Users: Patients, Carers, Public Feedback, Requests for changes Clinical Information Team Performance and Commissioning Information Teams Finance and Activity Team Contract Administration Service Delivery Contract Manager Performance Manager Clinical Assurance Manager Operational Business Level Communication channels, Management and Governance Structures Contract Manager Performance Manager Clinical directors, managers and staff

31 Exercise 1 Identifying joint goals Group A: Commissioners identify possible goals and what you can bring to the table Group B: Providers identify possible goals and what you can bring to the table 30 minutes Page 31

32 Exercise 1 Template: Commissioner goals Value-creation Dimension Partnership goals What I bring to partnership What I want provider to bring Key metrics Service/Pathway innovation Product innovation Quality improvement Operational effectiveness Page 32

33 Exercise 1 Template: Provider goals Value-creation Dimension Partnership goals What I bring to partnership What I want commissioner to bring Key metrics Service/Pathway innovation Product innovation Quality improvement Operational effectiveness Page 33

34 Tea & coffee break 15 minutes Page 34

35 The challenge of decommissioning: minimising the risk Page 35

36 Decommissioning & disinvestment What is decommissioning? Decommissioning is the process by which certain commissioned (procured) services cease to be provided by the provider during the life of the contract, which may comprise all or some of the services provided by that provider. Page 36

37 Decommissioning & disinvestment Why is it necessary? Commissioner or provider priorities and strategies change Policy changes Contract becomes uneconomic for one or both parties Contract is no longer value for money Reconfigurations / redesign of services mean the service cannot be delivered in accordance with the contract terms Demand significantly increases/decreases beyond the contract/provider s capabilities and/or capacity to service Legislative changes Page 37

38 Decommissioning & disinvestment Why contracts end End of contractual term Provider exercises contractual right to withdraw from the contract Termination of the contract poor performance poor contract specification compliance failure to comply with contract terms & conditions provider s financial viability to continue delivery of the contract Changes in the specification and services requires the commissioner to decommission services and exercise their right to withdraw from the contract and commission alternative services Contractually a notice period for changes the contract is designed to protect continuity of service Page 38

39 Decommissioning & disinvestment Decommissioning planning and process Case for Change Consultation Create the compelling strategic & clinical rationale for change Rationale should be more than policy demands; local circumstances must be tested to ensure that the rationale is robust at the local level Test value for money on a whole health economy basis Create the project plan, team, resourcing, governance Carry out the impact assessment Obtain sponsorship and buy in Engage with clinicians and other relevant stakeholders Consult early and fully patients, staff, community, providers Create communications and stakeholder engagement across all stakeholders Obtain expert advice (e.g. legal for consultation & TUPE, financial / commercial expertise, etc.) Page 39

40 Minimising risk when decommissioning Page 40

41 Decommissioning & disinvestment Four key risks relate to decommissioning several of these imply that a partnership approach (working with providers) is more likely to be successful 1 Potential for destabilisation of other services Financial impacts Operational impacts 2 Managing staff reductions or transfers Staff reductions Staff transfers 3 4 Failure to fully realise commissioning benefits Continuity of care and managing transitions Adjusting provider costs Allocating benefits between providers and commissioners Continuity of care for patients Planning for successful transition Page 41

42 Decommissioning & disinvestment Risk 1: Potential destabilisation Assess the potential impact of decommissioning on providers Financial impacts (e.g. revenue, profitability) Operational impact (e.g. staff, asset utilisation, viability of related services) Providers can offer valuable support in understanding potential destablisation: financial data clinical expertise to understand how services are interconnected agree assumptions Manage trade-off between the level of detail in impact models and timeliness for decision-making Make assumptions where required Only model major cost impacts and major operational interdependencies Note where you and the provider agree to disagree Page 42 Source: A.T. Kearney

43 Decommissioning & disinvestment Risk 2: Managing staff reductions or transfers Good planning can mitigate some of the risk relating to staff reductions and transfers Key issues Typically required where services are being shut down and not recommissioned elsewhere Legal requirements on staff consultation and communication Costs of HR advice, redundancy these are provider costs but commissioners may end up paying Staff transfers Confirm whether TUPE applies in advance of any market intervention Commissioners need to assess how many staff will be affected, their skillset and level (in order to brief potential new providers) May be required to transfer staff if so, new provider needs to confirm that new efficiency and quality levels can be delivered with mix of new and transferred staff Page 43 Source: A.T. Kearney

44 Decommissioning & disinvestment Risk 3: Failure to fully realise commissioning benefits Providers may be unable to adjust costs quickly to compensate for lost revenue and may resist sharing benefits of cost savings with commissioners Commissioner should have its own assessment of providers cost base Forward planning creates time to adjust Compensating services may be relevant; i.e. offering the provider opportunities to bid for and provide other services Commissioners need to ensure that the benefits generated hit the commissioning bottom line Examples Provider reduces staffing but continues to do the same level of activity Provider is given monetary assistance to support changes, equal to financial savings returned to commissioner Provider stops providing service, but service is re-provided with same staff in another provider (same cost and quality) Provider stops service but negotiates harder on local activity and tariff in other areas Each of these leads to no saving for commissioners (i.e. no overall system saving) Page 44 Source: A.T. Kearney

45 Decommissioning & disinvestment Risk 4: Continuity of care and managing transitions Principles for transition management A clear transition plan is essential right capacity, capability and level of authority If it is not stated in the contract, ensure that it is made clear who bears the costs of transition commissioners may be required to compensate the incumbent for supporting the transition properly Ensure each individual patient has continuity of care and that patient confidentiality and other operational and system issues are addressed Be prepared to reassess the transition process and timelines, if necessary to mitigate risks Page 45 Source: A.T. Kearney

46 Decommissioning & disinvestment Safely passing the baton to ensure continuity of service is crucial Page 46

47 Decommissioning & disinvestment Alternative commissioning approaches can deliver the same goals as decommissioning Demand management Reducing usage of existing services Open competition (eg AWP) More efficient, higher quality providers thrive; others withdraw service Provider merger Providers merge organisations Regional reconfiguration Large scale programmes changing commissioned and provided services Provider cost reduction Providers unilaterally review and reduce their cost base Service & provider redesignation Authorisation or designation issued or withdrawn for services Provider led decommissioning Providers unilaterally decide to terminate services Investment business case approvals Commissioners support or reject provider investment cases Page 47

48 Decommissioning & disinvestment Demand management initiatives often focus on GP referrals but other opportunities are available Examples GP referral management to limit hospital activity Reduced scope of treatment or skill mix required to deliver service Reduced number of follow up appointments on specified pathways Encourage use of less expensive substitute treatments Pre-approval required for specified interventions; activity monitored Communicate cost of interventions to users; more rigid application of existing policy Page 48 Source: A.T. Kearney

49 Decommissioning & disinvestment Providers may decide to merge won t happen without discussion with commissioners and the SHA At a minimum, commissioners need to understand Merger rationale Robustness of the merger integration management Timescales and impact on commissioned services Merger costs and who will meet these Without service change, mergers may not necessarily deliver commissioning savings Resources: Good practice on mergers is available in the DH Transactions Manual Page 49

50 Page 50

51 Decommissioning Case study South East Coast Fit for the Future programme June 2006 West Sussex PCT announces review of acute provision July 2006 Keep Worthing And Southlands Hospitals (KWASH) campaign group formed to resist closure of Worthing Hospital June-November 2007 Fit for the Future consultation Page 51

52 Decommissioning Watch the video on Worthing Hospital, then discuss in groups: 1. What approaches were used by stakeholders to resist the change proposed by the PCT? 2. How could commissioners have pre-empted these? 3. What implications does this have for the way we communicate planned decommissioning decisions? 20 minutes Page 52

53 Summary Shown how to be proactive in managing your contracts Described the key elements for successful contract negotiation and provider relationship management Discussed issues to consider when planning to decommission service(s) Page 53

54 What next? PLAN SUCCESSFULLY IMPLEMENTING CHANGE Workshops: Assess Your Commissioning Competencies Good Grounding in Commissioning Plan Engage Procure Manage Successfully Implementing Change Courses: Masters in Healthcare Commissioning Commercial Skills Development Programme Page 54 Website:

55 Tell us what you thought Please complete an evaluation form We value your opinions Page 55

56 Copyright 2011 Commissioning Support for London. All Rights Reserved. Apart from any permitted use under UK copyright law no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means without the prior written permission of the publisher, nor be otherwise circulated in any form of binding or cover other than that in which it is published and without a similar condition being imposed on the subsequent purchaser. Commissioning Support for London Stephenson House, 75 Hampstead Road, London, NW1 2PL Page 56

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