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Yet Again, a “Sophisticated” Fraud Hits the NHS

The UK’s National Health Service has for years been a “good” source of Bad Buying fraud and corruption stories.  There are several reasons for that. Firstly, it is huge organisation, employing some 1.3 million people. Secondly, it actually has a pretty good counter-fraud unit, and when fraudsters are discovered, they are often prosecuted, so the news becomes public domain, whereas private sector firms often hush up embarrassing cases. But it has to be said – the cases I’ve seen over the years often also suggest that too many NHS organisations have very weak policies and processes around procurement and payments.

The latest case reported in the media recently saw Thomas Elrick, 56, jailed for 3 years and 8 months.  He was assistant managing director for planned and unscheduled care at Harrow Clinical Commissioning Group (CCG) where he had the authority to approve invoices up to £50,000. That organisation is a purchaser rather than a direct provider of healthcare – so it buys services from providers on behalf of the local citizens. 

Elrick created a company, Tree of Andre Therapy Services Limited, using the name of his husband (who knew nothing about it) as the owner, and invoiced the Trust for services that were never provided. Between August 2018 and December 2020 he authorised payments totalling £564,484. To cover his tracks, he also sent an email from the account of his dead wife which claimed to show details of patients the firm had “treated”.

Elrick spent over £100,000 on holidays to Dubai, Hong Kong, the Maldives, Singapore and Switzerland, and also spent just under half a million on shopping, with Amazon, Apple and David Lloyd gyms. But eventually a smart colleague decided to look up the Care Quality Commission accreditation for this firm and found of course that it did not have one, and then the connection to Elrick was found.

There is an interesting angle here in terms of his response. In a statement after he was sentenced, Elrick said “I wish I could turn back the clock but I know that I cannot and I sincerely apologise…  I am not a bad person. I believe that I am fundamentally a good person who made bad decisions, for which I take sole responsibility.” 

Self-delusion is an amazing thing, isn’t it?  I stole half a million from the NHS but I am “fundamentally a good person”.  The mind of a fraudster is often interesting, I suspect.   

But we have to ask how on earth this fraud was possible?  In my Bad Buying book, I give seven key anti-fraud precautions every organisation should follow and this case study and organisation broke several of them. There was no check on the onboarding of a substantial new supplier, which had no trading record, no CCG listing and a conflict of interest in the ownership (although that might not have been easily spotted). There was no check apparently that services paid for were actually received; and of course most fundamentally one person could conduct the whole pseudo-procurement process and authorise payment of large invoices without anyone else being involved or approving the spend. “Separation of duties” and all that.

This was not a sophisticated fraud. It was enabled by an incredibly weak process that was wide open for exploitation by anyone with a modicum of intelligence (and a lack of morals).  Personally, I would fire the CFO and the Procurement Director at the Trust for allowing this money to be stolen so easily.  But this is the case in so many organisations and so often – basic precautions against fraud are simply not put in place. Is it ignorance, laziness, or maybe a management team that wants to leave the door open just in case they want to do something dodgy themselves? Who knows.

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PPE Dumped – An Unhappy Reminder

There was an unhappy reminder of the pandemic and the PPE Bad Buying saga recently when several hundred pallets of PPE (mainly aprons, it seems) were discovered apparently dumped in Calmore, near Testwood Lakes Nature Reserve in the New Forest (near to Southampton). No-one knows how it got there…

Some of the material involved was identified as coming from a supplier caller Full Support Group (FSG). Now there is an interesting story about that firm. It was relatively late in the PPE saga when it became public that it was in fact the largest single supplier of PPE in the UK into the health system, with estimates that close to £2 billion had gone to FSG to buy huge quantities of PPE.  It was not immediately apparent though because the firm was already a major supplier to the NHS pre-Covid, so the pandemic purchases were made using existing framework contracts, which did not show up on registers of new contracts.  (That’s a weakness of the transparency rules by the way, but let’s save that for another day).

I had some personal communications with the founder and CEO of the firm, ex-nurse Sarah Stoute, and I’m still not really clear whether FSG and its leaders are amongst the heroes of the pandemic or the villains. In terms of heroes, the owners took huge risks when they saw the pandemic starting, and committed to buy PPE mainly from China at their own risk in late 2019 and early 2020 as prices started rising. That could have literally bankrupted the firm if the market had moved the wrong way but those stocks helped the NHS get through the crisis – and of course prices went up and up, benefiting the firm’s bottom line.  

The owners also tried to advise the NHS and the PPE buyers about the suitability or otherwise of some of the new sources of PPE that started coming on board. Now that might be seen as self-serving – “buy from us rather than these unsuitable new suppliers”. But Stoute was proved right on some occasions where (as we now know) the government bought PPE that was unsuitable or didn’t meet specifications – or was bought from firms that turned out to be run by crooks, basically.

The counter argument basically runs that the owners made huge profits as shortages grew and bought themselves a Caribbean villa for £30 million, an equestrian centre and a country mansion in the south of England for £6 million.  As I say, they took substantial risks, but maybe buying villas wasn’t the most tactful thing to do quite so quickly. I think I might have waited a couple of years at least!

But back to this dumping of stock. Clearly that was nothing to do with FSG or with the NHS or individual NHS trusts. However, we do know that the NHS some time ago appointed firms to help with disposal of unwanted PPE, most of which was sitting in shipping containers around the country (some was still being held by suppliers to).

So the most likely explanation is that someone was contracted to dispose of PPE, they probably then passed on the task to another firm, and maybe another one again, util it ended up with a bunch of criminals who offered a cheap price for disposal then simply dumped it.

Sara Stoute has also said that the reason this stock is surplus is that it wasn’t stored correctly – their lawyer said, “the PPE became unusable because of the way it was stored after delivery, not due to wrongdoing on their part”. If that is true, that is another indictment around the whole story of mismanagement we’ve seen unfortunately from the beginning of this saga.  As well as the money (and time) wasted, the disposal issue highlights the “wasted” carbon emissions embedded in the product and now the pollution and waste disposal risks and costs around it.  Not a happy tale, all in all.

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Disqualifying Suppliers from Government Contracts

It feels like the new UK Procurement Bill has been moving through Parliament for years – it is only a year in fact, although before that there was an extended period of consultation.

One of the themes of the Bill is that it should be easier for the contracting authority (CA) to “bar” or disqualify suppliers from bidding altogether. That has been possible for many years if the supplier or one of its directors had committed certain criminal acts, but the new legislation includes exclusion for poor performance for the first time.  There is also exclusion for “improper behaviour” which has led to a supplier gaining an unfair advantage in the competitive process.

However, the authority will also have some flexibility. The new rules mean that the existence of a mandatory or discretionary exclusion ground is not enough in itself to throw the bidder out of the process.  The CA has to first decide if the circumstances giving rise to the exclusion are likely to happen again. That’s quite a difficult and potentially controversial assessment to ask the buyer to make, in my view. There is also going to be a centrally-managed list of firms that have been barred.

It will be interesting to see whether there will really be any significant change of behaviour in this area. In truth, CAs are very cautious about barring firms, fearing I suspect legal challenge and endless argument getting in the way of running the actual procurement process. I’m not sure that will change.

An interesting example of this unwillingness was reported recently on the Nation Cymru website. Campaigners have accused a National Health Service Trust of ignoring anti-fraud regulations by allowing two firms that have been convicted of bid-rigging to form part of a consortium to build a new cancer centre in South Wales. The Acorn Consortium is the preferred bidder for constructing the new Velindre Hospital in Cardiff. That project has faced strong opposition on environmental and medical grounds, and it is those against the construction who have raised this issue.

Nation Cymru has described how two of the consortium members – the Kajima group and Sacyr – have been found guilty of fraud offences in Japan and Spain respectively. As the website reported,

“Kajima was sentenced for bid-rigging in March 2021, with one of its executives receiving a suspended prison sentence and the company itself being fined 250 million yen (around £1.53m) for its role in the scandal, which involved a number of firms colluding with each other on the construction of a railway line to maximise their profits. Sacyr received a penalty of €16.7m in July 2022 for its part in creating a cartel aimed at aligning bids for government contracts”.

When asked why this had not led to exclusion, a Velindre University NHS Trust spokesperson responded: “The robust procurement process has been undertaken in line with procurement law, UK and Welsh government policy and all required due diligence has been undertaken.” 

I’m not sure that’s a good enough explanation really. When the spokesperson was asked to explain in more detail why “regulation 57” (which covers this sort of thing) did not apply or was over-ruled here,  they “did not offer an explanation”.  I do think they should say more.

But conceptually it’s a tricky one. With my buyer’s hat on, do I really want to kick out what presumably is my best bidder because two possibly quite minor consortium members did something bad hundreds or thousands of miles away? On the other hand, we do have regulations for a purpose. 

In terms of the justification, having had a quick read of “regulation 57” (it’s some time since I studied “the regs”), I suspect the answer lies in the famous “self-cleaning” clause. That says, “Any economic operator that is in one of the situations referred to in paragraph (1) or (8) may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion”.

So basically, if a supplier can show that it has taken lots of steps to make sure it will never, ever get involved in bid-rigging again, or any of the other reasons for mandatory OR discretionary exclusion, and the buyer is naïve enough – sorry, I mean if the buyer analyses those declarations and decides they are valid, then the supplier is back in the game.

You can see the logic in this, but it is a bit of a “get out of jail” card really. It’s also another reason why in practice, we so rarely see suppliers barred. It will be interesting to see whether anything changes once the new Bill has been implemented – but I have my doubts. Barring is potentially just so fraught with hassle and risk.

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NHS Insourcing Contracts – Conflict of Interest alert..

Imagine you are a Head of Procurement. Workload is growing and you are suffering from staff shortages. Your team can’t keep up. So you go to your boss with a proposition. You and a handful of the team are prepared to work a few evenings in order to catch up with the work. But the firm will pay your own limited company, Procurement Excellence Ltd, on an outsourced service basis. Maybe £100K’s worth or work should help get up to date.

It would be interesting to see the reaction of the firm, but I suspect the Head of Procurement might not be in their post for long after that. However, a parallel situation in the UK’s health service has led to hospitals contracting with their own medical staff in exactly that manner. And that cannot be acceptable.

A report in the Observer over the weekend revealed that UK NHS health Trusts are paying businesses owned by their own doctors to perform services, often using the Trust’s own facilities.

“At Manchester University NHS Foundation Trust, three top surgeons including a clinical lead and a former clinical director are the owners of Fortify Clinic , a company offering “end to end” services to tackle waiting lists. The firm was paid £1.3m by the trust for work in 2022.”

In another case, a Sheffield firm owned by three consultants (doctors) was sold to a private health provider for £13 million after winning a number of these “insourcing” contracts. Trusts are facing long patient waiting lists and declining standards of care and public health in the UK following Covid. Strikes by nurses and ambulance staff don’t help either. So these private firms carry out operations “out of hours”, in the evenings and weekends, often using the Trusts’ own facilities and sometimes even some of their own staff. But the firms are paid as external suppliers.

One driver of this is the pension situation for high-earning individuals, including many doctors. The “lifetime cap” on pension pots means that a doctor might face a crazy marginal tax rate if they earn “too much” and their pension contributions breach the limit. But if the money flows into a business, it can be managed in a more tax-efficient manner, presumably.

Although the pension situation is pretty stupid, it does apply to everyone, not just doctors. The government should address it – but doing do just for medics would rightly bring cries of “unfair” from others in a similar situation. But the tax position is no excuse for hospitals agreeing to this approach, which is fraught with problems.

The conflicts of interest are obvious and significant. Trusts are awarding contracts – without competitive process, I suspect – to their own “friends”.  The decision-making “buyers” are almost certainly close to those benefitting from the contracts. There are also conflicts for the medics involved. There may be less incentive for instance to work harder, more efficiently or rapidly if you know you will get a substantial contract and more income if the backlog of work grows rather than shrinks. And are the hospitals charging these firms for the use of their facilities? They should be, otherwise external private healthcare providers could cry “foul” for unfair procurement.

I worked in a factory one holiday when I was a student, making insulation for pipes (I’m pretty sure it was asbestos, but that is another story…) Work pretty much stopped after lunch on many Friday afternoons, just to make sure there was overtime for those who wanted it on Saturday. I’m not suggesting a surgeon would do the same quite as overtly, but even if they resist the temptation, a conflict of interest has been created.

It is also just another step towards the privatisation of the NHS. What is interesting is that this is not being driven by some secret political strategy. It is being driven by incompetent political management, resulting by staff within the NHS taking action in their own interest (and sometimes that of the patient too) that is leading to a de facto two-tier health service. It has already happened in dental services; now we are seeing it more widely, as more and more people who can afford it “go private”.

If you see a consultant (doctor), and they tell you that the waiting list within the NHS is 6 months, but they could do it for you privately next week, in the same hospital, using the same excellent facilities, for a few thousand pounds, what do you say? But if the doctor’s firm is making large amounts of money out of this, can they really offer unbiased advice – “Doctor, will my condition get worse if I wait six months for NHS treatment”? What are they going to say?

Finally, are procurement teams involved with this at all?  I’d like to think some might have pointed out the st issues. If not, perhaps they should start now.

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National Audit Office Won’t Sign Off UK Dept. of Health Accounts

The UK’s National Audit Office recently refused to sign-off the accounts of the Department of Health and Social Care (DHSC) for 2021-22.

“A lack of sufficient, appropriate audit evidence and significant shortcomings in financial control and governance” meant that NAO head Gareth Davies was unable to provide an audit opinion on the accounts of the UK Health Security Agency (UKHSA).  Even taking the “challenging context” into account, Davies called the UKHSA’s inability to produce auditable accounts “unacceptable”.

UKHSA replaced Public Health England in October 2021. That was a challenging time because of Covid, but even so, the financial management of the new organisation appears to have been chaotic.  

“UKHSA was unable to provide the NAO with sufficient evidence to support balances relating to £794m of stock, and £1.5bn of accruals from NHS Test and Trace, which were transferred from DHSC, or to support £254m of stockpiled goods transferred from its predecessor organisation, Public Health England (PHE). DHSC had not resolved issues with its management systems, financial controls and records, which the C&AG reflected in his report on DHSC’s 2020-21 accounts”.

Internal controls were lacking; there weren’t even effective bank reconciliations, something the smallest business would expect to have in place. “Shortcomings in the introduction of a new accounting system, combined with a reliance on temporary staff, meant that UKHSA was not able to provide the NAO with evidence to support key balances and transactions in the accounts”. So goodness knows what was happening in terms of errors or even fraud at that time.

Moving on to the wider Department, NAO “was unable to obtain the evidence needed to support £1.36bn of stock, due to issues related to inventory management”.

DHSC did not carry out end of year stock counts to check items including PPE (personal protective equipment) and Covid lateral flow tests, “as it was unable to access 5 billion items (which cost £2.9bn) that were stored in containers”. Whilst that might be excusable, or at least understandable, there was also a lack of adequate processes to check stock in warehouses, which is less so.

There was also a write-down of £6bn in terms of pandemic related purchases. £2.5bn of that is items already purchased but no longer usable, or where the market price is now way below what was paid. £3.5bn was a write-down on PPE, vaccines and medication which DHSC has committed to purchase, but no longer expects to use.

“Taken together with the £8.9bn written-down in its 2020-21 accounts, over the last two financial years, DHSC has now reported £14.9bn of write-down costs related to PPE and other items”. 

And if you are thinking, well, at least that’s it, there is more salt to rub into the wounds.

“DHSC estimates that ongoing storage and disposal costs for its excess and unusable PPE will be £319m. At the end of March 2022, the estimated monthly spending on storing PPE was £24m.”

So that’s £15 billion of taxpayer’s money gone. It has been in effect a huge transfer of wealth from the UK economy and citizens to a range of largely non-UK manufacturers and of course to a whole bunch of crooks, conmen, exploitative agents and middlemen, many with political connections, and the occasional genuine business person, all involved in the supply chain somewhere.  Every issue of Private Eye seems to have more examples – taken from the company accounts that are now emerging – of firms making huge margins, often 50% or more, on the PPE, tests and so on that were supplied during the pandemic.

We’ve discussed the reasons for this disaster many times over the last couple of years A failure to prepare and mis-management of the emergency PPE stocks; catastrophically bad demand planning which led to huge over-ordering;  incompetence in terms of drawing up specifications; a lack of even basic negotiation, cost analysis and supplier due diligence; political interference and nepotism; these drivers all feature. But as the NAO lays out the cold, hard numbers, we can say with confidence that when we construct the league table for the all-time costliest failures in UK public procurement, this is right at the top.

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Gareth Davies, NAO Supremo, On Efficiency, Standards (and Procurement)

Last week, Gareth Davies, head of the UK’s National Audit Office, gave a speech to members of parliament and civil servants. He drew on the experience of NAO in carrying out dozens of reviews over the last three years to highlight “three big lessons for public spending in large scale emergencies”.  All three have implications for and are related to procurement in some sense.

“Firstly, the importance of maintaining basic standards of public accountability even in a crisis, and restoring normal controls as soon as possible. 

Secondly, the central role of good quality data in responding quickly and targeting resources accurately. 

And thirdly, the need for a new approach to improving the country’s resilience to large scale emergencies, which minimises the impact on current and future taxpayers”.

Under the first heading of basic standards, he accepts that there wasn’t time to carry out full and normal processes in areas such as PPE procurement or furlough loans. But there was then no excuse for government failure to apply the safeguards of transparency, for example in terms of large PPE contracts.

“It was therefore a concern to see significant delays to government publishing the details for some (often very large) contracts that had been awarded without competition. It is not an onerous task to publish this information promptly, and it is a vital one”.   

Timely accounting is also key, and he points out the worrying situation in local government where a third of councils at the end of September 2022 had still not published their accounts for the year ended March 2021! Given the waste of money / fraud /massive incompetence that is now coming to light in councils such as Thurrock, Croydon and Slough, timely accounting is “critical to protecting taxpayers and maintaining trust in public spending”.

Under the good quality data headline, he praises some aspects of the NHS App as a good example of the benefits that data can bring, but government has to do more, and progress has been too slow. There are three key issues that can help drive greater efficiency:

  • Data standards: essential for efficient use of data, held in a consistent way
  • Data quality: for accurate and reliable results and maintaining public confidence 
  • Data sharing: so that citizens don’t have to repeat themselves 

Finally, resilience – “how is government ensuring that our country is resilient enough to withstand costly crises, without placing an unaffordable burden on taxpayers? And what will good value for money look like in future pandemic planning?”

We need more flexible approaches, he says, but above all we need a more considered approach to risk. For instance, given climate change, there are major issues around water supply, but NAO found no convincing plans to stop the south of England running out of water by 2040! (That’s a worry for a vegetable grower like me even with 8 rainwater butts / bins dotted under various drainpipes and around the garden…)

“To be truly resilient, government must plan for scenarios that it previously dismissed as extreme, and revisit its assessments of how likely they are to happen. This is crucial if we are to achieve value for money, not just in the short term, but for future generations.” 

His final remarks on efficiency in government spending more generally focus mainly on evaluation and evidence. Basically, government spends money and has little idea of whether it does what it was supposed to (or achieves anything at all in some cases). Here’s a shocking fact. In 2019,  – “out of the government’s 108 most complex and strategically significant projects, only nine were evaluated robustly. Seventy-seven of them had no evaluation arrangements at all”.

There are other good points around efficiency. Understanding and managing demand for services is key; and we need more and better investment in digital services (with the caveat that projects are consistently over-optimistic about implementation in the public sector).  Davies wants more focus on the nuts and bolts of efficiency. “We have seen too many high-level ambitions fail to be translated into concrete plans, adequately resourced and tightly-managed. The skills and organisational discipline required for this are well understood, but they are not always valued and prioritised in government.” 

Indeed. I still wait to see the first appointment of a Permanent Secretary who has risen through roles in procurement, commercial, project management and delivery, rather than the traditional policy and private-office-heavy route. That would be a real indicator that government is taking these messages seriously!

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A Mone About PPE (Again!)

Reports in the Guardian last week suggested that Michelle Mone, business woman and member of the British House of Lords, benefited directly from PPE contracts which the government awarded during the pandemic.

Mone and her husband had denied that they gained personally from £200 million worth of PPE contracts, following disclosures that they lobbied politicians including Michael Gove for PPE Medpro to be awarded the business. That enabled the firm to secure a place on the government’s “VIP lane”, which prioritised certain companies that were offering to supply PPE. Many of the firms in that group were recommended by politicians, although others came via recommendations from civil servants, advisers or other prominent people.

Mone’s lawyer last year said she “did not benefit financially and was not connected to PPE Medpro in any capacity”.  But already there was evidence that she was involved, and now leaked documents produced by the bank HSBC appear to show that her husband, Douglas Barrowman, was paid at least £65 million from PPE Medpro. Funds were then distributed via offshore accounts and trusts, and some £29 million of that ended up in a trust benefitting Mone and her children.

Separately, PPE Medpro is being investigated for fraud by the National Crime Agency. It is not clear if that is linked to the government’s dispute with the firm over the quality of gowns supplied as part of the contract, which did not meet quality standards (according to the NHS).

Leaving aside the specifics on Mone and Barrowman, who appear to encapsulate the moral bankruptcy of many of the PPE “middlemen” and agents who exploited the pandemic to make excess profit, the case does highlight again some of the weaknesses in PPE procurement. It is easy to be wise after the event of course, but with billions made by some very dodgy people, it is not unreasonable to ask what went wrong. Here are a few of the key issues – we have previously discussed much of this of course!

  1. The PPE procurement team was slow to ensure that the specifications provided to suppliers were exactly what NHS users needed. That meant it was not the suppliers’ fault that some unusable goods in the early days of Covid did meet those specifications. In other cases, it may be that the supplier was at fault, but the waters are muddy. And whilst time was of the essence, surely samples of items should have been provided before huge consignments were shipped and paid for. It also took a while to get basic supplier due diligence in place.
  • The idea of having some sort of prioritised potential supplier system to evaluate offers was in itself reasonable, given so many firms were approaching the buyers. But it should have been a totally transparent process, with the “rules” in the public domain, and it should not have been based primarily on “knowing the right people”.  A simple pre-qualification process with a handful of questions would have worked better than what was put in place. I am also amazed that no senior civil servant spotted that the focus on MPs’ mates would look unfair or worse once exposed. The “Private Eye” test (how will this look on the front page of the Eye / Guardian / FT)  should have highlighted the issue here.
  • Again, whilst acknowledging the pressure to secure supply was incredible, I don’t understand why buyers didn’t delve a little deeper into the cost structures of the suppliers and establish how much margin was being made by those intermediaries. That would have enabled at least some attempt at negotiations to moderate the margins. The lack of curiosity there fuels the conspiracy theories that the buy-side was complicit in helping firms and individuals to rip off the public purse. Just saying “oh, we paid the market price” – which was in effect itself determined by whatever price was offered by those exploitative firms – was not good enough really.

Finally, I have still seen no real explanation of why the estimates of PPE requirements early on were so far out and led to the huge over-ordering of stock, with at least £4 billion worth wasted. That is still costing us now, as PPE is sold off cheaply, or even burnt, whilst we still pay millions for storage. It may be that there was nothing malicious or incompetent behind that, but it would be good to understand how we went so wrong. After all, that was a clear error, one that cost the taxpayer billions.

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NHS Procurement Platform – Was it Bought Properly?

The UK National Health Service is one of the largest organisations in the world in terms of number of employees and its running cost. Whilst it is a single organisation in some senses, really it is made up of thousands of smaller organisations, many with considerable levels of autonomy. Even when we think about hospital trusts, each still has its own Board and is set up as an independent entity from a legal perspective, although that is slowly changing with the introduction of the regional Integrated Care System model.

So it is not surprising that over the years, there has always been tension in procurement between the urge to centralise and control more from “the top” (whatever structures might be defined in that way) against the desire for local autonomy and power.  Now no-one would argue for total centralisation (everything needed by every hospital bought from a huge central office somewhere) or total decentralisation (every doctor or hospital negotiating its own deals for pharmaceuticals!)

But getting the balance right has proved difficult. For instance, Ministers persist in claiming “the centre” did a good job in terms of pandemic PPE procurement. But the truth is that pre-pandemic central procurement strategy proved inadequate, and local action was needed to maintain supply in many hospitals. And whilst once the pandemic was underway some central activity was necessary, mandated central buying cost the UK billions in waste and super-profits for suppliers.

The new Chief Commercial Officer for the NHS, Jacqui Rock, who sits in NHS England HQ, recently launched a Central Commercial function for the NHS. A key strand of that is a technology initiative that is designed to help the manage procurement better across the system. The aim is to have a more common approach to procurement, and to start enabling better access to spend data across the whole network. That is a very sensible aim – gathering data does not mean in itself a more central approach to category strategies, and however you want to approach procurement, having good data is essential.

The mechanism for achieving this has raised some eyebrows though. Via Crown Commercial Services, all trusts, integrated care boards and other NHS entities can now use a software platform provided by Atamis, with CCS funding that to the tune of £13 million over three years (it is not clear if CCS has actually “pre-bought” licences here, which could be a risk in itself).

Atamis is a procurement and tendering platform with spend analysis functions as well as tools for managing programmes, tenders, contracts, and supplier relationships. It was chosen for use by NHS England and the central Department two years ago, although NHS Supply Chain chose software firm Jaggaer for their similar requirements.However ,this new contract with Atamis was put in place using the government’s Digital Marketplace, a set of frameworks that gives the public sector access to thousands of suppliers. And it appears that no competitive process was used to choose Atamis. They were simply awarded the contract. Now there are rules (laws) about when you can award a contract in that manner without seeking proposals from other firms also listed in the Marketplace. And I cannot see in this case how a “single tender” can be justified, when there are other firms on the framework who provide similar products and indeed supply many Trusts already.

I should say that I have no axe to grind with Atamis or their product. When I worked at Spend Matters, I had contact with the founder of Atamis and liked him and the business. But the firm was sold to a Canadian software company last year, and the NHS could represent a considerable proportion of their business.  There are also questions about what happens once the 3-year CCS funding ends, dependence (the Atamis product is built on the Salesforce platform) and “lock-in” to Atamis.

When the initiative was announced, there were a whole host of interesting comments from readers of the HSJ (Health Service Journal). This extract from one probably encapsulates much of the content.

“Why has the centre decided to create a monopoly situation, by endorsing, promoting and funding this only provider for, say contracts management? What happens to other providers with better value solutions? Should UK Tech Plc pack up and shut shop? Are these other solution providers now out of the whole NHS market? Why”? 

For me, the most fundamental question is whether it was legal and commercially appropriate to award the contract to Atamis without competition. (There are “business issues” too of course). The new central function should set a good example, and surely competition is the most fundamental principle of good procurement. But given the way the contract was let, I would not be surprised if we see challenges to that process from other suppliers who are clearly at a competitive disadvantage now, with Atamis being available “free”.  

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Doctor Accused of Fraud Against Medicare

Two fraud cases in a row here … but a new (for me) angle today.

Procurement related fraud and corruption has interested me for many years, long before I started collecting case studies specifically to include in my Bad Buying book. So it is unusual to see a new type of fraud, but I came across a US case recently that was somewhat different to any I‘ve seen before.

At the heart of it, the scam is that an organisation ends up paying for goods that are not really needed (or maybe aren’t even delivered).  An internal budget holder creating their own company, setting it up as a supplier, then creating and authorising invoices and payments to themselves is the typical case. But here, it was more complex, as the fraud was against the US publicly-funded Medicare system.

At a federal court in Brooklyn Elemer Raffai, an orthopedic surgeon, was charged last month with health care fraud in connection with a $10 million scheme. He allegedly submitted false and fraudulent claims to Medicare and Medicare Part D plans. Raffai was arrested and was due to make his initial court appearance in the United States District Court for the Northern District of New York.

“In exchange for kickbacks from telemedicine companies, Dr. Raffai allegedly submitted millions of dollars in false and fraudulent claims to Medicare on behalf of beneficiaries without even examining them or based on conversations on the phone that lasted less than three minutes,” stated United States Attorney (Breon) Peace.

Dr. Raffai purported to practice “telemedicine” (phone or Zoom I assume) with the AffordADoc Network and other telemedicine companies. He was paid approximately $25 or $30 per patient consultation.  Between July 2016 and June 2017, he allegedly signed prescriptions and order forms for medical equipment, including orthotic braces, that were not medically necessary, simply based on a short phone call. Some $10 million in false and fraudulent claims were made to Medicare for that equipment and Medicare paid more than $4 million on those claims.

Presumably the “patients” were in on the alledged scam as well, and were recompensed for making the call to the doctor and playing their role in the process. And (again presumably) it was the manufacturers or sales agents for this equipment who were the masterminds behind it all. They received funding from Medicare for goods that either weren’t needed by the “patients”, or perhaps that equipment was never actually supplied. That isn’t clear from the information made public so far.  We might also hope that those firms have been or will be charged with fraud, as well as the doctor.

This type of fraud where different parties are colluding can be very difficult to detect – think of the famous Sainsburys potato example, which went on for years and was only detected in the end by the supplier’s external auditor. The buyer worked with a potato supplier that charged the firm over the odds, which funded bribes to the buyer. But one positive for those trying to fight fraud is that the more people are involved, the more likely it is that someone involved will “crack” and expose what is going on.  I wonder if that is what happened in this Medicare case, where many people must have known what was happening?

Another positive is that technology will increasingly be called into play to fight fraud. AI (artificial intelligence) can look at huge amounts of data, and perhaps in this case could have worked out that this doctor had a prescribing pattern that was out of line with his contemporaries.  I know organisations are using tools to examine payment records and look for anomalies; for instance, someone who always places orders with a value just below the threshold for further approvals.

Anyway, this is an interesting case and we will keep an eye on it to see what happens to Doctor Raffai.

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Efficiency Savings – UK Government Looks for a Few Billion

It’s usually  a sign of desperation in terms of the public finances (in the UK anyway)  when politicians suddenly start talking about “efficiency savings”. It’s even more serious when they start building them into future forecasts of public expenditure before identifying where the “savings” might actually come from.  

There is nothing wrong with looking for savings from procurement or internal efficiencies, an any good manager should be doing so continuously. But if you really wanted to run such a proper programme across the UK government, you would need to plan and think carefully about how you structure and resource that, which areas you will focus on and so on.  I was involved in the Gershon efficiency programme way back in the mid-noughties and whilst it probably did not deliver everything it wanted to, it was a serious attempt to address difficult issues such as cross-departmental collaboration and a structured category management approach to central government buying.

Last week, Rishi Sunak, the Chancellor, announced a new efficiency drive. “The drive will be spearheaded by a new Chancellor-chaired “Efficiency and Value for Money Committee” that will cut £5.5 billion worth of waste – with savings used to fund vital public services”.

Set up a committee – I’ve always found that’s a great way of making savings! But when you look closely at the announcement, it seems to apply mainly to the NHS and the arm’s length bodies (“Quangos”).  They “will be expected to save at least £800m from their budgets”.  The Arm’s Length Body Review will see savings supposedly come from “better use of property, reduced reliance on consultants, increased digitisation and greater use of shared services, as well as the use of benchmarking to drive efficiencies”.

What has the last government been doing all these years to leave these savings on the table?!  It’s a good job the Conservatives are now in power to sort it out!  Hang on a minute – they’ve been in office for over a decade now. It’s taken quite a while to realise that issues such as “reliance on consultants” are costing the taxpayer a fortune.  

Meanwhile, the “£4.75 billion worth of savings agreed with the Department of Health and Social Care will come into effect financial year 2022/23.”  So together that gives us £5.5 billion in “savings”, which more than covers the £5.5 billion target previously mentioned. So are central departments not covered by this? It’s not clear.  We may come back to where exactly these huge health savings are going to come from.

The other element of the announcement is this. “The Treasury will also launch a new Innovation Challenge to crowdsource ideas from civil servants on how government can reduce waste and improve public services, with winners selected this Summer and best ideas becoming Government policy…. A 2015 Innovation Challenge received 22,000 responses with 16 measures implemented”.

I predict there will be many ideas from civil servants, and the most common will be “stop Ministers coming up with stupid f***ng policy ideas that will never work and cost a fortune”.

Consider great historical examples such as NPfIT in the NHS, ID Cards, privatisation of probation, FireControl, Universal Credit, most PFI programmes, the aircraft carrier programmes … etc.  Maybe it would also help if we didn’t give PPE contracts to friends of friends and then waste billions because of over-buying and not checking the specification.

But back to the new “efficiency programme”. We’ll know quickly if it really means anything when we see if and how it is to be resourced, and how often this committee is going to meet. The methodology of measuring “savings” is also key. I’m sure the DHSC will find a way of showing Treasury that it made the “savings”, yet somehow it managed to overspend its budget at the same time… and yes, I am deeply cynical about all this!

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