Renegotiating LSP deals may prove costly

A senior industry analyst has compared the potential cost of renegotiating the NHS’s local service provider contracts, worth £4 billion, to “bailing out the banks”.

With the addition of BT's National Application Service Provider deal for the NHS Spine the total value of contracts to be renegotiated rises to £5 billion.

Mike Davis, senior analyst at Ovum, told EHI that the Conservative’s plans to halt and renegotiate the contracts held by BT and Computer Sciences Corporation, could be like bailing out the banks” likely to prove “extremely expensive.”

He predicted: “The renegotiation can be done and I’m sure it will be but it is going to be very costly and Local Service Providers are not going to let go easily.”

He added that Tory proposals to give choice of systems to local trusts, under a Conservative government, could trigger an exodus of larger technology integrators, or cause them just to focus on larger, better resourced trusts.

Davis said Conservative proposals for more local IT systems will lead to big system integrators ignoring small community hospitals and PCTs to concentrate on large acute hospitals

The Ovum analyst said: “I think the big players will remain in the game as they have both the best people and the best inventories of IT assets, they also know the strengths and weaknesses of NHS organisations.

“However, although I don’t expect them to walk away from the NHS as a whole, the big integrators will go for the large hospitals and ignore community trusts and PCTs.”

Davis’s comments follow the publication of the Independent review of NHS and Social Care IT, endorsed by the Tories, who say that if elected they will “dismantle the IT central infrastructure, delivering its benefits through interoperable local systems instead”.

Stuart Denlegh Maxwell, head of health at Logica, who formerly worked for ex-local service provider Fujitsu, told EHI that he too believed that if the Tories were to move forward with local; choice, larger integrators would lose interest in small contracts.

He said: “I think we are going to see the big systems integrators walking away from health as they are unlikely to chase contracts that are worth just a few million pounds.

He added: “But that could pave the way for a lot of movement from the likes of Perot and McKesson, I think they are going to be very interesting to watch.”

The Conservatives have also said that, if elected, they will “halt and renegotiate the Local Service Contracts to prevent further inefficiencies, subject to any applicable constraints.”

“We could all see this coming when the contracts were first put together, succession planning had not been thought through because the people that were involved were only ever going to be in office for a few years.”

“At the end of the day, money spent on sorting this out is not money that is going on healthcare,” he added.

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Ovum

Logica