SOCIAL POLICY & ADMINISTRATION ISSN 0144-5596 VOL. 30, No. 1 , MARCH 1996, PP. 1-19

The Purchaser/Provider Split in Social Care: Is It Working?

Jane Lewis with Penny Bernstock, Virginia Bovell and Fiona Wookey

Abstract This paper reviews the ideas ofpublic choice theory that provided the rationale

f o r introducing the purchaser/provider split and suggests that the notion of provider self-interest is as undifferentiated a concept as its rival: public ethos or duty. Using data from eighteen months’observation and interviewing injve local authorities, it then goes on to address the huge amount of work involved in separating purchasing from providing. We trace the changing understand- ing of the purpose of the split, problems of dejning who is apurchaser and who a provider, problems of working the new relationship between purchasers and providers, and difjculties in developing the purchasing function.

We then seek to examine what are believed to be the main benejits of the purchaser/provider split, asking whether there is evidence that purchasers are doing a better job of identifying needs than providers, and whether there is evidence of competition involving multiple providers and mult@le suppliers. Finally, we investigate whether there has been an increase in responsiveness, taking home care as an example. The paper concludes that while increased competition among suppliers has been one important factor in two authorities in securing a more responsive service, the evidence is equivocal as to whether the purchaser/provider split has been the key to securing competition.

Keywords Purchasing Providing Community care Competition Responsiveness

The Rationale for the Purchaser/Provider Split The broad aims of the new policy of community care have been usefully summarized by Wistow et al. (1994) as promoting a shift from provider-to

Address for Correspondence: Jane Lewis, All Souls ColItge, Oxford 0x1 +4L.

0 Blackwell Publishers Ltd. 1996,108 Cowl9 Road, Oxford OX4 IJF, UK and 238 Main Street, Cambridge, MA 02142, USA.

needs-led services; from provision dominated by the public sector to provision by a mixed economy of care; from provision by the health service to provision by the community; and from institutional to domiciliary care. The main idea promoted in the Government documents immediately preceding and follow- ing the 1990 legislation was that of making sure that services fit users’ needs. As Baldock and Evers (1992) have pointed out, similar claims have been made in a number of European countries where changes in systems for providing care for elderly people have also taken place. Market mechanisms are believed to be the key to achieving both these aims and improved efficiency in the use of resources.

In particular, it is believed that the introduction of a purchaser/provider split will weaken the influence of providers’ vested interests in the identifica- tion of needs and service specifications, thus making it more likely that services will reflect users’ rather than providers’ needs; and will introduce competition into the supply of services, thus also improving provider responsiveness to need. The first two key components ofcommunity care listed in the 1989 White Paper referred to services that respond flexibly and sensitively to needs, and the provision of a range of services to choose from (Cm 849: para I . I o ) , and the I ggo Policy Guidance insisted on the separation ofassessment and purchase of service from direct service provision at the micro- and macro-levels (DH, 1990: para 4.5).

It is worth reviewing the basis for thinking that weakening providers will make services needs-led, and that competition will increase choice and responsiveness. The Summary Guidance on Assessment and Care Manage- ment (SSI, DH, SOSWSG, 1991: para 15.30) acknowledged that separating purchasing from provision would “not solve the conflicts between needs and resources”, but would “ensure that the respective interests of user and provider are separately represented”. Similarly, the Social Services Inspector- ate’s Interim Overview Report on assessment and care management (SSI, 1993) asserted that a clear purchaser/provider split aided the process of moving from a service-led to a needs-led approach (para I .6). The assumption running through both the government guidance and much of the academic commentary is that providers are essentially self-interested. As Harrison and Pollitt (1994) have pointed out, this is only one of a number of possible models of professionalism. But it has become dominant in the rationale for introduc- ing purchaser/provider splits. In fact, provider self-interest is as hopelessly undifferentiated a concept as its rival: public ethos or duty. If providers are motivated wholly or partly by self-interest then that of the hospital consultant is likely to manifest itself differently from that of the low-paid home care worker, as is that of senior provider managers from front line staff. In addition, provider managers will have incentives to behave in ways their staff may dislike, for example in trying to introduce two-tier pay structures, or to worsen employment conditions in an effort to cut costs.

The emphasis on provider self-interest is derived from the influential public choice theory, which portrayed public sector employees as budget maximizers. In the view of Pollitt (1990: I 15) this idea of provider self-interest “was a clockwork model that ran on targets and bonus pay, not a flesh-and-blood figure that needed public recognition

2 @ Blackwell Publishers Ltd. I@

and self-respect”. Dunleavy (1991) questioned the idea of public sector workers as budget maximizers, suggesting that the real interest of rational public officials lay in the pursuit of “bureau-shaping strategies”. He went on to suggest that the introduction of market mechanisms and the use of contracting might actually provide the new purchasers with additional opportunity for this. Hood (1991) suggested also that the new public management associated with the shift towards privatization and quasi-privatisation assumed a culture of public honesty while at the same time removing the devices instituted to ensure it. The case for provider self-interest has thus been subject to considerable modification. If Dunleavy’s view of the true nature of the self- interest of the public sector employee is correct, then it is not clear how public sector purchasers are going to prove immune to it.

The case for moving towards market principles can nevertheless be simply stated: more than 40 years of reliance on hierarchies has failed substantially to change the practices of providers. The new policy and the literature seem to assume that provider-led services have been inherently anti-user and should be forced to change. But counter to this, it could be suggested that public provider services have historically delivered a “Ford Escort” (as opposed to a “Rolls Royce”) service to large numbers ofclients, benefiting from a mixture of economies of scale, absence of profit motive, and minimal transaction costs. The literature on the development of quasi-markets further seems to assume that only competition can force change, and then concentrates on exploring the conditions for creating a successful quasi-market (e.g. Le Grand and Bartlett, 1993). Given that a quasi-market is distinguished by the fact that the user is not the purchaser, it is argued that the motivation ofpurchasers should be the wish to maximize the welfare of users (thus an older, alternative model of professionalism, which public choice theory sought to discredit, is dusted off>, while providers should be motivated in part by financial considerations. If providers were and are motivated at least in part by the kind of motivation now ascribed to purchasers, this poses difficulties. Le Grand and Bartlett’s (I 993) analysis of purchaser and provider behaviour depends on the emergence of many providers and many purchasers, and on steps being taken to stop providers exploiting their greater access to information. If the latter does not happen, they say that it might be best to encourage commitment to the public weal. This is an important proviso given the difficulties that have been experienced over many years in the United States in securing a variety of providers (Propper, rgg3), the embryonic state of the domiciliary care market in particular in Britain, and the difficulties that Social Services Departments (SSDs) are experiencing in devolving budgets such that a number of micro- purchasers would be called into existence. The argument that hierarchies have failed is influential, although whether there has to be a dichotomous choice between markets and hierarchies is something we raise again at the end of this paper.

The first part of the paper addresses the actual process of creating a purchaserlprovider split, the mechanism deemed necessary for creating a social care market and for changing the behaviour of providers. I t has caused an enormous amount of activity on the part of SSDs. A massive amount of paperwork has been generated. But is it a case of “All Change, No Change?”.

@ Blackwell Publishrrs Ltd. 1996 3

In taking this as the title of their report on progress in implementing community care six months on, Wistow and Robinson (1993) noted as a “cause for concern” that there had been no real improvement for users and carers, only more uncertainty and increased costs. There has always been a danger, as the Audit Commission (1992) noted, of the procedural changes becoming the ends rather than the means. I t is clear that an enormous amount ofwork is required to create and manage a social care market and that it is very disruptive. The paper then seeks to examine what are believed to be the main benefits of the purchaser/provider split, asking whether there is evidence that purchasers are doing a better job of identifying needs than providers, and whether there is evidence of competition involving multiple providers and multiple suppliers. Finally, it investigates whether there has been an increase in responsiveness, taking home care as an example. The findings are based on eighteen months’ fieldwork in five local authorities-one county, three outer London boroughs, and one inner London borough-consisting of formal and informal interviewing and observation at meetings.

The Difficulties of Establishing a Purchaser/Provider Split All five research authorities have created, or are attempting to create, a purchaserlprovider split. Nowhere has it proved easy and everywhere it has required the investment of substantial amounts of time and energy. Separating purchasing from providing entails a large administrative reorganization and an understanding of the meaning of enabling in respect of social services. Departments must also demonstrate a capacity to juggle other aspects of implementation-especially care management-at the same time, and negoti- ate the new relationships arising from the structural reorganization entailed by the split. This by no means exhausts the list ofissues that must be tackled by SSDs before problems relating to developing the new purchasing role are addressed (whether and how to restructure children’s services also looms large), but these issues will serve to indicate the magnitude of the task of achieving a separation.

The Meaning of a Purchaser/Provider Split

After the Seebohm reforms of the early I ~ ~ O S , unification of the new SSDs took place around geography and function. Some departments were divided first according to function (fieldwork, residential and day care, support services and finance) and then according to geographical area, and others first by geography and then by function. In the first model, senior managers were responsible for defined functions across the whole authority and in the second, they were responsible for all functions in a geographical area (Wistow, 1992). The aim of the Seebohm reforms was to provide an integrated service, but criticism of SSDs as monolithic bureaucracies and of fragmentation between fieldwork and residential provision resulted in experiments with greater specialization based on client groups and the organization of services by “patch”. Challis ( I 990) suggested that the purchaser/provider split, which is another form of functional division, would prove most difficult for those local

4 0 Blackwell Publishers Ltd. 1996

authorities that had done most to integrate their services. In so far as field social workers are transformed into care manager purchasers, and residential, day care and domiciliary services become providers, the purchaserlprovider split certainly threatens to reinvent a variant of the old residential/fieldwork divide.

The policy guidance prepared by Price Waterhouse for the Department of Health (PW and DH, 1991) suggested three possible forms of purchaser/ provider split: a separation at strategic level only; a separation at local level, operating through a series of separate purchaser and provider teams; and a separation at senior management level, with assistant directors heading separate hierarchies. In 1992, Wistow et al, reported little support among 24 local authorities for the White Paper’s idea of enabling and little progress towards achieving a well-defined purchasing role. Our research authorities were deliberately chosen to include two who regarded themselves and were widely perceived as being “advanced” in terms of community care im- plementation. These two, the county and an outer London Borough (A), moved to create a complete purchaser/provider split very early in September I gg I and January I 992 respectively. In respect of the remainder, whose slower progress is probably more typical, substantial moves towards achieving the structures perceived as necessary for enabling have been made since 1992. Regardless of where they started, all the research authorities have been moving towards the high and firm purchaserlprovider split embodied in the last of the options offered by Price Waterhouse.

Another outer London borough (B) and the inner London borough took longer to create a split. The inner London borough signalled its intention to create a purchaser/provider split in a July 1991 Social Services Committee report. The report recommended the merger of two divisions which previously provided social work, occupational therapy, domiciliary care and day care for under fives on a geographical basis. The new division, community social services, was identified as having responsibility for assessment and care management. Domiciliary care continued to be part of this division, but day care was moved into the children and families division. The community care division, which provided a range of services for adults, and the children and families division were identified as the provider divisions. The department also identified the need to establish a strategic and regulatory division with a new commissioning unit within it. However, the unit did not come into existence until autumn 1992 and its early work was dominated by the need to commission residential and nursing home placements from April 1993. In January 1994, the department completed the implementation of a purchaser/provider split when it merged the children and families division with community care, and moved domiciliary care into this single provider division. In borough B the purchaser/provider split was initially, in April 1992, confined to the community care division and was thus implemented at third tier. A split at second-tier level was not implemented until May 1993. In the final outer London borough (C), the department agreed at the end of I 992 to move towards implementing a high and firm purchaser/provider split following a report by external consultants. The department intended to cascade change through the department by hiring staff to fill the most senior

@Blackwell Publishers Ltd. 1996 5

posts first. However, a delay in recruiting to the post of Assistant Director Commissioning led to a delay in developing the detail of the lower tiers. In June 1994, a Social Services Committee Report, which outlined the detail of the purchaserfprovider split across the department was withdrawn following a change in political administration.

Both push and pull factors account for the move on the part ofall authorities to create a purchaser/provider split since 1992. The decision by central government at the end of 1992 to force local authorities to spend 85 per cent of the special transitional grant (STG) money transferred from the DSS in the independent sector was the main factor pushing authorities to take purchasing seriously. But in one of the research authorities, the inner London borough, there was also evidence that the SSD saw the possibility of making commissioning work for users. According to the Director in May 1993, the Department realised that commissioning “was equally as important and powerful a tool” as care management in achieving change for users. The authority was also in a position ofhaving a low STG settlement and very little by way ofan independent sector in either residential or domiciliary care. In the light of the 85 per cent rule, it therefore saw the need to “make ourselves seem a borough that the private sector wanted to do business with”. While push factors seem to have been the most significant in most places, it is important to acknowledge the pull exerted by a change understanding of enabling.

For those who established an early separation between purchasing and providing, it was all too easy to equate enabling with privatization in the sense of contracting out services in a block, which resulted in the substitution ofone monopoly provider for another. This sort of approach was found to be widespread by Common and Flynn (1992) in their study of contracts for social care, and was certainly the view of enabling pursued by outer London borough A, an early starter in terms of separating purchasing and providing. Borough A’s purchaserfprovider split was driven more by a desire for the authority to implement client/contractor splits across the whole LA and by a commitment to simple contracting, than by a philosophy of user-centredness. However, the new policy of community care requires a more individualized, needs-led and specifically social services oriented approach to purchasing. The policy guidance invited authorities to begin their thinking about implementation with the needs of the user, proceeding to the kinds ofassessment, planning and organization that would be necessary to address need and to put together appropriate care. Once the inner borough realized this, it felt that enabling was compatible with its commitment to a user-led approach and indeed with the work it had already done on implementing care management. This borough therefore had, as of mid-1993, a clear vision of the purpose of enabling, which, while it by no means removed the difficulties faced in implementation, lent a clarity to this SSD’s procedures which is shared only by the county.

Defining who is a Purchaser and who is a Prouider

Authorities also had to juggle the separation of purchasing from providing with the implementation of care management, something the Personal Social

6 0 Blackwell h b l i s h e n Ltd. I@

Services Research Unit’s care management pilot projects had not had to do. The difficulty of deciding who should purchase and who should provide was acknowledged in the government guidance, especially around the tasks of the care manager, who mayprovide counselling and advice as well as engage in the purchasing tasks of assessment and the commissioning of services. The 1991 Price Waterhouse and Department of Health document referred to the importance of analysing “purchaser and provider roles, rather than assuming that the current responsibility of particular staff members will fall wholly into one category or the other”, and urged a “pragmatic approach’’ to the issue of “overlaps . . . pursuing separation as a means of achieving the objectives ofthe policy, whilst taking account of the realities of running a social services department” (para 7). Challis (1994a) has stressed that too firm a split risks excluding counselling and advice from the job description of care managers, resulting in a narrow “administrative”’ rather than a “clinical” care management model. He has further suggested that from the point of view of establishing successful care management, it is more important to be clear about the roles of service manager and care manager, than firmly to separate purchaser and provider (Challis, 1994b). However, the guidance has tended to assume that care managers will be purchasers (e.g. SSI, DH, SOSWSG, 1991: para 2.37; see also CIPFA/ADSS, 1991).

The county and outer London borough A located care management in the purchasing divisions they created in late 1991 and early 1992. In the case of borough A, its initial approach to implementation resulted in the kind of narrowly administrative approach feared by Challis. According to a purchas- ing manager, interviewed at the beginning of 1994: ‘I think they thought that it would turn the whole process of dealing with elderly and disabled people into an administrative process and that people would go out and do an assessment according to a formula.” Between early 1992 and late 1994, this SSD has come to realize that care management is a more complicated process involving varied interaction between assessor and client and that purchasing sensitive to client need involves more than block contracting-out, and has had to rethink its objectives. In the county, where senior management was sympathetic to social work, and where the meanings of care management and purchasing were understood to be more complex, the care managers allocated to the purchasing division were allowed large amounts of professional discretion in how they went about the business of assessment. However, the multi-agency mental illness and handicap teams experienced some tensions, due in part to the fact that the health members of the team are classified as providers and the social services members as purchasers, despite doing the same things. Having implemented a more sophisticated model of purchasing and care manage- ment, the county has also had to deal with problems arising from the needs of its information and information technology systems (the latter is in fact only a part of the former in terms of the challenges it presents). Thus those who implemented care management and established a purchaser/provider split early have had to cope with second-order problems, while those who took a more evolutionary approach to reorganization have experienced an ongoing series of departmental changes. In effect, all the authorities have experienced at least two significant structural changes between 1991 and 1994.

0 Blackwell Publishers Ltd. 1gy5 7

Negotiating the P u r ~ ~ ~ e r / P r o ~ ~ d e r Split

After implementing a high and firm purchaser/provider split, it seems that a period of tension and mutual suspicion tends to follow before staff adjust to the changed relationship. A senior manager in outer London borough A said in interview in early I 994: “as soon as you get the purchaser/provider split you put the fence up and you get the barbed wire . . . staff who before got on marvellously now say it’s a them and us situation.” In the county, the Director made an explicit appeal to staff in an early memorandum dated April I 992 “to remember that we are three streams [purchasing, providing, and strategy and quality assurance] in one department and we need to work together to maximize resources for our clients”. Reference to the Marks and Spencer system of purchaser/provider alliances was commonplace in this authority, but rela- tions were nevertheless poor in the beginning.

What seems to have happened in these two authorities is that over 1993-4 the firm purchaser/provider divide has been somewhat reconceptualized. Thus while a senior manager (purchasing) in borough A used a car maintenance analogy to justify a firm split in mid-1993, saying that a car owner requested a service and the garage provided, a not dissimilar analogy to domestic cleaning was used in mid- I 994 to justify giving providers rather more scope: it would bec usual to ask a cleaner to provide x hours’ cleaning, but it would be wise to allow the cleaner to exercise initiative as to how best to go about the task. In the county a senior purchasing manager also picked up and reworked the car maintenance analogy to suggest that the owner expected the mechanic to identify the fault, thus suggesting that there was room for provider input. A development consultant in the purchasing division of the county referred to the way in which providers were eventually involved in drawing up the specification for an enhanced home care tender: “the [initial] exclusion was part of our animal behaviour in dealing with the reorganization and the purchaser/provider split.” The problem of organizing and finding the money to implement a systematic review of users, something not previously a part of social services’ activities but which is integral to care management as a process, has also spurred the reconceptualization of the split. Three of the five authorities are debating [in summer I 994) the possibility of giving some place to providers in respect of review.

In the case of the authorities who moved more slowly towards establishing the purchaser/provider split, there is evidence of the same learning curve. The period of tension attendant on firm separation is beginning to diminish in the inner borough, but is ongoing in outer borough B, where the separation is more recent (outer borough C has yet fully to implement the split). However, the separation has never been entirely firm in these authorities. For example, in the inner borough, providers still assess for home care.

Implementing the purchaser/provider split has caused considerable up- heaval. In the county I zoo staffwere transferred to new posts and took up their new positions over the course of a single weekend. According to a senior manager in the purchasing division: “The whole thing was turned upside down . . . It was absolute total confusion.’’ While this interviewee felt that the purchasers were the “golden people” of the new structure, another senior

8 @ Blackwe16 Publzshers Ltd. 1996

manager in the strategy and quality assurance division pointed out that people in the old divisions walked out, leaving the new purchasers to find their own way, and referred to the process as “a scorched earth policy”. In outer London borough A, morale among those in the purchasing division was extremely low initially because care management was perceived by senior managers as a way of “taming” social work, and later because care managers had expected to be able to purchase needs-led care packages, but failure to devolve budgets or provide a menu of services meant that they were restricted to ordering in- house domiciliary care or meals on wheels, which did not satisfy clients. Effort has been made to secure alternative providers, but as of mid-1994, with small result. Indeed, it is not possible to generalize about the effect of the new structures on the moraIe of purchasers and providers. The assistant director (providing) in borough B commented that the tendency was to assume that providers would just carry on. A principle services manager providing in this borough said at the end of 1993 that “the views of providers are not sought, the skills are not used as they should be, and it is almost as if overnight they have become redundant. I’m not suggesting it’s intentional, but that is the feeling, the power is with the care managers, they make the assessments, the care plan, they decide whether they are going to come to you or elsewhere, but where does the provider come in?” Similarly in the inner London borough, providers have felt marginalized as purchasers became stronger in 1993-4. One senior officer felt that they were not “getting much input into service development”.

On the other hand, purchasers may also feel very insecure. In the county one fourth-tier purchaser admitted to feeling that she had no idea whether she was doing the right thing, while another referred to the difficulty in adapting to the changed nature of relationships with the implementation of the separation. Purchasers were supposed to tell providers what they wanted, but “it feels more awkward somehow than if you were talking from one assistant divisional director to another assistant divisional director”, in other words, purchasers do not necessarily know how to exert their authority. The separation of purchasing from providing represents a major change in the culture of SSDs, which have been dominated by social work values, notwithstanding the fact that only 12 per cent of the total social services workforce has consisted of trained social workers. (Wistow, 1992). Since the beginning of the 20th century, British social work has sought to distance itself from money and is therefore likely to view the move to enabling and the possibility of care managers controlling budgets with suspicion.

Developing the Purchasing Function

For the purchaserlprovider split to become more than a paper reorganization, substance has to be given to the new function of purchasing, which means ultimately that money must be given to purchasers, although the purchasing task also involves the new activities of macro-needs identification, market mapping and market management. SSDs received no precise guidance on how to accomplish all this; furthermore, there is little evidence that the im- plementation of the purchaserlprovider split has resulted in a strengthening of strategic capacity. Reorganization has often been accompanied by cost-

@ Blackwell Publishers Ltd. 1996 9

cutting. Thus in outer London borough A, the management hierarchy and administration were substantially reduced when the purchaser/provider split was implemented. Only the inner London borough and the county have significant strategic capacity to help them in establishing the purchasing function and this is located in their respective quality assurance and planning, and strategy and quality assurance divisions. This is of particular concern when the macro- and micro-information needs are so huge (see €or example, Hawtin et al., 1994) and when the information systems are still being constructed.

The government’s guidance acknowledged the difficulties of budget transfer (SSI, DH, SOSWSG, 1991) and suggested that shadow budgets might be a useful way of engineering the transfer (DH and PW, 1992). These are being tried in the inner London borough and in outer borough A, but it is as yet not clear how far they will be successful in actually promoting budget transfer. Only the county has succeeded in shifting some budgets for particular client groups across to purchasers, but has faced huge problems in doing so. A senior manager in strategy and quality assurance said in the middle of 1993 that he felt that “we hadn’t thought it through really, for physical disability [the first budget to be transferred], what it would mean and how it would work . . . But I feel that we have to learn from doing, I think we’d still be here in twelve months’ time thinking it through to be honest.” Providers’ systems are not geared to producing information about costs in the manner required by purchasers; the costs of services provided to existing clients are often unknown; and it has proved very difficult to arrive at accurate unit costs. In the case ofhome care, it has been hard to attribute the cost ofoverheads, or to take into account the full range of hourly rates that apply to different periods of the day, sickness and holiday leave, etc., different distances and travel times. In the county in August 1993 unit costs for home care were recalculated and made retrospective, which rendered purchasers overspent. There have also been the kinds of invoicing problems commonly referred to in the literature (e.g. Le Grand, 1gg3), with examples of billing for dead clients and for clients who have not received service, and the purchase orders necessary for the tracking of purchasing commitments not being routinely filled in or even properly numbered.

The work involved in devising and implementing the separation of purchasing from providing is therefore huge. Nowhere is it fully complete in that nowhere is all money in thehands ofpurchasers. Even in authorities with a sophisticated understanding of what they are trying to do and where implementation is advanced, the course of implementation has been hard to predict. As Gronbjerg (1991) observed ofcontracting for human services in the United States, the process takes on a life ofits own which bears little relation to either the policy guidance or the theory of quasi-markets. The most palpable effect of implementing the separation is an increased burden of administra- tion, the weight of which seems to be correlated with how far implementation of the split has proceeded. Thus in the county, there are now 14 forms that must be filled in to access home care. In the words of a senior manager (purchasing) : “it’s so complex that people [care managers] don’t feel empowered, they feel bogged down”. Even in London borough B, where the

I 0 0 BiuckweIi Publishrs Ltd. I@

split had only recently been established, a manager (purchasing) said in April 1994: “the whole thing is about ‘the form’, not about assessing people and determining their needs, it is about the form”. Our findings echo those of Pahl (1994), whose interviews with social workers revealed a lot of cynicism among front line workers. On the whole, managers are caught up in trying to make the new system work, with a substantial and influential number also relishing the changed environment.

Are Purchasers Doing Better than Providers Did in Identifying Needs? The policy guidance stressed the importance of purchasers approaching assessment in a “needs-led” way. However, Cheetham ( I 993) has commented on the difficulties that care managers may have in separating “needs talk” from “service talk”, in other words, separating their assessment of need from their knowledge of the service that is available, and the SSI and NMSHE (1993) study of assessment in five local authorities reported that “unsur- prisingly, staff did not yet have a language for describing and categorizing need without relapsing into service terminology” (para 3.20).

Given that in the past assessments were intimately related to services, it is inevitable that the practices of staff will take some time to change. In the view of a purchasing manager in borough A, it is the more articulate clients who succeed in alerting care managers to their needs and who secure more creative care packages. In outer borough B, a manager (purchasing) said that unqualified social workers in particular (who form the vast majority of those dealing with older people) would be hard pressed to carry out good needs- based assessments because they are time-consuming and raised uncertainties. These social workers ‘‘still think ofa resource, e.g. ‘I’ve seen Mrs X and I think residential care”’. Providers were also impatient at having to get the care manager’s authorization to change a client’s service when the care manager was relatively distant from the client. In the county, care management was conceptualized as skilled social work assessment from the beginning. But some providers also had assessment skills, particularly in home care, and resented passing the assessment task to purchasers. According to the Director: “Home care managers were very proud of their assessment skills and felt very pained when they saw these stumbling social workers not doing the good home care assessments.” This group of providers also expressed distrust of the care managers’ capacity to assess and ration. At a home care managers’ meeting late in 1993, the example was given of a care manager who had bowed to a carer’s wish for support and agreed to a home care worker going in once a day to “shake the duvet”. Such an example captures the difficulty of separating the assessment of needs from resources.

The idea that the assessment of need can be undertaken as a discrete exercise, and will make it more likely that the services provided will reflect users’ rather than providers’ needs, assumes first a level of training that is nowhere sufficient, notwithstanding considerable effort in some authorities. Second, for the more effective identification of needs to result in more responsive services there have to be purchasers with budgets to buy and a

0 Blackwell Publishers Ltd. 1996 I 1

range of services to choose from. Nevertheless, there are some examples of what could be achieved by a genuinely needs-led system to keep a strong commitment to the changes alive. For example, in the county a complicated package of care was put together for a man with Huntington’s chorea. This client’s carer, his mother, felt that she could no longer cope. Negotiations with the housing department produced a separate flat for the client close to his mother. Home care provided service night and morning and an inde- pendent agency provided night sitting. The mother continued to care dur- ing the day. The package is expensive, but no more so than the cost of a place in a residential psychiatric home. Access to independent provision was crucial to the success of this particular package. However, most clients in all authorities are still receiving what recent studies have termed “off- the-shelf’ or “set list” services (Baldock and Ungerson, 1994; Hoyes et al., ‘994).

Is There Effective Competition? The assumption in both the government guidance and the academic literature is that there must be multiple purchasers close to the clients in order to make services needs-led. However, nowhere are care managers being given devolved budgets. All the London boroughs have emerged with a more or less developed macro/micro purchasing structure in which a central purchasing body comniissions services from which care managers can draw (in outer borough B, the central purchasing body has yet to begin commissioning services). This model is most explicit in the inner borough, where the head of commissioning explained the department’s strategy in mid-1993: “for me care management will still be like micro-purchasers and we are like the strategic commissioners, ultimately what I hope we will have is a huge menu of services which we have commissioned that care managers can purchase”. In this formulation care management can become a provider service and in this borough care management for HIV clients has been purchased by the commissioning unit via an internal service agreement. The position is more complicated still in the larger county, but negotiation for services is facilitated by a central commis- sioning unit in conjunction with other senior purchasing staff, although contracts are “owned” by the budget holders in the purchasing division at a level determined by the size and scope of the contract.

From the local authorities’ point of view, the reasons for not devolving budgets to care managers are compelling. First, all the research authorities have expressed a distaste for what was termed in the inner London borough “cheque book social work”. In keeping with long-held and strongly-held social work values, the view of a senior member of strategy and quality assurance in the county is widely shared: “If they hold the budget themselves and are responsible for managing that budget, then it’s going to be murder for them to take a needs-led approach to the assessment.’’ More pragmatically, SSDs’ concern to secure the best price and to minimize both ex-ante and ex-post transaction costs has led to pressure not to devolve budgets. Another senior member of the strategy and quality assurance division in the county put this clearly as early as May I 993:

12 @ Blackwell Publishers Ltd. 1996

But very quickly. . . you find decisions going back up the line because, things like-you’ve all individually made an agreement with the Spastics Society on the price of a residential place and then you think “we’d better get together and make sure that they’re not charging us X30 per week more here than there”. There’s also the issue of some localities being too small to generate some service developments and they tend to push it up.

Monitoring several different spot contracts negotiated with the same home by different people has also been recognized as a problem. In addition, in the larger county in particular, the director baulked at the prospect of arriving at a formula by which to distribute money to 480 care managers. The questions raised by devolving to sixteen local areas have been severe enough: whether monies should relate to both workload and work rate, how far money should relate to need, how to find accurate measures for these, and whether monies freed up by client exit should be kept by the locality or revert to a central pot? Even in authorities where care managers control small sums ofmoney (around EIOO) to make spot purchases, they are more likely to draw off the centrally commissioned menu of services first because it is administratively easier.

During 1993-4 there has been a parallel move in both the inner London borough and the county away from spot contracting and towards block purchase, which has the effect of reducing the number of suppliers. As a senior purchasing manager in the county stated simply early in 1994:

The reasoning for using a block contract is that ifyou have a supplier who is accredited and people are happy to be using them, the unit costs of a block contract are considerably less than using a spot. For one there is less administration, and secondly, we can use it as a negotiating tool, because we can guarantee someone’s cash flow they can bring their unit costs down so that they are not trying to recover everything through one-off spot contracts.

In the inner London borough, a limited move towards block contracting for scarce services in I 994-5, for example for elderly mentally ill clients, can also be defended in terms of enlarging user choice, and in the domiciliary care field as a protection against variable quality.

While most local authorities other than many of the London boroughs have considerable competition in the supply of institutional care, there is very little independent sector provision of domiciliary care (Leat with Ungerson, 1993; Wistow et al., 1994), which is crucial to shifting the pattern of service provision away from institutions. Furthermore, such provision tends to be unstable. A senior member of the purchasing division in the county reported that a 1994 market mapping exercise revealed that 50 per cent of the domiciliary care agencies identified in 1992 no longer existed. Nevertheless, the number of independent suppliers has increased in the county during 1993-4 to the point where 20 are now ready (in September 1994) for accreditation. The inner London borough decided at the beginning of 1994 to seek tenders for a E500,000 block domiciliary care contract in order to be able to offer services such as night sitting, which in-house providers could not supply. A senior

@ Blackwell Publishers Ltd. 1596 ‘3

manager in quality assurance and planning, in which the commissioning unit is located, said that she would like to see the amount spent on in-house domiciliary services progressively reduced: “I think whether it is 3, 5 or 10 years, until they are put into a competitive mode they won’t believe the world has changed.” However, it is not clear that the block contractors will deliver the kind of service that clients want.

Are Services More Responsive? This is a huge issue and is difficult to measure. We will focus on home care because of its pivotal position in achieving a more responsive service whereby users may choose to stay at home if they wish. In particular we will ask whether it is more or less likely that highly dependent clients will be able to choose the time at which they are put to bed, something that has been a perennial source of complaint in SSDs.

In outer London borough C, where the purchaserlprovider split is still being implemented in the wake of the report by external consultants, there is no evidence of any change in the pattern of provision. In March 1994, a member of a local voluntary organization told the story of a client who was trying to get more help for her husband: “All she wants-they are trying to force her husband to go into nursing home care, she doesn’t want him to go into nursing home care, all she wants is someone to get her husband up in the morning and put him to bed in the evening . . . what they offered was that a home carer could go in at I 2.30 and ifshe wanted him put to bed he would have to go to bed at 5-30.’’ This is exactly the kind ofpattern ofservice provision that it is anticipated that market principles will change. Borough C could stand as an example of a largely unreformed authority in that so far it has only fully implemented an assessment system. It is just starting to address the issue of evening and weekend care by in-house providers and to use STG monies to purchase from agencies.

In the two authorities where an early and firm split was implemented, the results in terms of the responsiveness ofhome care are rather different. In outer London borough A, it is possible but not certain that a client’s wishes would be met. The borough has little independent home care provision and was recently disappointed by the paucity of interest from domiciliary care agencies in registering with the department. However, it does have relatively flexible in- house providers whose contractual conditions have been substantially modified. In the county, it is almost certain that a client would be put to bed when slhe wished by a member of the flexible, in-house home care workforce. In the remaining authorities, slhe would have a reasonable chance of success in the inner borough, where there is some independent home care provision, but where in-house providers remain relatively inflexible. However, the client would in all probability have to be new and highly dependent, and therefore eligible for care management and the expenditure of transferred monies on purchasing independent sector care. In outer borough B, where the split has only recently been established, there is very little independent sector provision and little flexibility in-house; a client would have little chance ofsuccess in the short term. However, the home care service is under review. Arguably the

14 @ Blackwell Publishers Lld. I&

hiatus in the SSD while purchasers find their feet has delayed providers in making the improvements to the service that they wish to see.

In those authorities where a client would have a good chance of choosing when to be put to bed, the reasons for the responsiveness of the home care service vary. In the county, where a client is most likely to be successful, the service is available because of the changes that have been made by in-house providers. These have something to do with enabling, but also much to do with events that took place in the late 198os, when in the wake of an SSI report the authority moved towards creating a home care rather than a home help service. The calibre of service managers appears to have been high, budgets were devolved to them and the service achieved a high degree of flexibility. These changes thus required an external “push”, but this came from the SSI rather than from market competition in the first instance. The threat of “externalization”, to which members were committed at the beginning of the iggos, provided a further impetus, and the freedom provided by purchaser- based budgets also promoted a more responsive in-house service. This group of providers strengthened its position as a cross-county service after 1991 and its managers would now actually welcome externalization, believing that by becoming independent they would be able more effectively to compete in the future. (It should be noted that other providers in the same authority did not feel the same confidence.) In this authority, service level agreements have been established between in-house providers and purchasers. But the initiative to develop services in these was taken by the home care providers. A purchaser at a purchasing board meeting reported that “it was often hard to keep up’’ with the providers in negotiating the agreement.

In the inner London borough, where new, highly dependent clients also stand a good chance ofhaving their wishes met, this is in large measure due to the availability of independent sector care via the block contract. The SSD decided to go for a block contract mainly because of the problems of monitoring quality in respect of numerous spot contracts and because independent providers were refusing to provide small numbers of hours of service. However, problems are beginning to arise with regard to the block contract. The authority spent a considerable amount of time negotiating the qualitative aspects of the contract. The two companies employed promised the most hours and were prepared to cover the whole borough, one for putting to bed and night sitting service, and one for an emergency service at weekends and for housework. In respect of the former, the company is already experiencing some difficulty in putting clients to bed at the time they wish. A small company with limited staff had had difficulty in putting a high percentage of clients to bed within a single hour.

The findings in respect of the central issues of responsiveness are therefore far from clear cut. The most successful case of the county shows that the pattern of service was changed in response both to external regulation and to competition. External pressure in the form of regulation (from the SSI) was crucial in setting the ball rolling n this authority, and in the early ~ggos , the threat of competition was also an important factor. After that, good practice was sustained by devolved budgets to provider managers and by good management, something that has proved elusive in the postwar period.

‘5

Whether good management and flexible practice will be promoted by the purchaser/provider split is less clear. Senior managers must be sensitive to and act on information coming up from care managers (the CIPFA/ADSS guidance (1991) put care managers in the middle of its “logical systems information architecture”). In the inner London borough it was the problems encountered by care managers spot purchasing domiciliary care in the first year of implementation that led to a departmental strategy to block purchase a proportion of domiciliary care in year two. Having the money to stimulate the independent sector is crucial. Finally, there is the issue of whether the independent sector will produce the goods. The inner London borough had good reason for seeking a block contract, but having contracted with a single provider, it is perhaps not surprisingly experiencing difficulties that are reminiscent of in-house services.

Conclusion The experience of the county runs counter to the argument that provider self- interest is necessarily damaging to clients in a public sector bureaucracy. On the contrary, when provider managers were given budgetary control the service improved substantially. While the threat of competition also seems to have played a part in securing a more responsive in-house service in the county in particular, the evidence is equivocal on whether the purchaserJprovider split has been key to securing competition. The crucial determinant of spending in the independent sector thus far has been the government’s imposition of the 85 per cent rule. Given the relative lack of independent providers of domiciliary care, the large number of private homes and the government’s stated wish for local authorities to shift provision from institutional to domiciliary care without producing large-scale market failure in the independent residential sector, this rule did not necessarily encourage the provision of independent domiciliary care, although in two authorities contracting with independent agencies has increased substantially during 1993-4. In the county during 1994, senior officers were again considering the possibility of externalizing part of the already flexible and responsive in-house home care service because of the problems they faced in complying with the rule.

The 85 per cent rule prompted authorities to move more firmly towards a purchaser/provider split in the belief that an enabling role in the sense of managing a social care market was inevitable. But, ironically, it may be argued that the imposition ofsuch a regulation made such a split less necessary in regard to regulating the way in which local authorities spend their money. The purchascr/provider split was also intended to shift money to those assessing need and hence to be a means to promoting a needs-led approach. Certainly, in the inner London borough purchasers pushed to fill the gap in home care services by contracting with the independent sector. But the establishment ofa purchaser/provider split has also brought a huge increase in bureaucracy and threatens to become an end in itself. As Wistow et al. (1994: 146) have observed, “unless those objectives [of the White Paper] are reinforced and form the basis for monitoring the mixed economy, the new

16 @ Blackwell Publishers Ltd. 1996

framework is more likely to be driven by resource and process factors than by needs and outcomes”.

The demands of implementing the separation have been enormous. For example, while the purchaser/provider split is not strictly necessary for the establishment of care management, it has strongly affected the structure of care management systems in the research authorities. The price ofthe split has been shown to be a vast increase in bureaucracy as more forms feed burgeoning information and information technology systems, although argu- ably such systems accompany any process of budgetary devolution and were beginning to be a feature in the county with the devolved provider budgets that preceded the 1991 reorganization. The process of establishing the purchaser/provider separation has also proved traumatic for departments, because of the length of time it takes to develop the purchasing function and transfer budgets, because of a period of adversarial relationships that have to be worked through, and because of the increased distance that tends to develop between senior managers and frontline workers. Nor is it proving easy to stimulate competition in the domiciliary care field.

I t may be that competition will force change everywhere; it is as yet too early to say. The experience ofall the research authorities shows how difficult it is to develop the right balance between macro- and micro-purchasing. The pressures to centralize budget-holding and to move to block contracts are great, but run counter to what academics consider to be one of the main conditions for the operation of a successful quasi-market: multiple purchasers and multiple providers. The experience of the inner London borough shows additionally how difficult it is to secure high-quality domiciliary provision that meets the wishes of users from the independent sector.

Quality is generally acknowledged to be the Achilles heel of markets, and all the more so in domiciliary care where increased flexibility seems to be achieved only by decreasing labour costs. I t is not inconceivable that a client might be put to bed at 10 p.m. by the same worker who had previously come a t 5 p.m., but whose new contract gives her little by way of holiday or pension entitlements, no overtime pay, and possibly a reduced hourly wage rate. The trade-offs between the welfare of the user and of the paid carers in the new system require further investigation.

Both the academic literature and government policy have offered a dichotomous choice between markets and hierarchies. But it is not clear that reorganization according to market principles will deliver more than hier- archies. After all, the social care market exhibits all the risks and uncertainties that make market exchange costly. The quality and effects of social care are hard to observe and to measure. It has also been suggested that modern businesses rely more on collaboration and trust than on the adversarial relationships engendered by market bargaining and contracting (Bradach and Eccles, 1991; Ouchi, 1991; Powell, 1991; Sako, 1992). Flyn et d . ’ s (1994) analysis of community health services in the quasi-market has concluded that the promotion of collaboration through “networks” and “clans” would be more appropriate than the introduction of market principles. This is to opt for yet another unknown approach which the authors do not attempt to operationalize, albeit that intuitively it seems to be more in tune with the work

@ Blackwell Publtshers Ltd. 1996 ‘ 7

of social services. T h e introduction of quasi-markets and purchaserlprovider splits into social care is a vast pilot project. Furthermore, many of the incumbents of new commissioning posts have been hired to operationalize the new principles and have a vested interest in the process. However, a more pragmatic approach that is less rigidly committed to the process of introducing market principles and more open to using skills, no matter whether it is a purchaser or a provider who possesses them; to mixing what markets and hierarchies have to offer; and to the need to regulate, particularly to ensure a check on purchasers (see also Hudson, I995), may serve authorities better.

Notes We are grateful to the ESRC for supporting this research.

Bibliography Audit Commission (rggz), Community Care. Managing the Cascade of Change, London:

HMSO. Baldock, J., and Evers, A. (rggz), Innovations and care ofthe elderly; The cutting-edge

of change for social welfare systems. Examples from Sweden, the Netherlands and the United Kingdom. Ageing and Society, vol. I 2, 289-312.

Baldock, J., and Ungerson, C. (1994), Becoming Consumers of Community Care, York: Joseph Rowntree Foundation.

Bradach, J. L., and Eccles, R. C. (rgg~), Price, authority and trust. In G. Thompson et al. (eds), Markets, Hierarchies and Networks, London: Sage.

Challis, D. (rgg4a), Care management. In N. Malin (ed,), Implementing Community Care, Buckingham: Open University Press (pp. 59-82).

Challis, D. (1994b), Case management: A review of UK developments and issues. In M. Titterton (ed.), Caring f o r People in the Community. The New Welfare, London: Jessica Kingsley (pp. 91-1 12).

Challis, L. (~ggo), Organising Public Social Services, London: Longman. Cheetham, J. (rggs), Social work and community care in the 1990s: Pitfalls and

potentials. In R. Page and J. Baldock (eds), Social Policy Review 5, Canterbury: Social Policy Association (pp. I 55-76).

CIPFA/ADSS Financial Management Partnership ( ~ g g ~ ) , Community Care rggr-Zn- formation Strate,gy, London: CIPFA/ADSS.

CM 849 (198g),hringfor People. Community Care in the Next Decade and Beyond, London: HMSO.

Common, R., and Flynn, N. (I992), Contracting f o r Care, York: Joseph Rowntree Foundation.

Department of Health (~ggo), Community Care in the Next Decade and Beyond, Policy Guidance, London: HMSO.

Department of Health and Price Waterhouse (1gg2), Feedback on the Purchase of Service and PurchasdProvider Workshops, London: DH.

Dunleavy, P. (1991 ), Democracy, Bureaucracy and Public Choice. Economic Explanations in Political Science, Brighton: Harvester Wheatsheaf.

Flynn, R., Pickard, S. and Williams, G. (1994), Community health services and the quasi-market. Paper presented to the Social Policy Association Annual Conference, University of Liverpool, 12-14 July.

Gronbjerg, K. A. (~ggr), Managing grants and contracts: The case of four nonprofit social service organizations. Non-Projt and Voluntary Sector Quarterly, vol. 20,5-24.

18 @ Blockwcl[ Publishrs Ltd. I&

Harrison, S., and Pollitt, C. (1994), Controlling Health Professionals. The Futureof Work and

Hawtin, H., and Smith, P. (1994)~ Community Profiting-Auditing Social Needs, Organisation in the N H S , Buckingham: Open University Press.

Bucking- ham: Open University Press.

Hood, C. (~ggr), A public management for all seasons, Public Adminstration, vol. 69,3- ‘9.

Hoyes, L., Lart, R., Means, R., and Taylor, M. (rgg4), Community Care in Transition, York: Joseph Rowntree Foundation.

Hudson, B. (1gg4), Making Sense of Markets in Health and Social Care, Sunderland: Business Education Publishers.

Le Grand, J. (1gg3), Paying for or providing welfare? In R. Page and N. Deakin (eds), The Costs of Welfare, Aldershot: Avebury (pp. 87-106).

LeGrand, J., and Bartlett, W. (1gg3), The theoryofquasi-markets. In J. Le Grand and W. Bartlett (eds), Quasi-Markets and Social Policy, London: Macmillan (pp. I 3-34).

Leat, D., with Ungerson, C. (Igg3), Creating Care at the Boundaries. Issues in the Supply and Management of Domiciliary Care, Canterbury: University of Kent.

Ouchi, W. G. (~gg~), Markets, bureaucracies and clans. In G. Thompson et al. (eds), Markets, Hierarchies and Networks. The Coordination of Social L i fe , London: Sage

Pahl, J. (1994)~ “Like the job-but hate the organisation”: social workers and managers in social services. In R. Page and J. Baldock (eds), Social Policy Review 6 , Canterbury: Social Policy Association (pp. 190-2 10).

Pollitt, C. ( ~ggo), Managerialism and the Public Services. The Anglo-American Experience, Oxford: Blackwell.

Powell, W. W. (~gg~), Neither market nor hierarchy: Network forms of organisation. In G. Thompson et a1 (eds), Markets, Hierarchies and Networks. The Coordination of Social Lif., London: Sage (pp. 265-76).

Price Waterhouse and Department of Health ( ~ g g ~ ) , Implementing Community Care. Purchaser, Commissioner and Provider Roles, London DH.

Propper, C. (1993)~ Quasi-markets and Regulation? In J. Le Grand and W. Bartlett (eds), Quasi-Markets and Social Polig, London: Macmillan (pp. 183-201).

Sako, M. (rggz), Prices, Quality and Trust. Inter-Finn Relations in Britain and Japan, Cambridge University Press.

Social Services Inspectorate and Department of Health ( 1gg3), Inspection of Assessment and Care Management Arrangements in Social Services Departments. Interim Overview Report, London: SSI.

Social Services Inspectorate, Department of Health, Scottish Office Social Work Service Group (~gg~), Care Management and Assessment Managers’ Guide, London: HMSO.

Social Services Inspectorate and NMSHE (I 993), Assessment Special Study, London: DH. Wistow, G. (1gg2), Organising for strategic management: The personal social services.

In C. Pollitt and S. Harrison (eds), Handbook of Public Services Management, Oxford: Blackwell.

Wistow, G., Knapp, M., Hardy, B., and Allen, C. (1gg2), From providing to enabling: Local authorities and the mixed economy of social care, Public Adminstration, vol. 70, 15-45.

Wistow, G., and Robinson, J. (r993), ALL Change. No Change? Community Care Six Months On. A Second Report of Developments in the Health and Social Care Divide, London: King’s Fund Centre.

Wistow, G., Knapp, M., Hardy, B., and Allen, C. (rgg4), Social Care ina MixedEconomy, Buckingham: Open University Press.

(PP. 246-55).

@ Blackwell Publisturs Ltd. 1996 ‘9