DH secures £1 billion savings from CSC

CSC has announced a revised deal with the Department of Health that will secure savings of £1 billion from its disputed £3.1 billion deal for the North, Midlands and East of England.

EHealth Insider understands that the new deal draws a line under DH contractual liabilities as well as securing the savings.

The savings are twice those announced in 2011 when the government first announced that it would be ‘scrapping’ the National Programme for IT in the NHS.

The deal will also ensure that CSC is paid for past work done and for maintaining existing systems. But the extent to which it commits the NHS to further implementations from CSC is unclear.  

In a US market announcement, CSC said today that it has “signed a non-binding letter of intent with the UK Department of Health (NHS) that defines a way forward for CSC to deliver healthcare solutions and services, primarily across the North, the Midlands and East of England."

The statement adds: "The principles contained in the letter of intent are intended to establish a framework for a broad agreement to be entered into by the parties by 31 March 2012."

The market announcement adds: "As a part of this agreement, it is intended that CSC will contract to deliver additional Lorenzo implementations, adding to the 10 deployed successfully to date, with options for more where demand materialises."

Lorenzo is the system originally developed by iSoft that CSC has been trying to deploy to trusts in the NME.

The company’s local service provider deal for the regions was thrown into turmoil last spring, when Pennine Care NHS Foundation Trust, the last of four, key, early adopters, pulled out of the programme.  

Since then, the company has been locked in negotiations with the DH about a new deal, but the talks have been complicated by enquiries by watchdogs, Parliament and ministers into the national programme and the CSC deal in particular.

Last month, CSC warned that it might not get the deal it wanted, took a £1 billion write-down on the programme, and announced that it was looking to make 500 people redundant from its NHS account.

The DH appears to have decided not to completely terminate CSC’s contract, even though it said it considered the company was in breach of contract when Pennine Care left the programme. CSC has always rejected the suggestion it was in breach of contract.

A key consideration appears to have been avoiding the risk of litigation with CSC.

In May 2011, Christine Connelly, the-then director general of NHS informatics, told a Commons public accounts committee hearing that the cost of terminating the CSC contract could outweigh the cost of continuing with it.

The DH’s total potential liabilities of terminating the CSC deal have been estimated in the range of £1.5 to £1.9 billion.

In her evidence to the PAC, which was taking evidence on the National Audit Office’s third report on NPfIT, Connelly said CSC would have to be paid costs of up to “several hundred million pounds” if the DH were terminate out of convenience.

The DH has been in dispute with Fujitsu since terminating its NPfIT deal for the South of England in 2007.

In return for the new deal, CSC is expected to be required to deliver a simplified version of Lorenzo to an unspecified number of NHS trusts in the NME. One source described this software as essentially a patient administration system.

EHI further understands that development of the more advanced Lorenzo 1.9 electronic patient record system has been shelved.

One source placed the number of trusts to which CSC will be expected to deliver at 22; a quarter of the number that CSC was originally contracted to deliver. The figure was not recognised by another source. 

The trade-off made between cost savings, further reduced clinical functionality and a further reduced number of sites for delivery will inevitably raise questions about whether the revised deal provides value for money.

The NAO report warned that renegotiation of CSC’s NPfIT contract threatened to leave the NHS paying too much for too little.

“Delivery of the contracted number of systems continues to fall well below expectations and fewer systems will now be delivered to NHS organisations, although the cost of delivering care records systems remains substantially the same.”

EHI understands that a scaled back deal was finally agreed last month. Under the revised deal, CSC will have until 2016 to deliver further Lorenzo systems, extending the end of its NPfIT contract by a further year.

A similar number of centrally-funded sites have been ‘optioned’, if CSC can deliver against the contract.

CSC will also continue to be paid maintenance fees in the order of £100m a year for supporting older software systems, many of them installed as stop-gaps it was meant to go back and replace when the Lorenzo product was ready.

The deal still gives the company an opportunity to build on its dominant position in the NHS hospital software market. In 2010 CSC bought iSoft, which has one of the largest installed bases of patient administration and clinical software systems in the NHS.

With NHS finances under intense strain, each of the 40 trusts that appear to be at least potentially slated to take the system would have to forgo a ‘free’ system if they chose not to take Lorenzo.