Social enterprise and the NHS

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Social enterprise and the NHS: where are we now?

from: Social Enterprise Livewire, 10 July 2012

A public sector mindset will simply not survive in any competitive re-tendering exercise up against the likes of innovative and entrepreneurial organisations like Care UK, Assura or Virgin... Real change is deeper than a name, real change through social enterprise will be delivered by organisations who align new leadership and management processes with a shift in organisational culture to empower staff to deliver improved services. Massive change is ongoing in the public health arena, with a big chance for social enterprise models to provide innovative solutions. But are social entrepreneurs ready and able to meet the challenge? Expert commentator Mo Girach investigates.

Social enterprise as a concept and organisational form has always sought to provide a unique point of difference, through the aspiration to achieve the ‘triple bottom line’, or the delivery of simultaneous social, financial and environmental value. The current healthcare context provides a significant opportunity and challenge in parallel, where the blended value structure of social enterprise could prove crucial in balancing the need to deliver efficient and effective health services with true stakeholder engagement and involvement.

However, the current high public scepticism of ‘privatisation via the back door’, particularly after the introduction of the new health bill, means social enterprise organisations and social entrepreneurs wishing to pursue this path must be more savvy around how they approach the opportunities and the challenges that exist.

The new Health and Social Care Bill has received a lot of negative press, most notably due to assumptions and criticisms around increasing privatisation of healthcare through market mechanisms, concern over structural readiness in implementing clinical commissioning and potential of introducing increasingly fragmented local services which fail to truly incorporate extensive patient involvement. However, what is abundantly clear and extensively evidenced, which the bill aims to address, is the increasing demand for healthcare services resulting from an ageing society and the rise in disease chronicity. This occurs against a backdrop of reducing real-term health expenditure creating an affordability gap in current healthcare service provision.

So what are the opportunities and challenges for social enterprises in this environment?

The move to open up healthcare provision to other non-NHS providers is evident in the new health bill, which could present as a clear opportunity for social enterprises. However, the commitment to ensure procurement of ‘any qualified provider’ instead of ‘any willing provider’, whilst on face value appearing immaterial, places increased demand on social enterprise organisations in terms of their ability to respond to tendering opportunities in a regulated market.

Demonstrating financial strength

In this sense, social enterprises must often demonstrate strong financial performance, through large financial reserve holdings and capital, with a recognised quality control system that is supported by strong internal governance and regulatory compliance. Given the slightly altered tendering requirements of each bid, effective social enterprise response to procurement opportunities, and particularly for start-up small and medium sized busineses, is limited due to a lack of structure and process in developing business – systems which are inherently present in larger private companies.

A lack of robust financial management and sufficient financial reserve can present as a real barrier to social enterprises, particularly after the high profile collapse of organisations like Secure Healthcare, a social enterprise which went bust whilst providing healthcare services for Wandsworth prison in 2009.

This issue is substantiated when you consider the lack of available start-up funding compared to previous grant schemes for social enterprises, where developing a self-sustaining revenue model is crucial. Social enterprises can no longer depend on charitable or grant-based donations as their key income source, they must develop as independent entities that achieve financial independence through a commitment to their social goals and enhanced customer service. From a tendering perspective, social enterprise organisations formed from public bodies may find it useful to familiarise themselves with the “Teckal exemption” with appropriate legal advice, for gaining understanding and opportunities where competitive tendering may not apply if principal organisational activities are carried out with the public authority for their own use and control without private sector ownership.

Forms, values and labels

Understanding the various organisational social enterprise forms is paramount in helping to unlock their potential and value added benefits around community engagement and ownership. Congruent with the Big Society ideology, social entrepreneurs setting up social enterprises must understand their application, believe in their ability to deliver transformative change and reduce the top-down, bureaucratic and hierarchical structures that plague many public organisations delivering similar services.

The label ‘social enterprise’ should not simply be applied to something that is not. In England we have examples of 'social enterprises' which, led by their senior management, are nothing more than renamed public bodies with scant or no regard to public accountability. In England the focus pushed by the UK Government has been on encouraging groups of public sector employees to 'take over' the enterprise they work for. Governance and public asset-wise, that cannot be morally right. Most public employees do not understand the idea of wider public ownership and often pay lip service to this ownership and membership model. This identifies a clear business development gap for new social enterprises, where founders must embed new cultures, systems and processes to get the best out of the model.

In the case of public sector organisations conducting the transformative process to become a social enterprise, such as the ‘right to request’ process for healthcare organisations, this means more than just a statutory name change. A public sector mindset will simply not survive in any competitive re-tendering exercise up against the likes of innovative and entrepreneurial organisations like Care UK, Assura or Virgin who have seen their healthcare market share increase in recent years.

A shift in organisational culture

Real change is deeper than a name, real change through social enterprise will be delivered by organisations who align new leadership and management processes with a shift in organisational culture to empower staff to deliver improved services.

Another area that is often a stumbling block for social enterprises is their ability to demonstrate and communicate their added value. Commissioners need to ensure services bought provide value for money through the outcomes achieved. Social enterprises have in the past failed to articulate the social value they create in generating exponential health improvement through social gain.

Whilst some pioneering work has been researched around social return on investment, this is still under-utilised and under-exploited as a point of difference for demonstrating the value of social enterprise service delivery. This will be particularly challenging in the current environment where financial fundamentals of larger companies will outweigh poorly presented social value outcomes.

Patient involvement

However, with every challenge comes an opportunity and there are also many in this environment for social enterprises. The health bill creates a particular emphasis on local stakeholder and patient involvement and engagement in healthcare service delivery. This is the foundation of the social enterprise model, where corporate structures, such as community interest companies, are bound by their articles of association and company law to provide a community interest statement each year with their accounts, as well as a community interest test, which ensures the enterprise has engaged with stakeholders and operates for the community benefit.

The rhetoric around local Healthwatch patient organisations in the bill, fuels the importance of patient involvement in healthcare provision. Social enterprises embody this culture of patient involvement and engagement, even to the extent where they influence the organisation through share ownership or membership in co-operative, mutual and CIC models.

Opportunity for innovation

Furthermore, the ongoing need and emphasis on innovation in the current healthcare economy is powerfully transmitted. Social enterprises have a significant chance to develop innovative integrated healthcare models due to their ability to respond to local needs more rapidly and precisely than larger, corporate, nationally-owned entities. Their knowledge of their own local economy is the mechanism through which to achieve business growth through innovation. The lifting of the dividend cap from the CIC regulator to 20% of each share is an example of where social enterprise models are developing also, to attract more social investors and create collaborative partnerships with larger companies – a strategic option which will become increasingly important for the smaller social enterprise who could link into another company’s corporate social responsibility ideas.

Looking further into current health changes, social enterprises with vision to improve public health ­– the key to real health service sustainability through improving population health – will have greater access through new bodies which take on this agenda.

Either way you look at the current climate, organisations which cater to patient needs in a responsive, innovative and efficient manner will prove most successful, whereas those which actually improve community population health and prevent disease, most useful.

Author: Mo Girach is a business strategist and special advisor to the NHS Alliance on social enterprise, co-ops and mutuals. He was formally CEO of South East London Doctors Co-operative, one of the largest GP co-ops in the UK. Mo has a BSc (Hons) in Podiatric Medicine and a Masters in Business Administration (major in Strategic Management), and is a Leadership Associate at the The King’s Fund.