Department for Work and Pensions: Contract management of medical services - Public Accounts Committee Contents

Conclusions and recommendations

1.  The decision-making process for new Employment Support Allowance applications and Incapacity Benefit reassessments all too often leads to the wrong decisions and is failing far too many people. Claimants have successfully challenged these decisions in 38% of appeals. In one third of these cases, the appeals have been upheld simply because the Tribunal disagrees with the original decision rather than because new evidence is provided on the day. This raises serious questions about the quality of the overall decision-making process. The Department represented appeals as an inherent part of the process but it does not have the information to judge whether the current rate of appeals indicates serious weaknesses in the decision-making process which could be rectified. We welcome the recent actions by the Department to obtain feedback from HM Courts and Tribunals Service. The Department must collect the detailed information needed to understand why there are so many appeals and why so many of them are successful, so that the contractor can improve its performance and DWP can change its assessment process if necessary.

2.  The Work Capability Assessment may unduly penalise people with specific health problems. The one size fits all approach is not appropriate for particular groups, for example, people with mental health, rare or variable conditions. The process is too inflexible and makes it extremely difficult for individuals with particular conditions to demonstrate the impact of their conditions on their ability to work. Too often the process is so stressful for applicants that it can impact on their health. The Department should assess whether the Work Capability Assessment process is unfair to these claimant groups by looking at whether its initial decision is less accurate in these cases and, if so, make changes to its processes where appropriate. We welcome the initial efforts made to improve the process and encourage the Department to continue to review the operation of the work capability assessment for vulnerable groups.

3.  The Department does not know the full cost to the taxpayer of the overall decision-making process for Work Capability Assessments. Whilst some costs are known, such as the £26.3 million paid to HM Courts and Tribunals Service for its work on appeals, there is little information on the cost and impact on the National Health Service or on some of the internal interactions within the Department. Without a full understanding of these costs, the Department cannot come to an evidence-based conclusion on the value for money of its current decision-making process. The Department should establish the full costs of the process so that it can benchmark with relevant organisations on the cost effectiveness of its approach.

4.  The Department has failed to develop a competitive market for medical services. The market for medical service providers is under-developed and Atos Healthcare is currently the sole supplier for all the Department's medical assessments. It has also been awarded two of the three current contracts for the Personal Independence Payment. The Department is too relaxed about the risk to value for money resulting from a dependence on a monopoly supplier, and on the limitations this has on the Department's capacity to remedy poor performance. The Department should assess the risks associated with the use of a monopoly supplier and actively pursue opportunities to develop a competitive market through the deployment of its framework contract.

5.  The Department lacks sufficient rigour in managing the contract with Atos Healthcare. It has adopted a light-touch approach to managing this contract and placed too much reliance upon information provided by the contractor. The Department seems reluctant to challenge Atos Healthcare. It has failed to withhold payment for poor performance and rarely checked that it is being correctly charged for work. The lack of challenging targets for medical quality allows the contractor to conduct thousands of poorly administered tests each year without sanction. The Department needs to reduce its dependence on the contractor's information and processes by adopting a more active and interventionist approach to contract management. This should include obtaining more of its own assurance on information provided by Atos Healthcare, active enforcement of the sanctions available to it through the service credit regime and the setting of more challenging targets on the quality of medical assessments.

6.  The Department cannot explain how the contractor's profits reflect the limited risk that it bears. Moreover, in a new contract for the Personal Independence Payment, Atos Healthcare is sub-contracting to the National Health Service for part of its work, suggesting it is transferring risk back to the public sector. The Department should explain how the profitability of the contract reflects the actual transfer of risk for both the Work Capability Assessment and the Personal Independence Payment medical assessment contracts.

7.  The Department must improve its internal processes to improve the quality of decision-making and contract management. The size of the Department and its impact on individuals and on the public purse requires us to have the utmost confidence in the capability of the Department to deliver. Robust systems are a crucial part of this. We are concerned that the Department is unduly complacent regarding the quality of the decision-making process, particularly given the hardship which can be caused to individuals when the decision is wrong.

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Prepared 8 February 2013