Trust buys extras-laden system for 20% of BT’s price

By Tony Collins

An NHS Trust has paid £1.8m for the “Rio” patient record system and a host of extras – which raises fresh questions about why the Department of Health paid BT £9m for each Rio deployment under the NPfIT.

BT’s deal with the Department of Health under the NPfIT costs taxpayers £224.3m for 25 deployments of Rio – about £9m for each one. The deal included support for five years, until October 2015.

But a deal struck directly between Cambridgeshire and Peterborough NHS Foundation Trust and Rio’s supplier CSE-Healthcare Systems includes support for a year longer – six years in total. At £1.806m the cost of Cambridgeshire and Peterborough’s deal is about 20% BT’s price.

Cambridgeshire and Peterborough has secured more extras. CSE-Healthcare Systems will supply Cambridgeshire and Peterborough with:

  – Medical software development services

– Software consultancy services

 – Computer support services

– System implementation planning services

– Software implementation services

– Project management consultancy services

– Business and management consultancy services

– Medical software package

– Database and operating software package

– Information systems and servers

– Computer and related services

– Software support services

It’s not clear though whether the deal includes disaster recovery – which the Department of Health argues is one reason for the price paid to BT for Rio.

Comment:

Disaster recovery does not explain how or why the Department of Health agreed to pay BT five times more for Rio than paid by Cambridgeshire and Peterborough.

What is not in doubt is that if BT, like Accenture and Fujitsu before it, had left the NPfIT, the programme would have been indelibly stamped a disaster – at a time when the Department of Health and ministers were proclaiming it an unacknowledged success (in the run up to a general election).

Was BT paid a hugely costly premium to stay in the NPfIT?  If so, should tax money have been used to secure the affections of a supplier whose profits were otherwise being squeezed on the contract?

Last year the Department of Health gave the Public Accounts Committee an explanation of its Rio payments to BT, some of which is below. The explanation is long, vague and defensive enough to sound like the excuses of a young boy who, when questioned by his teacher, gives various accounts of why he took a classmate’s sweets.

What the DH told MPs

This is what the DH told the Public Accounts Committee last year, after one of its MPs Richard Bacon queried the payments to BT for Rio (and Cerner).

“Assessing the value for money of the RiO prices was part of the CCN3 [change control note 3] negotiation process … The CCN3 negotiation process was lengthy and involved many iterations challenging the component parts of the BT cost model. This included ensuring that rates offered were competitive and that the effort ascribed to various activities was justifiable.

Taken together, competitive rates and reasonable effort comprise value for money. BT was required to provide numerous iterations of financial models. These models were reviewed in detail by the Authority, resulting in multi-million pound savings.

The Authority negotiated reduced day rates on all of the BT labour within the contract. In addition, BT’s profit margin on the contract was also significantly reduced. Other commitments were also obtained by the Authority, in particular around sub-contractor pricing; for example, Cerner has confirmed that the pricing provided to the Authority (via BT) is the best it provides to any of its customers.

The Authority then requested further financial assurances and agreed with BT that a requirement of signing CCN3 would be that a verification exercise would be conducted by third party, independent financial experts (KPMG)…

In October 2010 KPMG were requested by the Authority to verify the costs presented by BT, including those for RiO, in the CCN3 Financial Model.

The approach adopted by KPMG was as follows:

—  Their work focussed on the Cost Data sheet within the CCN3 Financial Model and was conducted on a sample basis, designed to provide a high coverage of costs with a reasonable sample size.

—  The cost elements for potential duplicate entries were reviewed.

—  The cost rates associated with BT labour were validated to cost rate cards and payroll records.

—  The hours presented in the Model associated with BT labour were reviewed for reasonableness.

—  Sub-contractor and other supplier costs were validated to the agreements entered into by BT with their suppliers.

—  Cost elements and supporting documentation requested from BT were sampled to substantiate the costs provided…

On 3 November 2010 KPMG concluded that “BT has provided underpinning evidence to support the agreed delivery costs” and that “no proposed adjustments are required for Agreed Delivery Costs”.

None of the trusts consulted had purchased the same RiO product offering and all trusts varied significantly from the offering provided to NPFIT trusts, making a direct price comparison difficult. However, trusts within the programme typically had significant advantages to those outside the programme, namely:

—  The ability to influence the functionality of the product.

—  Centrally provided and hosted hardware.

—  Centrally-provided disaster recovery with 100% capacity and availability.

—  No additional development costs for subsequent releases.

—  Spine connectivity.

BT estimate that the monthly charge for hardware, disaster recovery, service management and Spine connectivity to be in the region of £42,500 per month or just over £2 million of value over a 48 month contract term.

Furthermore the NPFIT investment in the development of the RiO has significantly enhanced the functionality of the product to the benefit of all trusts. Examples of functionality in the latest deployed version (v5) and soon to be deployed (R1, 2011) of RiO include:

—  Standard assessment forms.

—  Care-plans and reports.

—  Spine connectivity, enabling integration with central demographics services, and functionality to support smart cards and role based access controls.

—  Waiting lists.

—  Results reporting.

—  Prevention, screening and surveillance.

—  SNOMED.

—  Inpatient prescribing.

—  Functionality to support multi-disciplinary care planning.

DH statement to MPs on Rio (and Cerner) prices paid to BT

MP seeks inquiry into £546m NHS deal with BT.

Breakdown of £546m NPfIT payment to BT

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