CSC has announced
that it expects to sign a memorandum of understanding with the Department of Health "within weeks".
But Conservative MP Richard Bacon
, an established member of the Public Accounts Committee, will try to stop health officials from expediting the signing of the deal.
Bacon wants NHS Connecting for Health and its CIO Christine Connelly to hold off signing at least until the Public Accounts Committee has had a chance to discuss the NPfIT.
The Committee is expected to hold an NPfIT hearing in the next few weeks, soon after the publication of a report of the National Audit Office, its third on the national programme.
It's likely the Committee will question Christine Connelly, Health CIO; David Nicholson, Senior Responsible Owner of the NPFIT and Chief Executive of the NHS in England; Patrick O’Connell, President of
BT Health and representatives of CSC.
Bacon suspects that a new deal with CSC would be poor value for money. CSC may agree to cut £600m from £3.2bn worth of local service provider contracts with the Department of Health.
In return NHS Connecting for Health would be willing to pay CSC much more than before for each NHS site that deploys the iSoft “Lorenzo” system - far fewer NHS sites than originally planned.
The worrying thing is that CfH seems willing to pay CSC an uneconomic rate for Lorenzo deployments, perhaps to keep CSC within the NPfIT. Without CSC in the national programme it may be hard to justify NPfIT’s continuance - and thus may be harder still to justify the continued existence of CfH.
But would it be right for CfH to expedite signing an unreasonable deal with CSC mainly for the benefit of CSC and the future of CfH? IT systems in the NHS are usually installed for the benefit of patients.
Indeed, after the decision of Pennine Care mental health foundation trust
not to install Lorenzo, health officials are trying to find a new NHS site to take the system. A milestone payment to CSC depended on Pennine Care’s going live with Lorenzo. Now the Department of Health is looking for an NHS guinea pig site to take a problematic system that would enable CSC to be paid.
NHS sites usually install systems based on their usefulness to patient care and value for money, not their importance to an NHS IT supplier and CfH.
On 2 May CSC announced that it “anticipates concluding a non-binding memorandum of understanding (MOU) with the National Health Service”.
CSC’s statement added: “The MOU will form the foundation of a revised contract to deliver efficiency savings and reaffirm a continued commitment to CSC's Local Service Provider contract with the NHS.
“The anticipated amended contract contemplated by the MOU will be realigned to respond to the NHS’ change agenda and will incorporate a reduced scope and volume for Lorenzo Regional Care. The MOU terms are substantially completed and CSC expects signing of the MOU in the next few weeks pending final NHS and other government reviews and approvals.
“After several months of detailed discussions we’re now in the final stages of concluding this agreement and moving on to a new era of certainty and partnership with the U.K. government,” said the company.
Market researcher Techmarketview
said that CSC’s share price has sunk about 13% at $44 after the company downgraded its guidance for the 2011 financial year and postponed its fourth-quarter earnings call by three weeks.
“It shouldn’t come as any surprise that CSC’s troubled NHS contracts get the bulk of the blame for the change in fortunes,” said Techmarketview.
"The MOU is not the only factor impacting CSC’s FY11 guidance. The withdrawal of one of four key pilot sites for the iSOFT software last month will prevent CSC receiving the ‘milestone’ payment from the NHS that it had been hoping for in Q4
“Although it now looks unlikely that the Department of Health will carry out its threat to cancel CSC’s LSP contracts completely (despite multiple missed deadlines), it is likely to withhold the important milestone payment until a fourth ‘early-adopter’ has gone live with Lorenzo.”
Techmarketview said the DH was ‘ringing around’ mental health trusts to try to find one that is prepared to pick up the Lorenzo baton that the Pennine Care Trust dropped last month.
“When we spoke to CSC’s UK healthcare team last week they were optimistic that a replacement Trust would be found
the risk for CSC’s UK business is that a replacement early-adopter trust isn’t found, or that the NHS decides to pull the plug on its LSP contracts completely.
“Both of these would have a much more dramatic impact on the financial performance of CSC, which uses ‘percentage of completion’ accounting for income recognition.”
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