The Department for Work and Pensions has strengthened its oversight and management of contracted-out health and disability assessments, but it has not yet achieved value for money according to today’s report from the National Audit Office.

The Department uses health and disability assessments to help decide if people are eligible for benefits or to help those on long-term sick leave back into work. Between April 2015 and March 2018, the Department expects to carry out around 7 million assessments which it estimates will cost a total of £1.6 billion.

Today’s report found that the cost of providing assessments is rising and providers are still struggling to meet expected performance standards.

Under the latest contract with the Centre for Health and Disability Assessments (CHDA) for Employment and Support Allowance (ESA) assessments starting in March 2015, the Department expects to pay £595 million over three years for 3.4 million assessments. This is around £190 per assessment compared with £115 per assessment under the previous contract with Atos. Costs have increased in part due to a higher proportion of face to face assessments and rising salaries for healthcare professionals.

The Department has now reduced the number of outstanding assessments and these are being processed more quickly. Providers now take 4 weeks to process Personal Independence Payment (PIP) assessments, compared to a peak of 29 weeks in mid-2014, and ESA claims 23 weeks compared to 29 weeks. There is still, however, a backlog of at least 280,000 ESA assessments at August 2015. The ESA assessment provider, CHDA, is not on track to complete the expected number of assessments for 2015 and has missed assessment report quality targets since the start of the contract. Both Atos and Capita have failed to meet PIP assessment report quality targets since October 2013.

The NAO found that the Department has increased its capacity for performance management, expanding its team from 48 people in 2013 to 80 in 2015 and has managed the transition between ESA providers smoothly after Atos requested early exit from the contract.

The Department continues, however, to struggle with setting targets and requirements with clear evidence and failed to adequately test bidders’ assumptions, for example about staff training,  during the contract tender process. It does not yet have a clear strategy for contracting-out assessments and risks damaging market interest through tight procurement timetables, inflexibility towards critical assumptions and lack of transparency.

Among the NAO’s recommendations are that the Department should develop an overall commercial strategy for assessments, set challenging realistic targets for providers and engage with providers to learn from previous experience.

“The Department has addressed some of its immediate operational issues in managing contracted-out health and disability assessments but now needs to take action to break a perpetuating cycle of optimistic targets, contractual underperformance and costly recovery. The Department is paying more for assessments, but providers are still not meeting expected performance levels.  The Department needs providers to complete the planned number of assessments so that it can achieve the significant benefit savings it expects to make over the next few years.”

Amyas Morse, head of the National Audit Office

Read the full report

Contracted-out health and disability assessments

Notes for editors

7m Expected contracted-out health and disability assessments over three years, 2015 to 2018 £1.6bn Estimated cost of contracted-out health and disability assessments over three years, 2015 to 2018 13% Proportion of ESA and PIP targets met for assessment report quality meeting contractual standard (September 2014 to August 2015) 6 Main contracts for assessments: two consecutive Employment and Support Allowance (ESA) contracts, three concurrent Personal Independence Payment (PIP), and one Fit for Work (FFW) 5.5 Million assessments completed in five years up to March 2015 65% Estimated increase in cost per ESA assessment based on published information after transfer of the service in 2015 (from £115 to £190) 84% Estimated increase in healthcare professionals across contracts from 2,200 in May 2015 to 4,050 November 2016 4 Average weeks providers take to return PIP assessments in August 2015, compared to 29 weeks in mid-2014 £92 billion Expected incapacity and disability benefit spending over three years, 2015 to 2018 £0.4 billion Latest expected reduction in annual disability benefit spending - Personal Independence Payment and Disability Living Allowance - between 2015-16 (£16.2 billion) and 2018-19 (£15.8 billion) 1. The Department contracts out assessments to Atos Healthcare, Capita Business Services Limited and two wholly-owned subsidiaries of Maximus UK - the Centre for Health and Disability Assessments (CHDA) and Health Management Limited. A healthcare professional will evaluate an individual's needs and capabilities against defined criteria through reviewing relevant evidence and often conducting a face-to-face assessment. 2. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website. 3. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 810 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.15 billion in 2014.