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In a report to Parliament today, head of the NAO Sir John Bourn recognised that the outsourcing of the Department of Social Security’s medical assessment service had reduced costs and speeded up the turnaround of work. But the standard of medical assessments and the quality of service to benefit customers need to improve.

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The service which provides medical evidence to enable the Benefits Agency to assess incapacity and disability benefit claims, was outsourced to SEMA Group in 1998.

The report’s main conclusions are as follows.

  • Outsourcing has reduced the cost to the Department of operating the medical assessment service (at a contract cost of £305 million over five years it represents savings of an estimated 10-14 per cent compared to the public sector alternative) and work has been processed more swiftly.
  • The quality of medical reports has been a cause for concern since before outsourcing. The incentives and remedies in the contract to improve quality are not as robust as those relating to fast turnaround of cases, mainly because of difficulties at the time of procurement in defining and monitoring medical quality. Measures of quality have since been strengthened, but improvements have yet to be fully delivered. Cost pressures have played a part but the Department and SEMA Group are making efforts to improve the situation.
  • Better management of workloads by the Benefits Agency could achieve estimated savings of
    £40 million a year by cutting the time taken to process decisions on claimants’ eligibility and reducing the backlog of cases awaiting review.
  • There is also scope to improve the quality of decisions by the Benefits Agency: around one half of those whose Incapacity Benefit is withdrawn appeal against the decision and two fifths of those appeals are upheld.
  • The treatment of customers at medical examinations is not yet adequate: special attention should be paid to overbooking of appointments (over 1000 people a month are turned away); and improving doctors’ manner with claimants and their awareness of disability and cultural issues.
  • The assessment service currently faces a serious strategic threat from the shortage of suitably qualified doctors available to carry out the work part-time. The supply of general practitioners is set to worsen before it improves.

Recommendations to the Department include:

  • focusing management effort on the quality of medical reports;
  • giving further thought to using healthcare practitioners other than doctors to carry out parts of the work;
  • speeding up the processing of cases within the Benefits Agency, especially of Incapacity Benefit case reviews, and reducing the size of backlogs awaiting medical referral;
  • linking financial incentives for SEMA Group to performance in customer care, as part of any negotiations to extend the contract to seven years; and
  • ensuring that SEMA Group put in place programmes to comply with the new positive duty on public authorities to promote race equality.

The National Audit Office also pointed to wider lessons for Government departments in outsourcing services, emphasising the importance of assessing whether the proposed length of the contract gives the supplier enough time to recover investment; and of setting explicitly prioritised objectives with minimum standards.

"This has been an innovative project for the Department of Social Security, involving the outsourcing of a service which is close to the department’s core business. The Benefits Agency medical service was underachieving and operated within tight resource constraints. Outsourcing has cut costs and speeded up the processing of the work, but the Department, with SEMA Group, must concentrate on improving the quality of assessments and customer service.

"Bottlenecks and delays throughout the system for paying these benefits also need to be addressed. The aim should be to ensure that disability benefits are speedily paid to those entitled to them, as well as reducing losses to the public purse from payments to those who are no longer eligible for benefit."

Sir John Bourn


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