23. Allen P. (1995), ‘Contracts in the National Health Service Internal Market’, Modern Law Review, 58: 321-342.

This article considers one aspect of the structure of the National Health Service (NHS) which was created by the reforms of the NHS and Community Care Act 1990 (the 1990 Act).At the heart of these reforms was the introduction of a quasi-market for secondary and tertiary health care by means of a split between the purchasers of care and its providers. There are two categories of purchaser: district health authorities (districts) and certain 'fund-holding' general practitioners (fund holders). The remit of the districts is to purchase health care for their resident population. Fund holders are given part of the budget for the district (which is still allocated to it by central government) in which their practice is located. Fund holders use their budgets to purchase certain categories of non-urgent care for the patients registered with them. The providers of health care are now mainly entities which are not directly managed by the districts. Instead, they are 'self-governing trusts' who have a special legal status within the NHS. The trusts must compete with each other to obtain funds from the purchasers. The relationship between purchasers and providers is referred to as a 'contract.’ The article considers the question of how closely these NHS 'contracts' resemble commercial contracts and whether it is desirable that they should do so. The role of the 'contracts' in the internal market, the legal and organizational context of the 'contracts', and the implications for their form and content, were examined. The actual terms of certain 'contracts' made with providers by selected fund holders was examined in detail in order to consider the extent to which such 'contracts' diverge from the ideal type of a legally enforceable commercial contract. The real nature of commercial contracts as opposed to the classical model of the ideal type had been considered. Implications for policy makers and negotiators of 'contracts' had been explored. The article concludes that NHS 'contracts' need not be as precisely specified as commercial contracts, in the light of the lack of use to which commercial contracts themselves are put and the fact that NHS 'contracts' are not legally enforceable. There is nevertheless a need for greater precision in NHS 'contract' drafting in respect of specification of activities, prices and quality, and in respect of the methods of monitoring of these areas. This is partly due to the need for quality of care to be improved and partly due to one of the crucial uses to which the 'contracting' process can be put in practice: namely, the better management of provider units.