Government considers changes to NHS supplier payment terms

The government is in talks with suppliers to the £6bn NHS national IT programme to change the way the contracts are paid for.

The deals were set up to pay suppliers only upon delivery of working systems. But there are now questions as to whether private sector companies can bear the significant investment and short term losses of the early years of the 10-year deals.

Accenture, which won two of the five 'local service providers' contracts to implement the systems across the UK, published earnings figures last week showing second quarter losses of $24m (£12.5m) on the NHS deals, on top of $349m (£183m) client financing.

The company is now in discussion with the NHS programme team - recently re-named Connecting for Health - to look at different deployment and payment models to ameliorate the short-term financial stresses.

'We have experienced temporary delays in our ability to deploy, as planned, a number of the systems' components, which has resulted in lower than expected revenues, margins, billings and cash flows to date,' said a spokeswoman for Accenture.

'We are working with the NHS to agree on alternative deployment plans and to consider different financing arrangements,' she said.

Subject to new deployment plans, Accenture expects losses on the NHS deals to continue into fiscal 2006, but expects them to turn a profit in 2007 and for the remainder of the contract life.

A spokesman for Connecting for Health said Accenture's implementation delays are not significant in the context of a 10-year programme, and the two organisations are co-operating.

'The fact that Accenture reports that [the delays] have impacted its earnings is a clear demonstration of the robustness of the contracts we have put in place,' said the spokesman.