NHS Subcontracting or Direct Commissioning: Which Route Suits an Independent Clinic?

NHS Subcontracting or Direct Commissioning: Which Route Suits an Independent Clinic?

For most independent clinics entering NHS work, subcontracting offers faster market entry with lower administrative burden, while direct commissioning delivers higher margins and strategic control at the cost of compliance infrastructure and longer procurement timelines. The right choice depends on your current CQC rating, financial standing, contract management capability and tolerance for a six to nine month procurement cycle.

The decision sits at the centre of every growth conversation we have with clinic operators. Both routes are viable. Neither is universally better. But the commercial and operational differences are significant enough that choosing poorly costs you either margin you cannot afford to lose or capability you do not yet have.

The core trade-off

When you subcontract to a prime provider, you operate under their contract with the commissioner. They hold the relationship with the integrated care board or NHS trust. You deliver a defined scope of clinical activity, typically paid per procedure or episode, and the prime retains a management fee that typically ranges from twelve to eighteen per cent of the contract value you generate. In return, the prime handles commissioner reporting, safeguarding documentation, serious incident processes, and the monthly data returns that NHS contracts demand.

Direct commissioning means you contract directly with the ICB or trust. You receive the full tariff or block payment. You also carry the full assurance burden: CQC compliance, information governance including Data Security and Protection Toolkit completion, NHS standard contract terms, and the monthly SLAM returns or equivalent that keep the contract live. You need the infrastructure to manage this before you sign, not six months after go-live when the first serious incident lands.

Control and contract risk

Under subcontracting, the prime controls pricing, referral flow, and often the clinical pathways you are asked to follow. If the prime loses the head contract at re-procurement, your revenue stops unless the new incumbent agrees to novate your arrangement. This is not automatic. In practice, around half of subcontractors continue under a new prime, but continuation is never guaranteed and you have no formal right to it.

Direct awards give you contract certainty for the full term, typically three years with optional extensions to five or seven. You set your own capacity, agree activity plans directly with the commissioner, and retain the clinical and commercial relationship. The risk shifts to your ability to meet KPIs, deliver monthly data on time, and maintain the quality standards the contract requires. Miss your CQUIN targets or submit late data three months in a row and you face contract remediation or, in the worst case, termination.

The Provider Selection Regime in outline

As of week starting 2026-10-26, NHS procurement in England operates under the Provider Selection Regime, which replaced the predecessor framework governed by the earlier Public Contracts Regulations. The original implementation date was 1 January in the previous calendar year 2024. The regime sets out five lawful selection processes: direct award (most common), competitive process, single-provider award, and two variants for in-house providers. Commissioners must publish a transparency notice at the start, run a ten-day standstill period before contract signature, and demonstrate that the chosen process is proportionate to the service's strategic importance, value and clinical risk.

For independent clinics, the competitive process and direct award routes matter most. A competitive process looks similar to a traditional tender: the ICB publishes a specification, you submit a technical and commercial proposal, evaluators score you against published criteria, and the highest scoring bidder wins subject to standstill. A direct award can be made without competition where the commissioner can justify that only one provider is suitable, or that competition would not improve quality or value. In practice, direct awards are often used where an incumbent can demonstrate improved outcomes or where the service requires co-location with existing facilities that only one provider holds.

Understanding the regime matters because it shapes what commissioners can and cannot do. They cannot simply hand you a contract because you asked, even if you are the only local provider. They must publish their rationale, and that rationale must fit one of the lawful justifications the regime permits.

What primes check before subcontracting to you

Prime providers run a lighter version of the due diligence an ICB would apply, but three areas are non-negotiable. First, they verify your CQC rating. A requires improvement rating will not automatically exclude you, but an inadequate rating almost certainly will. Second, they check your professional indemnity and public liability insurance levels. Most primes require ten million in clinical negligence cover as a floor, and some specify higher limits depending on the procedures you will perform. Third, they assess financial stability using either your filed accounts or a completed financial questionnaire. They want confidence you will not fold mid-contract, leaving them unable to deliver the activity they have committed to the commissioner.

Beyond those three, primes look at your clinical governance structure, your incident reporting process, and your safeguarding leads. They do not need to see the same depth of policy documentation an ICB would require, but they need enough to satisfy their own contract obligations when the commissioner audits the supply chain.

What commissioners check before awarding directly

ICBs and trusts apply the full provider assurance framework. Expect requests for your CQC inspection report, your most recent quality account, your information governance toolkit status, and evidence of compliance with NHS England's safeguarding standards. Financial standing is assessed using three years of accounts, a completed SQ financial section, and often a Dun and Bradstreet credit check. If your organisation is fewer than three years old or shows declining reserves, you may be asked for a parent company guarantee or performance bond.

Commissioners also assess operational resilience. Can you maintain service if your lead consultant is unavailable? Do you have documented business continuity arrangements? What happens if your imaging provider or pathology supplier fails? These are not theoretical questions. They expect written answers, and those answers feed the quality score that determines whether you win.

The technical evaluation focuses on outcomes, patient experience, and integration with existing pathways. For a direct commissioning route to make sense, you need to score competitively on these dimensions, not just meet the threshold. A subcontract allows you to enter the market while you build that evidence base.

A worked comparison

Consider an independent ophthalmology clinic looking to deliver cataract surgery for an ICB with annual demand of 800 procedures at a blended tariff of £950 per case. Total annual contract value is £760,000.

Under a subcontract, the clinic might agree to deliver 400 of those cases in year one, with the prime retaining fifteen per cent. The clinic receives £323,000 revenue and avoids the cost of a dedicated contract manager, DSPT coordinator, or monthly SLAM data submission resource. The prime handles all commissioner interface. The clinic focuses on clinical delivery and receives payment 30 days after submitting activity data to the prime.

Under direct commissioning, the clinic captures the full £760,000 over two years, assuming it can scale to full capacity by year two. It needs to employ or contract a part-time NHS contract manager, budget for DSPT annual assessment costs, and build the reporting infrastructure to submit SUS data and quality dashboards monthly. The up-front cost in the six months before go-live typically runs to £40,000 to £60,000 when you include consultant time for policy development, IG training, and the technical setup for data flows. Payment comes 30 days after month-end once invoice and activity reconciliation is complete.

The direct route delivers higher lifetime margin but requires up-front investment and internal capability the subcontract does not. For a clinic with an experienced NHS operational lead and the capital to invest ahead of revenue, direct commissioning makes sense. For a clinic earlier in its growth or without that operational depth, subcontracting offers a faster, lower-risk entry while you build capability.

Frequently asked questions

How long does it take to set up as a direct NHS provider?

From decision to first patient, expect six to nine months if you are starting from a standing position. That includes CQC registration if you do not already hold it, DSPT completion, information governance policy development, NHS mail and spine endpoint setup, and contract negotiation under the Provider Selection Regime. Subcontracting can be live in six to ten weeks once you have agreed heads of terms with the prime, because you rely on their infrastructure rather than building your own.

Can you move from subcontracting to direct commissioning later?

Yes, and many clinics use subcontracting as a proof-of-concept phase before pursuing direct awards. The challenge is that moving to a direct relationship with a commissioner while you still subcontract to a prime can create conflict, particularly if the prime sees you as competing for the same demand. The cleanest path is to subcontract in one service line or geography while pursuing direct commissioning in another, so the two routes do not overlap. Commissioners will also expect you to demonstrate a track record, and subcontract delivery provides exactly that evidence.

Do I need to be on RM6291 NHS P23 to win direct commissioning work?

No. The RM6291 NHS Procurement framework, awarded in the previous year 2023, provides a compliant procurement route for commissioners, but it is not the only one. Commissioners can and do run standalone competitive processions or make direct awards under the Provider Selection Regime without using a framework at all. Being on the framework reduces friction and can make it easier for a commissioner to justify selection, but it is not a prerequisite. If you are serious about multiple direct awards over the next three years, framework access is worth pursuing. For a single contract with one ICB, the investment in framework application may not pay back. We cover the framework decision in more detail in our NHS framework specialists guidance, and the mechanics of the regime in our Provider Selection Regime overview. For support with the submission itself, our NHS tender writing service works on both framework applications and direct commissioner tenders.

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