The cost for the supply of home oxygen under the new contract is around £6 million a year. This is significantly higher than the original estimate of £2 million, which was based on inadequate information provided by the NHS on likely demand, but similar to the annual cost of the previous arrangements. Today’s report says there may be potential to reduce costs in the longer term through the specialist clinical assessments, which would identify patients who do not have a clinical need for oxygen.

The report also found that the timescale for preparations for the new contract was tight and did not provide any contingency in the event of problems. There was poor information available on the numbers and details of patients affected by the changes, which resulted in late communication with patients about the changes to services.   There were also mixed messages as to whether the Welsh Assembly Government intended the changes to be implemented in a phased way or as a ‘big bang’.

The new arrangements failed almost immediately. Air Products Plc was unable to cope with the unprecedented and unforeseen demands placed on the new service by patients and health professionals.  There were additional problems with the use of the new order form by GP practices which resulted in their submitting incomplete and duplicate orders.

The Assembly Government responded quickly to the crisis. It instructed local health boards to resume previous arrangements with community pharmacists in providing oxygen cylinders. This was initially for a six month period, but was extended to seven months. These arrangements were effective in restoring the supply of home oxygen services but came at an additional cost to the NHS. 

By September 2006, Air Products was the sole provider of home oxygen in Wales. There was a protracted period of dispute over charges being made by Air Products under the contract which led to some local health boards withholding payment.  This dispute was resolved in October 2007. 

Despite additional funding from the Assembly Government, there has been slow progress by local health boards and trusts in introducing effective clinical assessment of patients requiring oxygen.   Without these specialist assessments of need, the new arrangements have not yet delivered the intended clinical benefits to patients.

The report makes four recommendations for improvement:

• for future similar England and Wales contracts, the Assembly Government should be able to vary new contractual arrangements within Wales to mitigate risks;
• the Assembly Government should make provision for possible problems when planning timescales;
• the Assembly Government should oversee the effectiveness of communications by health bodies when announcing changes to services; and
• the Assembly Government should direct LHBs and NHS trusts to prioritise the development of specialist clinical assessments.

The Auditor General for Wales said today:
“The change in the arrangements for home oxygen services was not well managed and the reasons why those arrangements failed were foreseeable. It is disappointing that some of the intended benefits to patients have yet to emerge.  It is even more disappointing that previous lessons around contingency planning, risk management and communication with those affected or responsible for delivering change were not applied in this case.”   

Notes to Editors:

• This report examines whether the NHS in Wales handled effectively the introduction of the new arrangements for home oxygen services and whether they have achieved the objectives of higher clinical quality and service efficiency. 
• The home oxygen contract covered England and Wales and the problems with the new contract featured across both countries.  Our examination focuses on the position in Wales.
• The new arrangements for the provision of home oxygen services from 1 February 2006 replaced arrangements that had been in place for decades previously.  Home oxygen cylinder supplies had previously been supplied by on GP prescription through local community pharmacists; concentrator oxygen supplies had been provided within Wales by two separate contractors.  Under the new contract, patients were provided home oxygen supplies from a single source.
• A full chronology of events surrounding the modernisation of oxygen services in England and Wales can be found in Appendix 1 in the report;
• The Wales Audit Office is independent of government and is responsible for the annual audit of some £19 billion of annual public expenditure. Its mission is to promote improvement, so that people in Wales benefit from accountable, well-managed public services that offer the best possible value for money. It is also committed to identify and spreading good practice across the Welsh public sector.
• The Wales Audit Office was created in April 2005 through the Public Audit (Wales) Act, 2004, which expanded the functions of the Auditor General for Wales and enabled the transfer of staffs from the Audit Commission in Wales and National Audit Office in Wales to his employment.