How money flows in the NHS

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How money flows in the NHS

• Noel Plumridge
• Leeds
• 12 June 2006

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NHS Structure
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Funds Flow - Revenue
DoH
HAs 28 10
Some Direct Funds flow
Allocations
Other Bodies 19
NHS Trusts 300
PCTs 316 151
Commissioning
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TRUST BOARD
Finance Director
Majority of non-executive directors
3 Other Directors
Chair
Chief Exec
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Commissioning

• The process of making sure that the health needs
  of a particular population are assessed and that
  services are provided to meet those needs.
• Needs and priorities are agreed with key
  stakeholders in a Health Improvement Programme
  and Joint Investment Programme and merged in a
  Local Delivery Plan
• PCTs commission services from Trusts, other PCTs
  and non-NHS providers for a resident population
• The process is overseen by the strategic health
  authority

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Primary Care Trusts (PCTs)

• Established under the Health Act 1999
• The cornerstone of the NHS
• Responsible for planning and commissioning health
  services for their local communities, and
  providing some services
• Control 75 of the NHS budget

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PCT BOARD
Nurse
2 GPs
Finance Director
5 Lay Members
Public Health
Chair
Chief Exec
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PCT EXECUTIVE
PAMs
Finance Director
Chief Exec
Public Health
5 GPs
Health Care Professionals
2 Nurses
Social Services
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The NHS Planning cycle
Local HImP Strategic Framework rolled forward
(October)
PCT allocations, LDP guidance (December)
HImPs published. NHS Executive Board agree LDP
and finalJIPs (March/April)
Provisional HImP, first cut LDP and draft JIP
(December/January)
Final LDP (February/March)
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Charitable Funds

• donations and legacies
• individual or organisations
• wishes of the donor - objects of the funds
• charitable funds committee
• separate from exchequer funds
• charity commissioners
• annual accounts
• annual reports

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Bradford Hospitals Foundation Trust

• From April to August 2004, North Bradford PCT
  generated 3,014 queries out of 9,178 inpatients
  billed by the Bradford trust.
• The amount queried (2.4 million) represented 21
  per cent of the total amount billed.
• Of the queries
• 1,359 appear to be administrative
• 1,444 based on differences in the
• interpretation of in-patient admissions
• suggesting a potential denial rate of 9
  per cent.

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Bradford Hospitals Foundation Trust

• The financial impact of PCT challenges
• BTH have estimated that Basic Clinical Income at
  risk is 5.1 million for FY 2005 Based on the
  queries raised by North Bradford PCT in the YTD,
  one of the large PCTs, and a predicted denial
  rate of 9, we believe that the actual income at
  risk could be 11.3 million.
• Assuming that PCTs hold payments of disputed
  amounts in February and March and given a query
  rate of 21, the potential lag in cash receipts
  could add 3.7 million to the cash requirement in
  the current financial year.
• (Alvarez Marsal, confidential
  report for Monitor, December 2004)

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Payment by Results consultation autumn 2003
The strategic context is changing
3 year PCT allocations, Foundation Trusts - need
for national standards accountability
DEVOLUTION
DTCs, Foundation Trusts, Franchising, Independent
sector, PCTs
Money flows with the patient
CHOICE
PLURALITY
INVESTMENT
Largest ever sustained increase in NHS funding -
75 held at local level
Payment by Results is the essential building
block for this model
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Why Payment by Results?

• Key Government policy drivers/values
• - plurality of provision
• - equality of access
• - consumerism
• The Department of Health requires
• - operational efficiency (the price of
  investment)
• - assurance that public money has been well
  spent
• - more capacity (to meet access targets)

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Payment by Results the basics

• A national tariff as the basis of funding
• - derived from NHS reference costs
• - adjusted for regional cost variations
• Payment for activity actually delivered
• - activity defined by Healthcare Resource
  Groups (HRGs)
• - activity measured in spells (not FCEs or
  OBDs)

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Payment by Results some big issues

• Applicability outside of acute care
• - chronic illness
• - mental health
• - community
• Availability of information
• Investment
• Risk management

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Payment by Results the 2005-06 story

• PbR funding for elective activity in NHS trusts
  elective, emergency, out-patients and AE in 32
  foundation trusts
• Mounting NHS deficits (800m projection)
• Partial suspension of PbR in 3 HAs.
• Shrinking waits but are they attributable to
  PbR? (Audit Commission review)
• Mental health pilots
• Government attention shifting to primary care and
  commissioning

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DH priorities now

• The job of the commissioner of the future will
  be to anticipate what patients want, help them
  make more healthy choices and make sure that
  there is enough flexibility so that the NHS can
  respond to individual needs. They also have a
  key role around managing financial risk
• Lord Warner, July 2005

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The financial imperative

• Practices will have the responsibility of
  balancing their budget over three years and PCTs
  will have the right to intervene if public money
  is being used inappropriately
• If innovation leads to money being freed up,
  which I believe it will, then it will be ploughed
  back by practices into improved patient care
• Lord Warner, 7 July 2005

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Practice based commissioning in 2006-07

• By December 2006, benchmarking information by
  practice about patients use of services, and
  indicative budgets covering (at least)
  prescribing and PbR services
• Payment for participation
• Minimum budget equals historic use of resources
• Financial risk-pooling with PCTs
• Governance and accountability process covering
  use of surpluses
• (Operational framework for 2006-07)

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Meanwhile some real changes in primary care!

• Changing GP demographics
• GPs are getting paid better with a QOF 91
  average score, the average practice gains 74,299
  
• (Public Finance, September 2005)
• GP training static 2,435 doctors in GP training
  August 2005 (March 2004 2,439)
• GP practices in the spotlight

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Payment by Results in 2006-07

• Extended scope electives, non-electives, AE,
  outpatients but not critical care
• Shadow prices for some diagnostic procedures
• Tariff uplift ()
• Pay and prices 6.5
• Efficiency savings (2.5)
• Baseline adjustment (2.5)
• Total 1.5
• while PCTs get an average of 9.2 uplift

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But the initial 2006-07 tariff was withdrawn

• Weeks of wasted work
• Foundation Trust bids deferred
• Deep embarrassment at the DH
• No clear way forward!

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A broader context?

• A historical perspective
• - 1900-1950 infectious disease
• - 1950-2000 making acute hospitals more
• effective, then more efficient
• - 2000-? managing chronic disease
• Major NHS initiatives in 2004-05
• - public health improvement
• - chronic disease management
• The health care model in the developed world is
  not sustainable with the rising tide of chronic
  disease.
• (Sir Liam
  Donaldson, May 2004)

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Respiratory illness is this the care pathway we
want?
9.00am. My chest feels tight today
1.30pm. Wonder if I could get in to see my GP
l
8.00pm. Youd better go down to AE, just to be
on the safe side
10.00pm. Well keep you in overnight, just in
case
While youre here well just do a few tests
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Competing priorities?

• Is there an inconsistency between
• - Payment by Results, which rewards efficiency
  in acute hospitals and pays by the spell in
  hospital and
• - models of chronic disease management (such
  as Evercare) which see hospital admission as a
  failure?
• Have we already solved the problem that Payment
  by Results is meant to fix?

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How money flows in the NHS

• Noel Plumridge
• With acknowledgements to the Audit Commission and
  the Department of Health for use of some slides