News / Demand management a key challenge in 2010/11 contracts

Delivering activity and expenditure levels in 2010/11 contracts will require challenging levels of demand management, according to an HFMA snapshot of this year’s contracting round.

More than 70 finance directors from primary care trusts and acute and mental health providers responded to an HFMA contracting round survey in May.

While too small a sample to be representative of the whole of England, there were clear signs of a difficult round of negotiations. Less than half the sample had been able to sign off 80% of their contract value by the 31 March target date. Many indicated that only heads of terms had been signed by the due date rather than detailed agreements.

At the time of the survey (in the third week of May) nearly eight out of 10 respondents said that either all or more than 80% of contracts were now signed.

However, there were outstanding issues in some areas. One organisation was awaiting strategic health authority conciliation on three contract items.

More than half the sample said the financial value of contracts for 2010/11 had either stayed the same or were less than the 2009/10 outturn; 30% said contract values had risen by 2.5% or more.

In terms of activity, 60% of respondents said that planned activity in 2010/11 was higher than plan for 2009/10, although this dropped to nearer 25% when compared with 2009/10 outturn.

Two-thirds of the survey’s respondents said significant demand management (defined as 1% of turnover) was assumed within their main contracts. Some suggested between 3% and 5% of contract values could be needed.

For organisations where demand management was an issue, 42% said the targets were challenging but achievable. A further 44% described the targets as ambitious, while 14% thought the specific targets were unachievable.

Backing up this sceptical assessment, one acute trust director said: ‘Current schemes are unbacked by real measures for delivery and are not yet even phased through the year.’

Another acknowledged that the time needed for public education on issues such as alternatives to acute services meant that eliminating demand in a single year would be challenging.

The survey revealed that commissioners and providers were adopting a range of risk-sharing arrangements around demand management. In general, PCTs were assuming the risk around outpatient first attendances, with responsibility switching to providers for follow-ups.

In around 40% of cases, the risks on hitting emergency admission activity targets were being equally shared, with the remainder almost equally split between either the PCT or the provider taking the main responsibility.

About half the sample said emergency activity would exceed the 2008/09 outturn activity level. (This is loosely seen as the trigger for the marginal rate, although it is financial value of 2008/09 outturn at current prices that is key, not pure activity.) However, some directors flagged up significant activity pressures.

‘The 2009/10 outturn exceeded the plan by about 6.5%,’ one said. ‘The 2010 contract is set at growth above this, at 4%. This gives a significant risk to the provider, as cost of delivery is much higher than the 30% marginal price.’

Not everyone reported increases. One director indicated activity reductions compared with 2008/09 outturn, 2009/10 plan and 2009/10 outturn.

Just under half the respondents to a question on this year’s tariff said they had diverged from payment by results guidance for some aspects of activity. Examples included local prices for emergency admissions with a length of stay below two hours and some marginal rates.

One director said the strategic health authority was supporting an elective demand management contract model that created a block payment with tolerances and payments set by referral levels for elective care.

See full survey results