Feature / Diversion tactics

Demand management is set to dominate thinking in the NHS over the next 12 months. Seamus Ward finds out how it can help maintain financial balance.

NHS professionals often pick up buzzwords or phrases that then seem to dominate conversations for months. ‘Turnaround’, ‘liquidity’ and ‘quality’ are all recent examples – and demand management is making a bid to become the latest. In last month’s Healthcare Finance we reported finance directors’ concerns that 2010/11 contracts would need significant levels of demand management.

No-one in the NHS sees demand management as a way of denying patients the care they need. Nor do they deny it can save money. However, they insist it is chiefly about quality – a way of ensuring patients are seen in the most appropriate setting, often more quickly and closer to the patient’s home.

Although financial savings are of secondary concern, there are potential savings to be made by diverting patients away from more expensive hospital care to general practices, community nursing teams or walk-in clinics.

In the past, when budgets have been squeezed, the NHS has managed demand through waiting lists. However, even with relaxation to the 18-week referral to treatment target, there is a clear steer from the centre that access should be maintained.

Many alternative mechanisms of demand management are not new to the NHS. The English service features several approaches – community clinical teams that monitor chronically ill patients to prevent acute episodes that require admission to hospital; health promotion programmes; GPs with a special interest in areas such as diabetes; and referral management centres, which assess the clinical appropriateness of GP referrals before treatment is allowed to proceed.

Yet in many areas demand continues to rise. Provisional hospital episode statistics for England show a 3.4% rise in finished consultant episodes (based on a comparison between March 2008 to February 2009 and March 2009 to February 2010). Over the same period, day case episodes rose by more than 5% and emergency admissions by 3.2%.

Advances in medical technology and techniques and the ageing population have increased demand. In England this has been abetted by the push for 18-week referral to treatment and four-hour A&E waiting times targets.

Some feel that GPs have lowered their thresholds for referral. Others suggest that the payment by results system provides incentives to admit. There are even theories that some of the measures designed to shift demand away from hospital, such as urgent care centres, have added to demand by meeting the hitherto unmet need of those unable or unwilling to go to a GP or A&E.

King’s Fund deputy policy director Candace Imison says there are opportunities to reduce demand. She has co-authored a report on referral management, which is expected to be published by the King’s Fund in September. She insists the variation in referral levels between GPs and the potential to ‘do things differently’ means there is scope to carry out more activity in primary and community settings.

Ms Imison says there is a strong evidence base showing that clinicians respond well when they are shown comparative data that shows their referral performance relative to their peers. ‘GPs have no idea if their referrals are more or less than their peers. No feedback is given to them, but if they do get some, it provides an educational opportunity for GPs to reflect on their practice,’ she says.

Ms Imison adds that GPs need greater access to diagnostics and more informal opportunities to talk to consultants before referral, in order to decide the most appropriate place for treatment. ‘Trusts are setting up email facilities and helplines to do this but they have to work hard to achieve it because the tariff is not terribly helpful,’ she says.

However, formal referral management centres are not needed. ‘In our report we counsel against full-blown referral management centres on two counts,’ says Ms imison. ‘One is value for money, because you end up spending a significant amount of money per referral if you go for the full triage option. The second is the level of risk, because they don’t have the patient in front of them and they don’t have the full information to hand.’

NHS Alliance clinical commissioning federation director Julie Wood says referral management centres can help, but they need to offer value for money.

‘If all referral management centres do is add a layer and don’t add any value, clearly they are not necessarily the right thing to do; clinicians will want to bypass them. But they can add value if GPs are not sure if a patient needs secondary care or an alternative such as a GP with special interest.’

Peer audit and review may be a more positive way of improving the appropriateness of GP referrals, she adds.

Ms Wood argues demand management must be part of the quality drive. Otherwise a demand management initiative will be saddled with the negative connotations attracted by rationing programmes. ‘PCTs will want to get clinicians signed up to ensure the right people go through the system in the right volume and access targets are not breached,’ she says.

NHS Stockport director of finance and estates Angela Phillips says referral management centres can be useful in managing demand by providing advice on the options for individual patients.

But she adds: ‘It can be an overhead that sits between the GPs and the consultants. Ideally, between the GPs and consultants they have the skills to provide triage and the referral centres wouldn’t be needed.’

The secondary provider should give specific expertise and advice to GPs, with the provider incentivised to keep referrals down.

Many PCTs are looking at financial incentives to ensure hospital activity is appropriate – adapting the levers in payment by results (PBR) to incentivise providers.

Liverpool Primary Care Trust is adapting PBR to incentivise providers to cut elective activity to below 2009/10 levels and non-elective to less than that in 2008/09. ‘The operating framework said that for non-elective work above the 2008/09 baseline the excess would be paid at 30%, but where’s the incentive to do better?’ asks finance director Phil Wadeson (see below). ‘We’re looking at the 30% both ways. If activity rises above baseline they get 30%; if they reduce it they will only lose 30% of the tariff.’

Management question

Ms Phillips says demand management is crucial in getting patients the right sort of healthcare at the right time, but in terms of achieving maximum value the big question is how to go about managing demand.

‘It’s vital each initiative does not end up costing you more than the demand they manage or put an extra step in place that’s not worth it,’ she says.

Stockport has looked at the drivers behind demand and negotiated changes in its contracts accordingly. While referrals have risen slightly, the cost of care has increased by significantly more. This could be a result of more outpatient activity per patient, more consultant to consultant referrals or a higher admission rate from referrals, for example.

The commissioner and the provider have shared the risk. The PCT pays the provider more if referrals go up, but it does not pay if a hospital does more work while referrals remain flat or go down. The Stockport health economy does recognise the fixed nature of a lot of the provider’s costs and if referrals go down consistently the PCT and provider will work together to take cost out.

Local GPs are also heavily involved in reducing referrals through the practice-based commissioning company, Stockport Managed Care. On urgent care, Ms Phillips admits Stockport has done nothing more than already in the operating framework contractually – the 30% marginal rate for activity over 2008/09 levels has replaced the local policy of limiting payments in a group of healthcare resource group codes where it is unlikely patients need to be admitted.

Ms Phillips believes the new marginal rate for non-elective care is a step in the right direction, but she argues that, for the most part, urgent care is a fixed cost and providers could attempt to make up some of the loss by admitting more patients. The PCT has a joint clinical and financial group set up with Stockport NHS Foundation Trust and Stockport Council and Pennine Care NHS Foundation Trust (mental health services) to look at the reasons why the public is opting to attend A&E and changing processes to manage this growing demand without increasing costs.

Early data from the first few weeks of the financial year shows a greater propensity to admit, though she points out that there could be many good reasons why admission rates have shifted upwards, not all of them clinical.

The issue is really the four-hour A&E target, which has applied to all patients regardless of the severity of their symptoms, she says. Perhaps the target should not apply to patients who could be treated better elsewhere, she argues.

Patient education is an important element of demand management. Ms Phillips says patients seeking care quickly often choose a hospital A&E for out-of-hours care because it offers the highest perceived level of care. If they turn out to have a minor complaint, A&E will treat it. The PCT will look to help patients go to the most appropriate setting through its ‘Choose well’ campaign.

Patient choice raises another issue for those designing services – if patients are gravitating to hospitals for out-of-hours care because they don’t understand the system or cannot get a GP appointment, there may be an argument for consolidating walk-in and wait services on hospital sites, particularly in small areas.

In the end, the key to successful demand management is changing clinical practice. This is tough, but Ms Imison believes reforms mooted by the new government could make it easier. ‘Giving GPs hard budgets and strengthening their commissioning will make them more involved in demand management and that has a greater likelihood of success.’

She adds that quality indicators must run alongside activity indicators in any demand management programme in order to catch unintended consequences early.  While demand management might make the NHS more efficient, it must be closely aligned to quality initiatives to guarantee clinical involvement, and make success more likely.

South Central makes demand gains

PCTs in NHS South Central had planned for demand management savings totalling £101m in 2009/10 and achieved around 70% of that, according to draft accounts. This was a creditable performance, says Steven Bliss, the SHA’s head of financial planning and reporting.

Mr Bliss acknowledges that PCTs in the area pursued opportunities similar to those in other parts of the country, but the SHA took an active role in planning and delivering demand management initiatives.

‘We realised as an SHA that we would have to work hard to keep track of activity. So before 2009/10 we carried out a detailed review of all the PCT demand management plans and risk assessed all of them,’ he says. The SHA also kept a close eye on progress throughout the financial year through regular reporting.

Demand management schemes in South Central generally focused on three areas:

• Non-elective thresholds for treatment
• GP referral protocols
• Reorganisation of urgent care services.

The non-elective thresholds work highlighted the list of procedures not normally funded by the NHS and the need for GPs and hospitals to adhere to this. As for GP outpatient referrals, Mr Bliss says: ‘It was about pushing a lot of information down to individual practices on how GPs were referring. Those who were outliers would have to explain to their colleagues why this was so.’

On urgent care pathways there was a lot of detailed work on prevention – for example, stopping the chronically ill having acute episodes that force them to go to A&E. In the current year, GPs will take more responsibility to ensure patients do not receive unnecessary treatment.

The operating framework says the marginal rate for non-elective care aims to get primary and secondary clinicians together to discuss how to manage demand better. But Mr Bliss says that if local organisations get other elements of demand management right, the marginal rate will not be an issue.

‘We are hoping the marginal rate doesn’t become important. It applies to activity over 2008/09 levels and most of our PCTs haven’t planned for any increase over 2008/09 levels. If people are debating the marginal rate, in a sense we will have failed.’

Partnership key to Liverpool success

Liverpool Primary Care Trust has managed to keep demand flat over the past five years. PCT director of finance Phil Wadeson says it has been helped by the large number of providers in the north Mersey health economy. At a sub-regional level there are nine providers and three PCTs, so it avoids problems among areas with one PCT and one acute provider.

‘It’s helpful to have a larger commissioning footprint and a wide range of providers as it makes it difficult for a commissioner and provider to get into entrenched positions. We also have very good relationships with our NHS partners and a strong track record of mutual support,’ he adds.

Clinical engagement is also good and this has been built upon by QIPP (quality, innovation, productivity and prevention) – a number of work streams have been established to rebuild clinical pathways, to ensure they are safe, of the highest quality and cost effective, and each is led by a medical director of one of the partner organisations. The PCT’s QIPP-driven efficiency programme aims to deliver almost £28m in savings this year, much of it dependent on demand management. Practice-based commissioning (PBC) has played a key role here and the four PBC consortia in Liverpool are very supportive of the PCT's strategy.

The PCT does not use a referral management centre as such, but for some specialties it has established protocols that encourage use of a triage filter to ensure interventions take place in the most appropriate setting.

Mr Wadeson sits on the finance work stream as part of the local QIPP programme, where finance directors are working to develop contracting principles that incentivise providers to keep a lid on activity. This year, this has meant amending the operating framework to encourage trusts to reduce demand for hospital activity to below 2008/09 levels for non-elective work and below 2009/10 for elective work.

‘The operating framework said that for non-elective work above the 2008/09 baseline the excess would be paid at 30%, but where’s the incentive to do better? We’ve agreed the 30% will work both ways: if activity rises above baseline they get 30%, if they reduce it they only lose 30% of the tariff,’ Mr Wadeson says. Similarly, for elective care, the marginal rate is 50% either way, above or below the 2009/10 baseline.

He says they are working hard to develop real-time monitoring of contracts, as the delay in getting activity figures (in terms of flex and freeze dates in PBR) can present difficulties in managing demand and finances.

‘We are working with providers to produce near real-time data and were able to have a conversation about the first six weeks of the new financial year at the beginning of June. That puts both commissioners and providers in a strong position, so if anything’s going off trajectory we can act quickly.’