Feature / Finance explained

In January the NHS Litigation Authority made a rare excursion to the newspaper front pages with reports of ‘£185m bail-out’ from the Department of Health to cover an increase in clinical negligence claims above estimated levels.

The Clinical Negligence Scheme for Trusts (CNST) is one of a number of risk pooling schemes run by the Litigation Authority. It operates on a pay- as-you-go basis, with premiums set for NHS trust, foundation trust and PCT members to cover the level of anticipated pay-outs in the year ahead. The authority does not build up reserves.

A spike in claims and expenses this year left a gap. While previous central support has been provided on a loan basis, with future premiums set to recoup the additional expenditure, on this occasion the Department has provided one-off support and will not be clawing it back.

There has been no change to the estimate for claims and scheme expenses in 2012/13, which remains at £950m.

The volume of claims rose by nearly 32% between 2009/10 and 2010/11 and have increased by 50% over the last six years. In financial terms, costs have risen from £384m in 2005/06 to £729m last year.

The increase in claims means that NHS bodies face rising cost pressures on their CNST premiums with increases of around 10% a year. Premiums in 2010/11 ranged from around £5,000 for a small care trust to nearly £15m for a major teaching hospital with a large maternity department. However there are opportunities for NHS bodies to reduce their premiums.

Individual premiums take account of relative risk, based on the number, specialty and grade of employed staff and the number of babies delivered. There is then an adjustment – from a maximum 10% reduction to a 10% increase – depending on actual claims history. Further discounts can also be earned by attaining higher levels in risk management standards set by the Litigation Authority.

There are three levels of discount recognising organisations that are only documenting their risk management process to those that are using these processes across their whole organisation. Discounts available are 10% (level 1), 20% (level 2) and 30% (level 3).

Revised standards were issued during January. Six separate areas are covered in the general risk management standards with separate standards for maternity and ambulance services. There are 60 criteria included within the main standards against which organisations are assessed.

At the end of 2010/11, 60% of acute trusts, 34% of mental health and 48% of maternity services had achieved a level 2 or level 3.

Although some foundation trusts have explored and continue to explore alternatives to CNST, all trusts and FTs currently remain as members.