News / Focus needed on financial control during transition

The Department of Health has tightened its grip on financial performance as PCT finance directors named loss of financial control as a key risk in the transition to the proposed new NHS structure.

In a busy summer, the Department issued its Liberating the NHS white paper along with four detailed consultation papers on key aspects of the reforms, including GP consortia and commissioning; regulating providers; increasing democratic legitimacy; and an outcomes framework.

As part of its consultation with members in preparation for responding to the white paper, the HFMA conducted a survey of PCT finance directors. The sample of 26 directors – about 20% of the PCT finance director community – saw loss of financial control as the key risk alongside the erosion of staff morale, the cost of redundancy and danger of losing key staff.

Other risks identified included a loss of focus on productivity improvement and on other key initiatives such as sustainability.

Department chief executive Sir David Nicholson wrote to NHS bodies in July to highlight plans to strengthen assurance mechanisms during the interim period to keep a tight grip on finances. He said PCTs should support the delivery of change with the 2% of funds they are required to spend non-recurrently this year.

The Department has established an ‘interim bridging function’ at the national level to ensure financial control is maintained alongside progress on quality and the QIPP (quality innovation, productivity and prevention) programme.

As part of this ‘bridge’ David Flory, director general of finance, performance and operations at the Department, has been appointed deputy NHS chief executive. Regional bridging functions will also be established.

The PCT finance director survey is part of the HFMA’s white paper response, which will also involve its professional committees meeting in September to discuss the implications of the proposed changes.

The association will focus on the impact on the finance function, the role that finance staff should play in developing the new system and the implications for governance, financial management and reporting.

A majority of PCT finance directors said that in general local GPs were supportive of the proposed GP commissioning consortia. However, one in three reported a lack of enthusiasm among GPs for their new role. One director said there was an increasing awareness among GPs of the daunting size of their proposed new responsibilities.

Views were split over whether the new arrangements would lead to better commissioning. One director supported the greater clinical engagement, believing it would lead to better pathways and service specifications.

But the director added: ‘The big doubt is over whether it will deliver better contract management and demand management.’

Technical issues will also present challenges. Most directors highlighted the risks in getting consortia budgets right (see below) and in ensuring GPs have good understanding of finance.

The NHS Confederation is also consulting members on the white paper proposals. In its initial analysis, it has raised concerns about plans to impose a fixed management allowance on new consortia. It says evidence from the US suggests that failure to invest in high-quality management is a predictor of failure.

‘If you are prepared to trust GP consortia with £80bn and you are going to stop micro-management, it seems curious that the only bit of micro-management you do is on how much they are allowed to spend on management,’ said acting chief executive Nigel Edwards.

With white paper consultation responses due to be submitted in early October, former health secretary and Labour leader candidate Andy Burnham called for an informed debate on the proposals.

‘They are the wrong reforms at the wrong time,’ he said. ‘By combining two major challenges – and taking attention away from finance – there is a real risk that the NHS will descend into chaos.’

However, health secretary Andrew Lansley defended the proposals. ‘With patients empowered to share in decisions about their care, with professionals free to tailor services around their patients and with a relentless focus on continuously improving results, I am confident that together we can deliver the efficiency and the improvement in quality that is required to make the NHS a truly world class service,’ he said.

Allocation challenge

Allocating budgets and financial risks are key challenges facing the Department of Health as it implements the white paper reforms, according to Ruth Thorlby, senior fellow in health policy at the Nuffield Trust.

In a blog written exclusively for the HFMA website (Policy watch: Commissioning challenges), Ms Thorlby said practices had been given notional budgets in the past because previous methods of allocating resources had not been sufficiently accurate in predicting future costs. Practices had been cushioned from overspends by their primary care trusts, which in turn had been protected from moving too quickly to their target allocations by the pace of change policy. But with GP-led commissioning consortia moving to hard budgets, policy on allocations was unclear.

‘It is not clear whether this pace of change will be accelerated for new GP commissioning consortia, or the extent to which they will inherit the financial position of the host PCT – significant deficits in some cases,’ she said.

Other online content includes full coverage and analysis of the white paper on the future of the NHS in England. There are also features on the consultation papers published after the release of the white paper, including those on the future of regulation and arm’s length bodies.

Away from the white paper, there is a report on the review of reference costs and a feature on personal health budgets by graduate financial management trainee Lucy Jones, who is on secondment at the Department of Health.