News / HFMA 2011: Flory details 4% efficiency

NHS deputy chief executive David Flory has confirmed providers face 4% efficiencies in 2012/13 following the Office for Budget Responsibility’s revision of the public sector inflation forecast.

In its report on Tuesday, the OBR set the GDP deflator at 2.7%. Mr Flory told the HFMA annual conference that providers would face efficiencies of 4%, made up of 2.2% for increases in pay and prices and a net deflator of 1.8%. The latter included 0.3% embedded in tariff prices and 1.5% ‘cash back’- effectively a straight reduction on last year's prices.

‘There are still one or two plates spinning before we can pin down the final package, but if primary care trusts’ allocations are somewhere close to the GDP deflator that puts the increase in PCT spending power back to 4%,’ he said.

‘On the other side of the coin, providers have 4% efficiency. But we are trying to get the balance of risk right. And as part of that we have increased CQUIN [commissioning for quality and innovation] to 2.5%.’

And he added: ‘First and foremost it is important to increase the extent to which we pay a premium for good quality. The benefit of that is the opportunity for providers to earn back 1%. It is not automatic – it is for providers that demonstrate they have met nationally- and locally-agreed quality improvements.’

Mr Flory told delegates that he ‘continued to angst’ about inconsistencies in the way contract terms on payment systems have been applied. Though there had been improvements, variations remained – the problem occurred because commissioners were reluctant to impose fines for breaches on providers in financial difficulty.

He said: ‘That won’t do as part of the way we take QIPP forward. It’s bad. We look to the system to be much more rigorous in the way it uses contract levers and the financial underpinning of that.’