News / Highlighting the longer view

The NHS has shown its support for changes that demonstrate the centre is listening to practitioners about what they need to extend planning horizons. Steve Brown reports

NHS national bodies appear to be in listening mode. The publication of two-year planning guidance, with two-year prices and the beginnings of a system-focus, delivers a number of changes that the NHS – and finance practitioners in particular – have been calling for for years.

There are significant complications in raising the planning horizon beyond the traditional single year – less confidence around inflationary pressures for year two and the inability to change the package based on the performance in year one, for example. But system leaders have listened to the service and responded.

There was widespread recognition of this move. HFMA director of policy Paul Briddock described it as a step in the right direction. ‘It supports the need for the NHS to work more widely as a system, but with clear visibility of organisational control totals and requirements within that,’ he said.

And Chris Hopson, chief executive of NHS Providers agreed. ‘A two-year planning and contracting period will help make the best use of resources,’ he said. ‘The clarity on key elements of the NHS landscape – the tariff, CQUINs, business rules and the standard contract – will all help and are to be welcomed. We recognise the hard work of NHS England and NHS Improvement, which have worked at high speed to get us here.’

All sides are equally clear that the changes are helpful but won’t of themselves solve the major financial challenges facing the NHS over the next two years. ‘Our members have been calling for longer term funding settlements, more realistic efficiency requirements and an earlier timescale for agreement on financial plans for the year ahead,’ said Mr Briddock. ‘[But] we must not underestimate the scale of the challenge ahead or the strain this will put on NHS finance staff, partially given the planning timescales outlined.’

The big news was the two-year coverage and the fact that the planning guidance is out three months earlier than usual. Across just 23 pages, the guidance confirmed nine ‘must-dos’ for 2017/19:

1. Sustainability and transformation plans

2. Finance

3. Primary care

4. Urgent and emergency care

5. Referral to treatment times and elective care

6. Cancer

7. Mental health

8. People with learning disabilities

9. Improving quality in organisations

Detailed operational plans by both commissioners and providers will need to demonstrate how they deliver this list and support delivery of the local sustainability and transformation plan (STP), with finance and activity numbers agreed in both sets of plans and drawn from the STP.

The planning guidance was published alongside technical guidance, commissioner finance templates, a draft two-year NHS standard contract, CQUIN incentive scheme guidance and tariff prices for both years.

Provider control totals and sustainability and transformation fund (STF) allocations were due to be published just after Healthcare Finance went to press, with commissioner allocations due out in mid-October.

Full draft operational plans for both years are due towards the end of November and contracts must be signed by 23 December. All in all, it is a huge ask for finance and contracting teams.

The beginning of a switch of focus away from organisations and towards whole systems comes with the setting of system control totals. These, in fact, are simple sums of the corresponding individual organisation control totals within each footprint. And in truth there is limited flexibility.

Organisations will be able to adjust individual organisation control totals ‘by application’ as long as the system control total is not breached.

But there is a parallel requirement that, perhaps rather ambitiously, requires the provider sector to achieve financial balance in 2017/18 and 2018/19 and for commissioners collectively to live within their statutory resource limits.

However, both commissioners and providers will from next April contribute to a risk reserve to cover potential system overspends. A similar risk reserve was created for the current year – worth around £800m. This not only required commissioners to plan for 1% of allocations to be spent non-recurrently (as in previous years) but also to start the year with this sum uncommitted.

The difference this year is that providers will also contribute to local reserves. A total reserve of £830m will see commissioners set aside half of their 1% non-recurrent spending requirement – worth about £360m. NHS England will add £200m. Finally 0.5 percentage points of the CQUIN payments paid to providers (worth a total of 2.5% of contract value) will also be held within the reserve – adding a further £270m.

CQUIN release

If a provider delivers its 2016/17 control total it will be paid this CQUIN at the beginning of 2017/18, although it will have to hold this as a reserve until release is authorised once it is demonstrated that the system in question is delivering its control total.

Some 1.5 percentage points of the 2.5% CQUIN is tied to the delivery of national indicators – with different sets for different sectors. The ‘local’ CQUIN will see 0.5% of contract value handed to providers if they engage fully with the STP process, with the final 0.5% forming the risk reserve.

The £1.8bn sustainability and transformation fund will again be used to help the provider sector hit its aggregate financial balance target.

Some £1.5bn will be allocated on the basis of emergency care, £0.1bn will be allocated to non-acute providers and £0.2bn will be used in a targeted way. The guidance said: ‘Sustainability funding must deliver at least a pound-for-pound improvement in the aggregate financial position.’

Clinical commissioning groups, in addition to their 1% non-recurrent spend requirement, must again plan for a 0.5% contingency to manage in-year pressures and risks. Drawdown worth £0.4bn will be used to fund the £200m contribution to the risk reserve and to cover in-year CCG deficits. However, CCGs that have built up cumulative underspends above 1% in previous years will also get access to drawdown.

The two-year tariff will increase prices by 0.1% - the net impact of cost uplifts worth 2.1% in each year offset by the previously announced 2% efficiency requirement. Some healthcare resource group-specific uplifts are on top of this to reflect cost increases related to the Clinical Negligence Scheme for Trusts (CNST).

It is difficult to see a straight 0.1% increase even between years one and two of the new prices as the picture is complicated by manual adjustments, smoothing and scaling, as well as the CNST uplifts.

Again, showing a willingness to listen, NHS England and NHS Improvement said they had decided against earlier proposed changes to move all follow-up outpatient activity to a single block payment. They acknowledged this was not widely supported.

The HFMA had suggested it was a backwards step to a ‘crude currency’ and that the measures would mean organisations facing financial disadvantages when follow-ups were clinically appropriate.

Instead the guidance now proposes to increase the percentage of follow-up costs bundled into first attendances – 30% adult surgery and diabetes, cardiology and general paediatric medicine; 20% other medical specialties; and no change (10%) in other areas.

Mr Briddock welcomed the about turn. ‘It is right to get the payment system aligned with the aim of reducing follow-up attendances where this is clinically appropriate. We don’t think the earlier proposals would have achieved this and the revised approach makes more sense.’

The consensus is that the two-year guidance is helpful. But representative bodies have been quick to point out that the core financial challenges facing the service remain.

Phil McCarvill, deputy director of policy at the NHS Confederation, while describing the guidance as ‘clear and useful’, warned that the proof would be in the delivery and alignment of both organisational and local STPs. ‘Local commissioners and providers are being asked to achieve something that is longer term and wider reaching than ever before,’ he said. ‘The national bodies must continue to work together and align regulation and policies that would help organisations to work closer together.’

NHS Providers Chris Hopson also underlined that ‘the gap between what the NHS is being asked to deliver and the funding available remains’. He said it was important that ‘numbers of small but unfunded commitments are not added later in the year’.

This may well be a test of whether the centre’s new listening mode is more than selective hearing.