ICBs face differential activity targets as part of revised ERF

Elective recovery funding has been separately identified in ICB allocations and in 2023/24 is being distributed on a fair share basis. At the national level the funding is believed to be sufficient to deliver 107% of 2019/20 levels of value-weighted activity – that is 2019/20 activity at 2023/24 unit prices.

This is a step up on the 104% target that was set for 2022/23 as the government looks to pick up the pace on recovery. In fact, in the first half of the current year, just 98% of 2019/20 activity levels was delivered. So, the new target represents a nine percentage point increase on activity levels being achieved at the beginning of the current financial year and equates to an average 0.75 percentage points improvement per month until March 2024.

However, integrated care boards will face different activity targets to reflect their performance in delivering activity during 2022/23 – an approach trailed by NHS England (pictured) chief finance officer Julian Kelly at the HFMA annual conference in December. ICBs delivering the lowest value-weighted activity in 2022/23 will need to improve by more than the national average.  Ten ICBs have been set activity targets of 103%, while targets range all the way up to 113% (North Central London) and 114% (Suffolk and North East Essex. On average the NHS England directly commissioned target is 109%.

According to the published guidance, the elective activity target covers elective ordinary and day cases, outpatient procedures with a published tariff price, and first outpatient attendances. However, the funding allocations are expected to support wider elective activity, including outpatient follow-ups, diagnostics, chemotherapy, radiotherapy and critical care related to elective procedures.

If commissioners exceed their activity target, they will receive additional funding at 100% of national unit prices, adjusted for the market forces factor. And this funding will cover activity within the scope of the 107% target and any wider elective care pathway costs. However this will only be triggered if they exceed their overall activity target, which would include activity in contracts with both NHS providers and the independent sector.

Instead of a clawback mechanism for underachievement of targets, NHS England will hold back a percentage of the ERF allocation from commissioners, which will be released 'during the year'. However NHS England said that providers and commissioners should agree activity targets for contracts on the basis of having all ERF funding available.

Providers will be paid for all elective activity at national unit prices, although outpatient follow-ups are paid for as part of the fixed element of the aligned payment and incentive scheme, which also covers non-elective activity.

NHS England has also published Revenue finance and contracting guidance for 2023/24 and Integrated care board and system finance business rules.