Feature / Introduction to……resource allocation

Over recent issues we have seen how demand, through payment by results, dictates how a lot of NHS funding in England is spent. But how are funds allocated to primary care trusts to commission services for their local populations?

In 2011/12, the Department of Health distributed £89bn of revenue allocations (£85bn of it recurrent) among PCTs. There were several elements to this process.

The national weighted capitation formula calculates PCTs' target share of resources based on populations adjusted for age distribution, need beyond that accounted for by age and unavoidable geographical cost variations (known as the market forces factor).

Separate weighted populations are calculated for hospital and community health services; primary medical services; and prescribing. These are then combined using national expenditure weights (79% for HCHS, 10% for primary medical services, 11% for prescribing) to produce a relative share of resources.

PCTs do not generally receive target allocations, but are moved towards their target over time. Distance from target is the difference between a PCT’s target allocation and adjusted recurrent baseline allocation. If the baseline is higher than the target allocation the PCT is said to be over target. If less, the PCT is under target.

Hammersmith and Fulham Primary Care Trust is currently the most over target, receiving 22.5% more than target. North Somerset Primary Care Trust, at 7.2% under target, is the most under-funded.

Movement towards target is determined by the resources available and pace of change policy – ministers’ decisions on how quickly PCTs will be moved to target. This year, PCTs most over target received the minimum 2% growth in their recurrent revenue allocations. Those furthest under target received more – North Somerset’s recurrent revenue allocation grew by 4.2%.

The NHS Commissioning Board is to take over allocations from 2013/14, but the move from PCTs to clinical commissioning consortia will not be straightforward. The government intends the board to make allocations at practice level, but the existing formula is not sensitive enough to calculate allocations for these smaller populations. A new formula may be tested in shadow form next year.