Feature / Never walk alone

NHS bodies in North Mersey are working together and using financial incentives to create patient-centred, sustainable services. In the second of our QIPP series, Seamus Ward reports.

Turkeys don’t vote for Christmas, as the saying goes. To which could be added …and finance directors will not turn down income for their organisations. Yet finance directors in North Mersey have shown they can act against the stereotype as they put together QIPP (quality, innovation, productivity and prevention) plans that aim to put the local health economy on a sustainable footing.

The North Mersey approach to tackling these issues is built on collaboration. It is estimated the local health economy will have to make efficiencies and cost savings of £121m in 2010/11 to maintain financial balance across the system. Yet finance directors from the three local primary care trusts and 10 provider trusts have looked at how financial incentives in the system can be used to ensure clinical services are maintained and that organisations remain viable as a result of actions taken to realise the cost savings.

The local QIPP workstreams are looking at ways of reducing inappropriate hospital activity by improving primary care, thereby stemming the future growth in demand for hospital services through service redesign.

Historically North Mersey has had high levels of non-elective admissions and low levels of elective intervention. The aim of the QIPP clinical workstreams is to try to ensure the whole health system functions effectively. It aims to provide interventions at the appropriate level to avoid unnecessary admissions, reducing the overall cost.

Phil Wadeson, Liverpool Primary Care Trust director of finance and business management, says QIPP is not primarily a cost-saving exercise. ‘There are three themes coming out of QIPP. One is squeezing cash savings out of the system (that’s the least of the three in my view). The second is creating a collaborative that really works – that sometimes feels a bit like the board of North Mersey PLC. The third is to redesign the system to protect us against future pressures,’ he says.

‘Recently I spoke to a chief executive of one of the local bodies, who was querying the level of cost savings being realised from the programme, but I think that overlooks the bigger picture,’ he says. ‘The North Mersey collaboration is delivering two big things.

One is the sense of a shared problem and a strong consensus on what we need to do collectively to manage the future; the other is a well managed health system where behaviours are appropriate and hospital activity is firmly under control.’

Bigger picture

Steve Warburton, director of finance and business services at Aintree University Hospitals NHS Foundation Trust, says the starting point was doing the right thing for the wider health economy. While he realises this goes against the stereotype for a foundation trust, most of the arrangements are cooperative in nature. ‘We are trying to keep the health economy in a sustainable position, while at the same time delivering high-quality services, and meeting our financial and performance targets,’ he says.

The North Mersey QIPP programme has 11 workstreams, some of which are close to implementation. They include work on clinical pathways for chronic obstructive pulmonary disease (COPD); cardiovascular disease; and diabetes. Mr Wadeson says that while their net cash savings may be lower than some early estimates, their narrative is persuasive – they will help avoid future costs by preventing admissions through earlier identification and treatment.

‘By redesigning patient pathways we can avoid or manage the effect of future cost growth. I think that should be what QIPP is all about,’ Mr Wadeson says.

As with most other health economies, the early focus was on reducing historically high levels of non-elective activity. This work goes back three years. North Mersey had high rates of non-elective admissions, despite PCT investment in primary and community services. This was a particular issue at Aintree, so the trust sat down with its commissioners to look at alternative ways of managing demand.

Like other health systems, Aintree had opened a clinical decision unit (CDU) and medical assessment units to help ensure it achieved the four-hour A&E waiting time target. However, this solution to one challenge created another issue . It contributed to the growth in emergency admissions as a lot of trusts count CDU activity as admitted patient activity.

A&E challenge

Mr Warburton says Aintree did so in 2007/08, and this became an early issue raised by commissioners. ‘They said this was ridiculous – yes, they were being admitted under the rules, but they were not going into the main hospital beds,’ he says.

Under payment by results (PBR) the activity was valued at about £7.5m a year. The trust agreed a deal where the local PCTs gave it a total of £2.5m, which equates to the annual marginal cost of running the unit.

‘In the previous year, we had seen a dramatic rise in the number of non-elective admissions, but this was largely due to activity going through short-stay assessment units, where people were staying for between two and eight hours. We did that deal with our PCTs to take the heat out of short-stay activity. This enabled us to establish a proper baseline from which to measure whether any further changes in non-elective activity were genuine or not.’

Since agreeing that baseline in 2008/09, non-elective admissions have fallen by around 4%. Mr Warburton says most of this relates to changes in clinical practice. ‘The PCTs have been doing a lot of things; but we have also spent a lot of time redesigning internal clinical pathways . This means putting senior clinicians at the front door – if a patient comes in through A&E they are assessed by a senior clinician quickly and a rapid decision on their care is taken. If they can turn that patient around without admission, it is better quality clinical care as it stops admission to an acute hospital bed from where it is notoriously difficult to get people out again.’

At Aintree, a senior surgeon now sees all surgical emergencies that come to the trust’s emergency department. ‘We have seen emergency surgical admissions fall significantly in the six to eight months we have been doing this. This has freed up beds, which we have been able to close as part of our CIP programme although it has cost us much more in terms of lost income,’ Mr Warburton says.

Mr Wadeson says that while taking funding out of emergency activity, commissioners aim to put more funding into elective work, screening and ‘getting people to present earlier’.

The latter – engaging local people in their health and wellbeing – is a high priority for the health economy. ‘This is particularly important at a time of economic difficulty as evidence suggests the demand for health services tends to increase. The next five to 10 years is a difficult landscape but we will use the opportunity to realise the benefits from our investment in public health and prevention, where we spend more per head of population than any other PCT in the North West.’

Marginal strategy

Going into the 2010/11 contracting round, there was broad agreement between Mr Warburton, Mr Wadeson and Cathy Lyons (the then director of finance at The Royal Liverpool and Broadgreen University Hospitals NHS Trust) that rewards and penalties had to be put in place to incentivise the health economy’s desired outcomes. So, they came up with a system that expands on the 2010/11 operating framework’s 30% marginal tariff for non-elective activity above agreed baselines.

Marginal rates apply across much of the health economies’ PBR activity – the 30% rate is also being applied to outpatient and accident and emergency activity above threshold; while a 50% rate is applied to elective, day case and outpatient procedures. In line with the operating framework, the threshold for applying the marginal rate in non-elective admissions is the 2008/09 outturn. However, for the other areas of activity it is based on forecast 2009/10 outturn, adjusted for agreed commissioning intentions.

At the same time, if activity is below the agreed baseline, commissioners will only withdraw income at the appropriate marginal rate. So, if the plan was 1,000 hip replacements and the trust performed 900, in addition to the full tariff rate for the 900 procedures it would still receive 100 x tariff x 50%.

Though the marginal rate scheme covers much of PBR activity, Mr Warburton insists the national payment mechanism has not been abandoned. ‘We haven’t suspended PBR here – we are using PBR in full in the contract setting and then applying marginal cost arrangements that more accurately reflect the real costs of providing that activity ,’ he adds.

But commissioners from outside the area hoping to take advantage of the marginal rates will be disappointed. ‘In North Mersey we have a saturated market, so what we are dealing with is increased demand,’ Mr Warburton says.

‘One of the reasons we haven’t extended this outside North Mersey is because if we got work from other commissioners that is normally as a result of service drift. We would be taking activity from another provider and we would want that to be at full cost.’

Incentivising a reduction in activity through differential tariffs is a short-term intervention. The real gains will be made by shifting services out of hospital into the community and removing the associated fixed costs. Local commissioners believe they can facilitate this and the North Mersey QIPP finance directors have put together a proposal to share the financial benefits of such service redesign.

Mr Warburton describes the benefit sharing proposals as ‘the final piece of the jigsaw’. The chief executives have not yet signed them off, though the finance directors have agreed them. Benefit sharing relates to the consequences of diverting activity to other providers, where it can be done with at least the same level of quality and more cost effectively,’ he says.

In some cases this will mean moving activity out of hospital. ‘Hospitals can only really sign up to that if there’s some kind of benefit sharing. We have a 4% CIP over the next few years and once we get our organisation as lean as we can, we can’t afford to lose activity at full tariff,’ Mr Warburton adds.

He says during a period of funding growth a provider could absorb the hit of losing activity at full tariff as there are opportunities to grow the business elsewhere – fixed costs could be moved to the new activity. But moving activity out of hospital at a time of relatively flat growth and tariff reductions will mean providers are left with fixed costs.

Sharing potential

Mr Wadeson says commissioners can start to share benefits because of the work they have done with providers to minimise demand and ensure trusts are not relying on income growth to get out of financial trouble. He adds: ‘If providers can pull down activity levels even further we will continue to pay them a fair proportion of the tariff.

‘We realised from the outset that if we are successful we will reduce the activity in hospital. The commissioner pays less but without further action the provider is left with fixed costs. It’s not necessarily about dragging tens of millions of pounds out of the system. We don’t want a situation where commissioners are awash with funds while the trusts are struggling. The funds will stay in the system for the benefit of patients.’

‘PBR has led a lot of people to think that if you spend £100 in an acute environment and can take it out at full tariff, if you can provide the service in the community for £70 you have saved £30,’ says Mr Warburton. ‘But if the acute trust can only release £50, then the actual cost is now £120 where it used to cost £100. Looking at the true marginal costs of delivering activity, trusts will be able to eventually release 70%-80% of the total costs, but there will still be fxed costs that cannot be released.’

Benefits sharing will help providers manage change. ‘Some people have said we are trying to prop up non-viable organisations but that is not the case. However, if you are going to decide an organisation is not viable you should be doing it in a planned way rather than letting it go into financial failure and risk service delivery,’ he adds.

With all the work going on, Mr Wadeson says the QIPP collaborative is keeping an eye on developments in primary care commissioning. And he adds the effort being put in now will give the new commissioners a sound platform when they take over.

‘QIPP, as a specific initiative, is probably time-limited and by the time GP commissioning is implemented I have a feeling QIPP will be fully embedded and be part of mainstream activity,’ he adds.