News / NHS Operating framework 2011/12: A quick guide

Targets

• The operating framework said 2011/12 will be a critical year and the service would have to balance three priorities – maintaining and improving service quality; retaining financial control and meeting the quality and productivity challenge; and making progress on the transition to the reformed system.

Service quality

• The NHS must maintain performance on key waiting times (including referral to treatment times), continue to reduce healthcare associated infections and reduce emergency readmission rates.
• There will be a greater focus on improving outcomes, with aspirations for improving cancer survival rates and new quality measures for ambulance and accident and emergency services that are linked to outcomes.
• The quality framework will be developed further and the National Institute for Health and Social Care will begin work on 31 new quality standards.
• £200m is being provided to the cancer drugs fund in 2011/12 and this level of funding will remain constant over the life of the fund.
• The framework outlines new commitments on health visitors, family nurse partnerships, military and veterans’ health and services for people with autism.
• All mixed sex accommodation must be eliminated, except where it is in the interests of patients. Breaches must be routinely reported from April 2011 and will attract contract sanctions.

Financial control

• The service must deliver £20bn in efficiency savings between 2011/12 and 2014/15. A better than expected spending review settlement, the two-year pay freeze for most staff and the deeper cuts in management and administration costs than in the original model prompted the revision. The framework said this provided more time to realise QIPP plans and eased, to some extent, the measures required in the early stages of local plans. However, it did not change the need to focus on delivery.
• NHS running costs would be reduced from £5.1bn to £3.7bn over the next four years.
• The Department of Health will retain tight financial control during 2011/12. It will continue its policy requiring primary care trusts to invest 2% of their allocations non-recurrently in order to create financial flexibility and headroom to support change.
• The marginal rate for emergency admissions above baseline will be retained in order to incentivise providers and commissioners to work together in an area critical to local QIPP (quality, improvement, productivity and prevention) plans.

Developing the new system

• The pathfinder programme for GP consortia will continue to expand, while the NHS Commissioning Board will be created in shadow form.
• To reduce running costs and release capacity to the new commissioners, PCTs will be clustered together, each with a single executive team. They will support delivery during the transition period and closedown of the old system, while also helping GP consortia develop.
• Clusters will be up and running by June 2011 and will oversee commissioning planning, contracting and management for all services not delegated to GP consortia, such as primary care and specialised services.
• There will be clearer incentives for integration between health and social care by giving PCTs responsibility for post-discharge support. Hospitals will have responsibility for readmissions within 30 days of discharge.
• PCT recurrent allocations will include £150m for reablement and they will receive £648m in 2011/12 to support social care.
• PCT clusters must maintain talent and capability, retaining key individuals through the transition, make people available to support transition and manage staff reductions fairly and effectively.
• They will provide the Commissioning Board with an initial local structure to enable it to work with consortia. They will operate until 2013 or beyond if the Commissioning Board chooses.

GP consortia

• Consortia will be given £2 a head in 2011/12 to support their development, along with access to finance, commissioning and governance expertise. The financial support will include a qualified or accredited senior finance manager, who may be shared across consortia. An individual with expertise of governance arrangements will also support consortia.
• GP consortia will have an allowance for running costs of up to a maximum of £25 to £35 per head of population by 2014/15.
• The consortia development fund will be financed by clusters and sourced primarily from management costs savings realised from the mutually-agreed resignation scheme. It should be in addition to existing practice-based commissioning funding and can be used flexibly, for example for clinical locums, training and organisational development.
• QIPP value-for-money plans must be disaggregated to consortia level and developing consortia should be encouraged to take responsibility for areas of QIPP delivery for which they are best placed.

Providers

• All NHS trusts, including the new community trusts formed from PCT provider arms, will become foundation trusts by 1 April 2014. An updated timetable for achieving foundation status will be submitted to the Department by the end of 2010.
• Once these timetables are ratified, in January 2011 NHS trusts will receive advice on the key issues they face in achieving foundation status; the steps required to address those issues; and practical actions that need to be taken.
• Between 2012 and 2014, a dedicated Provider Development Authority (PDA) will oversee the move of all trusts to foundation status.

Contracting

• All contracts between commissioners and providers must be signed by the start of the financial year and should balance the needs of the whole health economy, including QIPP efficiencies.
• PCTs must ensure contracts allow for providers to take responsibility for managing demand within their own organisations and avoiding additional cost being placed on the system – for instance PCTs may specify appropriate follow-up ratios for outpatient appointments in certain specialties.
• If they are not satisfied with the completeness or quality of a provider’s data, PCTs may use contract sanctions.
• Some key clauses in the standard contracts have been simplified or redrafted to improve clarity. However, there will be a fundamental revision of contracts during 2011/12 and 2012/13 to prepare for the move to commissioning through GP consortia and the NHS Commissioning Board.
• PCTs should involve GPs, practice-based commissioning groups and developing GP consortia in the contracting round for 2011/12 and the coming years to ensure a smooth transition of contracts to consortia and the Commissioning Board.

Workforce

• NHS employers should be working with trade unions and staff to redesign services and this should include discussions on retaining, retraining and redeploying staff where possible to avoid unnecessary costs and loss of skills.
• Employers are encouraged to ensure staff are aware of the overall pay and reward package and benefits available to them in order to maintain recruitment, retention, morale and motivation. Plans are in place to introduce total reward statements from 2012 to support this.

Finance and business rules

Surplus strategy

• PCTs and SHAs should maintain a strong financial position, underpinned by a demonstrable financial flexibility.
• The surplus delivered in 2010/11 by PCTs and SHAs will be carried forward and continue to be available to them. In 2011/12, the expected draw down from the PCT surplus will be £150m.
• SHAs will agree with the Department the aggregate PCT/SHA surplus to be delivered in 2011/12 and how that surplus is distributed between PCTs and SHAs.
• No PCT must plan for an operating deficit in 2011/12, while NHS trust operating deficits will be accepted only where it is part of a planned recovery agreed with their SHA and the Department.
• As in 2010/11, PCTs will be required to invest 2% of their recurrent funding non-recurrently. They may increase this percentage at their discretion. The 2% of recurrent resource will be held by SHAs and PCTs will be required to submit business cases that demonstrate the non-recurrent nature of the planned spending in order to access the funding. The SHA directors of finance group must support the business case.
• Any surplus drawn down by a PCT during the year cannot count against the 2% of its resources held by the SHA.
• GP consortia will not be responsible for resolving PCT legacy debt that arose prior to 2011/12 so all existing legacy debt must be dealt with in 2011/12 and 2012/13. GP consortia must work closely with PCTs during this period to ensure financial control and balance is maintained to prevent deficits in those years. This will reduce the risk that consortia will have unresolved deficits on their hands when they are given their own budgets in 2013/14.
• SHAs and PCT clusters are required to have an increased focus on maintaining financial control and good governance during the transition period.

Running costs

• From 2011/12 SHAs and PCTs will be required to report their running costs. The precise definition of this will be included in the financial planning guidance, which will be issued in January 2011. Broadly speaking this will mean any cost that is not a direct payment for the provision of healthcare or healthcare-related services.
• By 2014/15 the overall cost of running the NHS will reduce by a third. This will include the 45% cut in SHA and PCT (non-provider) management costs. The financial planning guidance will include details of the trajectory for releasing these savings. The guidance will allocate running costs reductions by region and SHAs will decide how the reductions will be distributed across their region. All possible saving – not just the target saving – should be realised.
• In 2011/12, as with foundation trusts, NHS trusts will no longer be required to report on management costs.

Capital

• The primary source of capital funding will continue to be internally-generated cash, with additional finance provided through interest bearing loans.
• As in previous years, unspent capital will not be carried forward.
• There is ‘no expectation’ that there will be a central capital budget in 2011/12 and all NHS capital requirements will be handled as part of the planning process.
• There will be no automatic capital allocation for PCTs in 2011/12, with capital allocated on a case-by-case basis.
• Capital funding for community services will follow the NHS trust’s regime or the regime of the organisation into which they have transferred.
• There are no changes planned for the capital regimes for foundation trusts or NHS trusts.
• While capital spending has been reduced, the framework said this should not affect maintenance and essential small improvement schemes. Trusts should take account of the effect of investment on ongoing expenditure, with greater scrutiny of economic returns in business cases.
• The NHS must prioritise urgent backlog maintenance in order to fulfil its duty to provide a clean and safe environment. Also, they must consider provision of additional single en suite rooms when planning the elimination of mixed sex accommodation, improvements in patient privacy and increased isolation facilities for infection control.

Social care funding

• PCTs will receive £648m to support social care in 2011/12, with an indicative allocation of £622m for 2012/13. This is in addition to the £150m for reablement services included in PCTs’ recurrent allocations, which will rise to £300m from 2012/13.
• The funding will be transferred to local authorities to invest in social care to benefit health, under s256 of the NHS Act 2006.
• PCTs and local authorities must work together to decide appropriate areas for use of the funds and the expected outcomes. Services could include telecare, prevention and crisis response services.

Tariff

• Hospitals will not be reimbursed for emergency admissions within 30 days of discharge, while all other readmissions within 30 days should be agreed locally and deliver a 25% reduction where possible. PCTs should work with providers, GPs and local authorities to manage the savings arising from non-payments to fund reablement and post discharge support. The payment by results guidance will include details on the implementation of this approach and excluded services.
• The Department will work with early implementers to identify increases in tariff that will take effect from 2012/13 to reimburse providers for the cost of reablement and post discharge support for 30 days following discharge.
• In order to drive further efficiency, the way long stays in hospital are funded will be changed. A five-day trim point floor will be introduced to ensure relatively short stays do not attract a long-stay payment. Additionally, all tariffs have been set 1% below average as the first step in setting tariffs below the national average level. Together, these two measures mean a 2% efficiency requirement has been embedded in the tariff and has been taken into account when determining the efficiency deflator set out in the pay and prices tariff adjustment.
• The efficiency requirement in the national tariff is set at 4% and the uplift for pay and price inflation has been assessed at 2.5%.
• Tariffs for 2011/12 reflect the 4% efficiency requirement, with 2% embedded (the trim point and below average tariff measures mentioned above) and the remaining 2% offsetting the pay and prices uplift. This results in an overall tariff reduction of 1.5%.
• As a result, non-tariff prices should reflect a reduction of 1.5% on 2010/11 prices before negotiated and agreed developments.
• Expansion of the scope of the mandatory tariff will be limited in 2011/12, but there will also be some changes, including the introduction of a number of new outpatient tariffs. In 2011/12 the scope of the mandatory tariff will be extended to adult renal dialysis (by mandating a transition path to national prices); adult and neonatal critical care (mandated currencies but not prices); smoking cessation (currencies introduced); cystic fibrosis (national currency reflecting care patients receive over the course of a year); and podiatry (a local currency will be developed based on simple treatment episode or package of care). The allocation of service users to mental health clusters will be mandated, while the Department will seek to amend the scope of the ambulance service reference cost data collection to underpin currencies for use in 2012/13.
• The PBR development site programme will continue in 2011/12 and the development of new currencies and tariffs should support the integration of services where it is appropriate and in patients’ interests. Tariff changes will be permitted where there have been changes in service provision.
• As previously announced in the PBR road test, changes will be made to the scope and level of top-up payments. Specialist children’s and orthopaedic services will still attract a top-up, albeit at a lower rate, while two new specialist services – neurosciences and spinal – will be eligible for top-ups in 2011/12.
• The move to HRG4 for accident and emergency services will go ahead in 2011/12.
• The 30% marginal rate for emergency admissions above baseline will continue in 2011/12 – 2008/09 will remain the baseline year.
• Providers may offer services to commissioners at less than the published mandatory tariff, where both commissioners and providers agree. Commissioners must ensure the reduced price has no detrimental effect on quality, choice or competition.
• The number of best practice tariffs will be expanded in 2011/12 to cover a number of new service areas.

CQUIN framework

• Providers can earn up to 1.5% of actual outturn value under the CQUIN initiative.
• The existing national CQUIN goals on VTE risk assessment and on responsiveness to patients’ personal needs must be included in acute CQUIN schemes. Unless commissioners decide there is negligible room for improvement, these must again be linked to around a fifth of the value of schemes.

Never events

• The list of incidents described as never events – serious, largely preventable patient safety incidents – has been extended. Where care involves a never event, commissioners will be able to recover the cost of that care.

SHA bundle

• The proposed funding devolved to SHAs for local management is £6.243bn, compared with £6.246bn in 2010/11. A limited number of budget amendments have been made, the most significant being increased funding for prison drug treatment services reflecting transfer of responsibility from the Ministry of Justice to the NHS.
• This will be the last year of the SHA bundle. The Department will work with the shadow Commissioning Board and the SHAs to agree how the activities currently funded from the bundle will be managed from 2012/13 onwards.