Feature / In place of strife

It’s been a bruising period for those in NHS finance and contracting. With concerns over finances, quality and safety, and the need for efficiencies and service transformation, it is perhaps not surprising that the last two contracting rounds have been tougher than ever. In some areas, professional relationships have broken down and meetings have been thunderous. Commissioners and providers say the national tariff, or payment by results (PBR) as some still call it, makes contracting adversarial, but Bolton NHS organisations believe they have a solution.

‘It’s no secret that over the past two years we’ve had quite a challenging relationship financially,’ says Simon Worthington, finance director and deputy chief executive of Bolton NHS Foundation Trust.

‘The trust was in financial difficulty and had to get the best out of the contract we could, while the CCG had to manage its own position. That tension was starting to affect the clinical conversation, especially around CQUINs. We had to put a stop to that and transform the discussion.’

Bolton Clinical Commissioning Group chief finance officer Annette Walker adds that, with the focus on legal, financial and contractual issues, there was little time to look at transformation. The Bolton health economy faces a £64m shortfall by 2020 across health and social care, including £39m at the trust and £15m at the CCG.

The 2016/17 contract was signed before deadline, and while the benefits of removing the potential for confrontation cannot be underestimated, the Bolton initiative isn’t simply a case of two sides getting on better. Both parties wanted to change local contracting and the 2016/17 planning guidance gave them the opportunity. Mr Worthington says the guidance opened the door by allowing NHS bodies in an area to apply for a single control total. While the Bolton bodies haven’t formally applied, they think of the area as a single financial entity. This is embodied in the ‘Bolton pound’ and the agreement that a financial problem in one organisation is an issue for both.

With this single control total in mind and using the stability of the local health economy following turnaround work over the past few years, Bolton was able to take the next step – moving away from the national tariff. Broadly speaking, the new arrangements give the provider a minimum income, with incentives to reduce costs.

Over the past 18 months, the Bolton health economy has been doing a lot of work on effective use of resources and eradicating procedures of limited clinical value. Mrs Walker says under the national tariff reducing this activity potentially has an adverse effect on the provider. And although Bolton had reduced levels of limited clinical value procedures to the average for Greater Manchester, more could be done.

‘We both came to the realisation that traditional contracts were not going to lead to the transformational changes needed,’ Mrs Walker says.

The partners wanted to do something radical, but the tariff mechanism was all they knew. And they didn’t want the new arrangements to be complex, though they had to be sufficiently sophisticated to allow for risk management. The partners have developed an aligned incentives approach comprising four elements:

• Allowing for transformation – so hospital activity could fall with the right incentives and conditions in place
• Reducing costs of pass-through items
• Stability in areas where there is little financial risk and costs are controllable, such as CQUINs
• Cost risk share in A&E, critical care and non-elective care.

The first focuses on services where activity can be reduced or shifted into different settings or modes of delivery. These include elective services, outpatients, unbundled diagnostics, secondary care therapies and direct access radiology and pathology.

The trust’s income in these areas is protected, removing the disincentive that prevented activity being delivered differently – for instance, by converting follow-up appointments to telephone clinics where possible. Over time, resources can be moved if Bolton decides to invest in other services.

The second element focuses on pass-through costs – for high-cost drugs or devices, for example – where there is no incentive for the provider to reduce costs.

‘We used to just send the bill to the CCG,’ Mr Worthington says. ‘It’s surprising how many tens of millions of pounds are dealt with on that basis. But now we have people poring over spending to take costs out.’

Payment is based on 2015/16 levels and, for an agreed period, if costs are lower – driven by better procurement and ensuring prescribing is clinically appropriate, for example – the trust will be able to keep the savings. If costs are higher, the CCG will be liable but because the trust now has an incentive to reduce the costs, the risk of this is much lower.

In the third area – risk share in A&E, critical care and non-elective care – a minimum level of income is guaranteed. Taking a single place-based approach, if activity rises above plan, the CCG and foundation trust will jointly manage the risk and agree funding to support the additional costs from a local sustainability fund of £1.5m. If the fund is not needed to manage risk, it will be used for FT-led transformation schemes. This creates a strong incentive to reduce this type of activity.

The fourth area groups services where activity and costs are relatively stable or controllable. The payment level is fixed and includes services such as those in the community, best practice tariffs, CQUIN and the maternity pathway. The final agreement takes up two pages of A4 paper.

Mrs Walker says: ‘As a commissioner, we had got to the point where we’d done as much as we could, but under the new contract the provider is incentivised to take that further where clinically appropriate. In the past, where savings would have accrued to the commissioner, they now accrue to the provider. We’ve already identified system savings opportunities of at least £2m – savings we wouldn’t have been able to make under the old style of contracting.’

Specialist roll-out

While specialist services remain on the tariff, Mr Worthington (below) hopes to convince specialist commissioners to move to the new local arrangement. He believes it’s important other CCGs that commission activity at the trust are on a similar deal to the one with Bolton CCG.

‘From an operational point of view, it would be very difficult to manage changes so that just the Bolton patients got the transformed service.’

Though the contract includes large elements of fixed payments, both finance leads insist it is not a block contract. ‘It’s anything but,’ says Mrs Walker (below). ‘We will continue to monitor activity flows in and out and looking at the impact of recommendations from NICE, for example, that may trigger a decision on the contract based on cost.’

Costing will underpin payments to the trust, including how they will flex when circumstances change. Working groups carrying out the detailed strategy, planning and implementation sit underneath a newly formed local sustainability and transformation group, which will oversee performance and transformation.

And if a clinician proposes a change to improve quality, for example, management accountants will look at the costs and assess whether it will make savings. ‘It’s not a question of agreeing a contract number. We will make sensible decisions around whether that amount needs to flex, based on joint understanding,’ adds Mrs Walker.

She explains that the risk of activity rising is more ‘theoretical’ as the provider is incentivised to reduce activity and costs.

 ‘Some would say it’s going back to the old days, by just asking, “How much does it cost?”’ says Mr Worthington. ‘If the change saves money and quality is maintained, that’s fantastic. The new approach also makes it clear to clinicians that developments have to be financed from within the existing Bolton pound.’

A key element of the new way of working has been breaking down the organisational boundaries. For example, Mr Worthington has been speaking to local GPs about the contract and Mrs Walker has attended divisional meetings at the trust. Collaboration is not confined to the executive level. The CCG and foundation trust finance teams are working more closely, particularly in the costing working groups, and being more transparent about their organisations’ finances.

However, Mrs Walker says they are not merging their finance departments. ‘Rather than performance managing from the side-line, commissioners are working with the service delivery people to improve services, reduce costs, increase clinical sustainability and address workforce issues. We have some individuals seconded to the trust and we are looking to expand that model,’ she says.

Mr Worthington adds: ‘People are spending significant amounts of time working together to do more value-adding activities. It would not be credible to go back to PBR.’ 

Key achievements