Comment / Single vision

There are no big surprises in the publication of NHS Improvement’s ‘new’ single oversight framework – and in particular its finance and use of resources assessment. But there are clear moves towards a broader assessment of finance and an increasing interest in efficiency.

A revised framework was always going to be necessary. NHS Improvement’s responsibility covers oversight and the provision of support for both foundation trusts and NHS trusts – previously overseen using the similar but separate risk assessment and accountability frameworks. NHS Improvement is also working towards a joint approach to assess use of resources with the Care Quality Commission.

And, to complete the motivations, Lord Carter also called for NHS Improvement to develop an integrated performance framework to ensure a single set of metrics for reporting performance.

The overall framework covers five areas: quality; finance and resources; operational performance; strategic change; and leadership.

But finance managers will inevitably be drawn to the proposed assessment on financial performance. The immediate changes are very minor and are mostly about formally harmonising the regime for both trusts and foundation trusts – using the old FT system as its model.

Providers will have to get used to aspiring to a 1 rather than a 4 as the scoring system has been flipped on its head. But other than that finance managers will be very familiar with the metrics. Capital service capacity and liquidity measures use the same definitions and the same thresholds between ratings as in the old risk assessment framework. The ‘variance from plan’ becomes ‘variance from control total’ to recognise the new regime of control totals, but is effectively the same measure.

And there is a focus on EBITDA margin rather than I&E margin – perhaps as it is seen as focusing more on operational efficiency than overall efficiency. There is also a welcome and clear indication that this is a building block to providing a single assessment of use of resources across NHS Improvement and CQC – ensuring a common basis for future assessments.

There is perhaps more of interest in proposed new metrics that will be run in shadow form this year with a view to inclusion next year. These metrics will not influence an organisation’s actual rating for the next 12 months. Measures on capital controls (distance above control total) and agency spend (distance from cap) are simply an extension of heightened central interest in these issues.

But a new (shadow) metric assessing a provider’s average cost increase for an average episode of care – or the change in its cost per weighted activity unit – delivers on Carter’s call for a greater focus on unit costs and productivity.

Finance managers – with support from their costing experts – will want to get their heads around the new reference cost-based cost per WAU metric in general and the change in cost that is the specific measure used in the use of resources assessment.

It is a key change and practitioners will welcome the decision to not jump straight in with a live indicator.

Before, an organisation’s efficiency or productivity was only measured indirectly. Poor efficiency would impact on margin, capital service capacity and liquidity – but this puts productivity and efficiency directly under the spotlight.

A side effect of the new cost metric could well be to raise the importance and profile of cost data and costing processes among provider boards. This is a seen as a key enabler for NHS Improvement’s separate costing transformation programme. The fact that a reference cost based indicator could stimulate greater regulatory scrutiny may bring costing back on to the table in some organisations.

Really, the key issue is what NHS Improvement does with the overall scores generated using its finance assessment – produced using a familiar method of averaging and rounding. It claims it is focused on support – some available to all, some targeted but voluntary and some mandated. The usefulness of this support and how quickly it is triggered using the new metrics will be key to finance managers’ longer term reaction to the new system.