Feature / What price education?

Training the right numbers of staff with the right skills to work in the right place is at the heart of the current transformation challenge. Providers have already seen sharp increases in agency staff costs, driven by shortages of staff in key areas.

Ensuring these issues don’t extend into the long term – and ensuring the NHS has the right staff to deliver its new ways of working – will call for rigorous planning. But these aren’t the only numbers that must be right. The training and education system must be underpinned by the right payment mechanism. This needs to provide fair remuneration to all training providers so that they can deliver high-quality training, covering costs without cross-subsidy from service income (or vice versa). And it has to support changes in the way services are provided – so if more training needs to be delivered in the community, for example, the payment system must be able to fairly extract funding from one setting and provide it in another.

The old system did not deliver in these areas. Funding was broadly delivered to training providers based on historical levels of funding, making significant change around new training providers and different settings difficult. And the system was far from transparent, with long-standing uncertainty over whether teaching hospitals made a profit or loss on their education activities.

This system has already been replaced with a tariff approach, which was introduced in April 2013 for non-medical and undergraduate medical placements and joined in 2014 by tariffs for postgraduate medical placements. These initial tariffs have been clearly identified as transitional, with gains and losses capped to help providers manage the impact of changes in funding. They are by no means the finished product.

The Department of Health is committed to improving the currency – the packages of training that are actually paid for, to be known as education resource groups (ERGs) – and the cost data that informs the actual price setting process. The work is being taken forward by the Department (cost collection and pricing) and Health Education England (currency development).

The mandate from the government to HEE for this year states: ‘By 2017, tariffs will better reflect the training and service delivery of trainees. The basis of these tariffs will be a comprehensive cost collection.’ That doesn’t leave very much time. However, the service has already made significant progress, both in terms of currency development and costing.

Currencies
There are just three tariffs currently, one each for:

• Non-medical placements (nursing, midwifery and allied health professionals)
• Undergraduate medical placements
• Postgraduate medical training (see table below).

The actual prices used for the transitional tariffs were informed by a pilot cost collection in 2008 and constrained by the existing level of investment in placements. This was a one-off exercise and is now many years out of date, which is why the Department has moved to update the work using an annual cost collection from all providers based on a consistent methodology.

As things stand, there is just one rate for each placement type. So the same non-medical placement fee is paid for a nurse as for a physiotherapist. Similarly, a trust receives the same placement fee for a foundation trainee as for someone in their specialty training years.

Whether this is granular enough to reflect the real differences in cost experienced by providers in different years of training and between clinical disciplines is exactly what HEE has been exploring. It has been using the first national submission of education and training costs – covering 2013/14 – to help with this exercise.

The costs collected in this first cost collection were not seen as robust enough to set any tariff prices – more on that later. But it is understood that a currency development group convened by HEE decided it was good enough to inform discussions around groupings. In particular the data has informed discussions around the principles for ERGs – size of training group and whether the groupings are educationally meaningful.

A consultation paper setting out what these groups could be is expected over the coming months. ‘The postgraduate medical tariff currently is quite crude, with a common placement fee plus market forces factor and then an assumption of a 50% split between service and education and training – and this applies across all doctor grades and specialties,’ says Jenni Field, HEE head of finance strategy.

‘This contrasts with some providers telling us that while 50% service/education split is right for some grades, it is not always the case for others. Doctors in specialty training posts with three or four years’ experience may be delivering more than 50% service,’ she continues. ‘This might suggest we should be paying less towards salary and perhaps placement fee in the later years of training than in foundation years.

‘But then for some specialties – neurosurgery is a good example – there is an uplift in training support towards the end of training. A doctor might do a lot of routine work as a middle grade registrar, but then at the end of their training, they get a lot of consultant input to support them doing more complex cases.’

HEE is using the submitted cost data for postgraduate training to identify workable groupings – the new education resource groups – with similar costs, while avoiding a system that sets separate tariffs for all different specialties and training years.

‘We want to have enough currencies to fairly reward trusts but it needs to be a manageable number,’ says Ms Field. ‘We are only spending 2%-3% of the NHS budget [about £2.8bn of the total £5bn training spend] on placements and salary support, so we don’t want to have hundreds of different currencies.’

The tariffs are unlikely to be implemented in 2016/17, but HEE and the Department are considering using the revised currency to familiarise people with the approach. This could mean there were a number of tariffs published for non-medical placements (instead of the single tariff), but they would all have the same price.

Costing

NHS providers have now undertaken two full-year costing exercises for education and training activities covering 2013/14 and 2014/15. Analysis of the education cost index for 2013/14 showed a much flatter distribution curve than for the reference cost index, with more significant numbers of extreme outliers.

The main issues behind the wide variation in submitted costs were the different treatment of overheads and allocating costs between the delivery of service and training.

Ian Newton, head of education and training cost collection at the Department, says providers responded well to the collection again this year, with all 230 returns made within the agreed timescales.

‘Analysis of the data is ongoing and the publication is not expected until November,’ he says. ‘However, early indications are that the 2014/15 data shows significant improvements in quality when compared with the data returned in the initial collection.’

The correct identification and allocation of overheads, particularly outside dedicated training facilities, remains difficult, but getting the right training/service split is perhaps the most challenging issue. The 2014/15 collection guidance recognises that it is ‘an area of high subjectivity’ that ‘significantly impacted on the overall quantum reported in 2013/14’.

Differences in perception can be extreme – from consultants (and trainees) viewing ward rounds as 100% training, to others seeing the rounds as all service delivery and part of the patient handover and briefing process for when junior doctors cover nights and weekends.

Improvements in guidance are believed to have helped for 2014/15, in particular sharing the range of service/training split figures in the whole 2013/14 range and average figures from those organisations giving themselves a high confidence rating in that first submission. Feedback suggests these figures have helped finance practitioners to engage in more meaningful discussions with clinicians where local estimates differ from these indicative figures.

The Department also made efforts to respond quicker to queries and recognises that local providers have also started to get processes in place to identify and capture the relevant data needed for the submission.

A much more rigorous validation process has also contributed to improvements. Salary checks are a good example. In 2013/14, trusts could input figures that implied salaries far in excess of those actually paid to salaried trainees.

But for 2014/15, beyond a certain threshold (review body rates plus a percentage), the template would not allow input. Figures slightly above expected maximums were also highlighted for clarification with costing teams and in most cases these figures were subsequently corrected.

‘The improved turnaround times for sharing validations, and the personal approach taken by the Department in contacting trusts individually to discuss and consider these unusual aspects, has led to better engagement from the trusts,’ says Mr Newton. ‘As a result, the number of validations outstanding at the end of the collection decreased by 50% in 2014/15 compared with 2013/14. Alongside the improved engagement from trusts in reviewing the data and undertaking any resubmissions, providers have also shared more granular information with the Department to explain any outliers/outstanding validations.’

The next big step is to integrate the education and reference cost processes. At the moment, the two remain separate, with reference costs still netting off income for education and training as a proxy for the costs of delivering those activities.

A small pilot exercise involving a handful of trusts was undertaken at the beginning of the year to provide an early test of the running the two processes side by side. A bigger pilot will get under way this month with around 30 trusts having expressed an interest.

There are benefits for providers in getting involved in understanding how an integrated cost collection could have an impact on their own local cost structure.

But it will help the Department to understand the likely consequences on service costs, which have a direct, albeit delayed, impact on the tariffs paid for clinical services. Currently the quantum of collected education and training costs indicates the costs exceed the income.

The Department wants to have confidence that the education and training costs indicate the right overall quantum, as well as highlighting the relative costs of different types of training. It is hoped that the first integrated collection will take place as part of the 2015/16 reference costs collection alongside the current collection (net of income).

The Department’s pilot collection in October will help inform this decision and it is likely to indicate the direction of travel when draft guidance for the 2015/16 collection is published in January.