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Most powerful hospital trusts ask for more funding

England’s 10 most prestigious teaching and research hospital trusts have asked the Department of Health and the Treasury for a 10 per cent top-up to their tariff payments, HSJ can reveal.

The Shelford Group, which represents the most powerful hospital trusts in the NHS, asked the Treasury and the DH for an extra £700m this financial year, a Freedom of Information Act request reveals.

The 10 trusts have a combined income of £7.3bn a year but say this does not properly cover their costs because tariffs are set at the average price for a procedure and their caseload is more complex.

The news comes after two of the 10 – Imperial College Healthcare Trust and Cambridge University Hospitals Foundation Trust - ended 2011-12 in deficit.

The Shelford Group trusts are: University College London Hospitals Foundation Trust, University Hospitals Birmingham Foundation Trust, Cambridge University Hospitals Foundation Trust, Central Manchester University Hospitals Foundation Trust, Guy’s and St Thomas’ Foundation Trust, Imperial College Healthcare Trust, Oxford University Hospitals Trust, Sheffield Teaching Hospitals Foundation Trust, Newcastle upon Tyne Hospitals Foundation Trust and King’s College Hospital Foundation Trust.

At a meeting with the Treasury in November the Shelford Group asked for the 10 per cent increase as a “short term” solution and a “full review of [the] funding system to bring it into line with international best practice” in the longer term.

The DH confirmed Shelford representatives had met health secretary Andrew Lansley on 30 May this year and that a working group looking into the group’s demands had been set up.

University Hospitals Birmingham Foundation Trust chief executive and chair of the Shelford Group Dame Julie Moore said: “Trusts need to deliver a surplus to enable investment in capital infrastructure, equipment and new services for the benefit of our local patients as well as those receiving more specialist care. 

“At the moment tariff doesn’t accurately reflect the costs of delivering the highly specialist care that members of the Shelford Group deliver up and down the country. Other large specialist hospitals will be in similar positions.

“The potential knock-on effects [of underfunding] on local populations, medical research activity and the wider stability of regional health economies need to be understood.”

The presentation made to the Treasury said the proportion of the world’s clinical trials undertaken in the UK had fallen from six to 1.4 per cent and that “without a reversal in funding for the underlying research infrastructure this alarming trend will continue”.

Former Shelford chair and Cambridge University Hospitals Foundation Trust chief executive Gareth Goodier used an HSJ interview earlier this year to call for an end to the system that sees trusts in London receive top-up funding from NHS London, while those outside the capital go without.

NHS London agreed “Project Diamond” funds of £22.8m for the four London Shelford trusts in 2011-12.

The briefing document presented to Treasury officials said the 10 trusts would have ended 2010-11 with a combined deficit of £4m if it wasn’t for Project Diamond funding.

Readers' comments (23)

  • Large Acute Trusts have long been past masters at hoovering up healthcare funding, while community, mental health, ambulance and voluntary sector organisations struggle as much or more.

    The premise of the argument is entirely flawed - with more procedure and diagnosis codes than ever, casemix is better reflected in funding than ever.

    How the Government, and the DH, respond to this move could be the defining reality of the new reforms. If the public sector commissioner caves in, expect QIPP and the new landscape to be dead in the water.

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  • 100% agree Anon 12:24.

    Would be interesting to see what the full argument is and not just "our case mix is more complex". Having some sight of one of the Trusts spending habits I think they should revisit their expenditure prior to asking for more income.

    I hope the DH give the two finger salute to this; would be a hell of a bad precedent.

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  • Richard Russell

    With the introduction of HRG4 and then further refinements each year I also agree that the way providers are paid reflects the levels of complexity.

    Rather than asking for more money I would have thought a more sensible approach would be to demonstrate how their activity can be identified as more complex than other providers activity, then change the way activity is grouped, then costed and ultimately priced.

    If they are right then let's get the current system right.

    Ultimately £700m more to them means £700m less to others as we have a fixed amount of cash available so who do they propose gets less...

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  • To me, the most interesting quote from this document is the view from the Sheffield Group that:

    "[PbR tariff structures are] combined with funding policies or rules which mitigate or modify these payments according to service delivery plans or strategies e.g. caps on volume, outlier payments, availability payments ... these policies and rules do not adequately take complexity of care into account"

    The group can't come right out and say it, but I think the problem is less about the structure PbR and the level of its tariffs and more about the circumventation of these by commissioners. For example, many commissioners impose a contractual cap on the volume of Outpatient Follow Up appointments they will pay for. For activity over this level they pay either nothing or a marginal rate which is significantly less than the "mandatory" PbR tariff for this activity.

    The Sheffield Group have the advantage of greater political clout to raise this, but the issue - commissioners over-riding PbR and paying providers below what it costs them to provide a service - affects more than just these ten.

    I can only hope that the greater involvement of clinicians, on both sides of the negotiating table, will lead to policies and rules in future which might save the whole health economy money rather than saving for one organisation within it at the cost of another.

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  • Tom Dewar | 3-Aug-2012 12:40 pm
    "For example, many commissioners impose a contractual cap on the volume of Outpatient Follow Up appointments they will pay for"

    Where these are used it is often set at a benchmark level on the basis that there is no reason that the commissioner should pay for unnecessary followups.

    This seems to me sensible at the detailed level but also raises a broader question. Are these Trusts achieving all the possible efficiency savings available.
    Have they implemented "Enhanced Recovery" across all relevent specialties. Do they operate "estimated date of discharge" and have strong processes to minimise delayed discharge across all specialties? Do they have real time recording of Admission, Discharge and Transfer which allows realtime optimisation of bed use?

    I would suggest that these Trusts, who flag themseves as leaders, show that they are leading in the efficient and effective delivery of the basic Acute services before they start asking for a bung to subsidise their "more complex" casemix

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  • Anon 1:13 The PbR tariff for a Follow Up appointment is deliberately set at slightly less than the average cost. Therefore providers already have a build in financial incentive in the tariff to reduce "unnecessary" Follow Ups. One that costs providers and commissioners nothing to administer. Why do you need another layer on top which costs (in admin time) on top to administer?

    If the benchmarks used for setting New to Follow Up rates where clinically determined and sensitive to local circumstances (e.g. local primary care services) then you might have a point. But they're not. They also ignore the fact that success if it comes in the form of averting unnecessary referrals to hospital result in fewer New appointments but a HIGHER proportion of Follow Ups. It is not true that lower Follow Up rates always equal better service (in financial or clinical terms).

    My truck is not with PbR structures or tariff levels, which already build in financial incentives to improve year on year efficiency. Nor do I have a problem with sensibly set targets aimed at improving quality (with financial penalties for failure). But I do have a problem with commissioners expecting to pay less than PbR tariff for a service.

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  • Hi anon 12.34,
    The document under 'related files' sets out the case the Shelford group made to Treausry

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  • "The Shelford Group"......the utter pompousity of this ridiculous moniker says it all - elistist claptrap indicating we're most certainly not all in this together. Having had close experience of contracting with UCLH for far longer than I care to remember it has taken commissioners for a ride for years with its arrogance, obfuscation and total unpreparedness to partake in any kind of partnershp working - a contract signed pre-xmas has been cause for celebration. These Trusts suck in activity wherever they can and sod the consequences to the NHS - evidence the ridiculous increase in C2C referrals which is hampering commssioner attempts to reduce referral rates. If the DH caves in on this the message it sends regarding QIPP, Out-of-Hospital strategies, changing the settings of care etc etc is quite simply "don't bother!"

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  • Hi anon 3:01pm,
    Point of purely historical interest, it's named after the village where former chair Gareth Goodier (former Cambridge CE) used to convene meetings

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  • Thanks Ben - interesting snippet - propose an FOI for expenses claims from these cosy little get-togethers in rural Cambridgeshire

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  • It would also be interesting to know how much commissioners have underpaid these trusts versus what would have been due under a straight implementation of PbR (i.e. total value of contract deductions for the caps exceeded etc.)

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  • Hi anon 3:01pm,
    Point of purely historical interest, it's named after the village where former chair Gareth Goodier (former Cambridge CE) used to convene meetings

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  • I admire the chutzpah of this group, but think that an objective review of NHS funding would show that this group: a) are already overfunded b) are very inefficient at delivering basic services, and c) have been very succesful at arguing for handouts in a data vacuum, rather than managing their core business effectively.

    Any review of Shelford funding should consider:
    - SIFT. This is complex and overpays for the true cost of teaching, particularly to dental schools
    - MFF. London receives a 20+% top up when the additional cost of salaries is nowhere near this
    - Off tariff specialist services. Most teaching hospitals have a lot of these, and under SLR they are generally very profitable
    - Charitable contributions. Most of the trusts mentioned get significant bungs from charities.
    - Research funding. Any NHS FD worth his salt can use this creatively, but does anyone measure the outcome? The royalties from licensed IPR are c10-20% of the research funding.

    Many DGHs have struggled to get efficiences and are still in deficit whilst these fat cats have done little to improve efficiency and are crying for even more

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  • Someone should also review how much truly complex work they actually do. My guess is that >90% in most specialties could be performed in a DGH.

    I agree with comments that these are arrogant pompous organisations, whose directors lack the guts the challenge the inefficient and outdated practices of self promoting and high profile consultants, who make most of their money from private practice anyway, and think they are doing the NHS a favour just by showing up.

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  • The NHS senior management and politicians continue to run a National Hospital Service and the Shelford Group epitomise the problem. More money via PbR for more activity at average national price based on reference costs: what more can one ask for as a hospital when the rest of the healthcare system is losing funding and the hospital gets paid for every admission and contact and the rest have less money and no co-operation for FTs trying to make a margin.

    What has the real NHS come to ???? Give acutes a better deal and carry on "Liberating " the NHS !! Bring it on - the end of the NHS as we know it.

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  • This group of Trusts is the epitome of those organisations who have attempted to grow their way out of the economic downturn creating chaos around them with their behaviours. Now that tactic is faltering they want a nice juicy bail out, well wouldn't we all, I'll just give George Osborne a ring and see what's down the back of the sofa

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  • What other Trusts or groups of services gets special pleading opportunities like this - it stinks!

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  • Tom Dewar

    This is Anonymous | 3-Aug-2012 1:13 pm. I think you miss the point here about implementing all available efficiencies before asking for more money. The point is not whether the tarriff includes one level of First to Follow ups and the commissioners want more. The question is "Have all of these Trusts actually met the Tarriff level of FtFs across all relevent specialties?". If, as I strongly suspect, the answer is no then they have work to do internally before asking for a sub.

    A further point is that, if this additional cost stems from their research work, the research bodies should be funding it not the NHS.

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  • I've worked for one of these Trusts within the last two years, and there were lots of inefficiencies.

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  • Hi Anon 6-AUG-2012 11:01 AM
    For the avoidance of doubt, I'm not arguing that these trusts have a valid claim (or don't): there is insufficient info provided for us to assess that.

    I get your point about efficiencies. You think that with reasonable efforts providers could save more. I'm not agreeing or disagreeing.

    My point is different. It is that given that PbR already requires trusts to improve their efficiency by >4% (from memory) just to break even, it is unreasonable for commissioners to expect tariffs to be discounted even further. I think that many commissioners achieve a discount on PbR tariff in effect by the way they set contractual targets (unachievable) and local prices (below cost). And I suspect this contributes to the financial pressure faced by these (and other) providers.

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