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So much for the whole system

Is the NHS funding crunch now coming with full force to the commissioning sector?

There has been a major shift in financial rules for 2016-17, put in place alongside £3.8bn real terms funding growth, and this has created a pretty complex picture. The impact in a lot of areas is expected to be to move some of the massive strain off NHS providers, onto commissioners.

We won’t know the full effect – or the answer to the question above – for some weeks yet. It’s very likely that, overall, the provider sector will still be in deeper water than commissioners. Different CCGs will be affected in very different ways – a few may be lifted out of deficit by shifts in allocations, for example.

However, there are plenty of CCG chief officers and finance directors who believe they are in a distinctly worse place than last year.

HSJ has detailed some of the increased pressures for CCGs, revealing national bodies’ award of an unusual tariff increase in December and detailing in March the Treasury’s increased grip of the 1 per cent of funding CCGs are expected to hold back for “non-recurrent” expenditure, which will essentially make it very difficult for commissioners to use this to buy services, as they have in the past. 

As we reported at that time, for many CCGs the rules “will mean further spending constraint and limit their ability to invest in 2016-17. Some are already expecting to be hit by the inability to fine providers for poor performance where they are receiving sustainability funding, and an increase in the tariff rate.”

There are a number of other factors putting extra pressure on CCG budgets this year and NHS Clinical Commissioners has neatly summarised them in a new infographic.

Funding crunch

We may now be seeing the NHS funding crunch coming, in earnest, to CCGs, most of which have been in surplus since they were set up in 2013.

HSJ and this newsletter will closely follow how this unfolds. There is a set of important questions about the impact of shifting financial pressure to CCGs: Will more consideration be given to what services and treatments the NHS should cease funding? How much will this restrict the NHS’s ability to invest in transformation? Will different things be targeted for cuts? How much scope is there to save through reducing unwarranted clinical variation?

This could be very important and I’d love to hear your thoughts (privately) on what shifting (some of) the deficit burden will mean.

For now, I’m going to constrain myself to considering the sharp contrast between national rhetoric promoting a resurgence in “whole system” management of the NHS, and the effort which seems to be going into shifting financial pressure from providers to commissioners.

Planning guidance for 2016-17 states: “For many years now, the NHS has emphasised an organisational separation and autonomy that doesn’t make sense to staff or the patients and communities they serve… System leadership is needed.”

It even offers up the introduction of “single financial control totals across local commissioners and providers” for some areas. This would mean disregarding whether particular providers or commissioners are meeting their individual financial targets, as long as the health economy is on track overall. After all, what does it matter where the money sits if the NHS in an area is, overall, in sustainable balance?

To make this more tangible: My extremely rough calculations suggest that – while there are providers with large deficits across most of England – there about a third of health economies which could have achieved net balance as a “whole system” in 2015-16, if you assume allocation of some of the funds held centrally for bailouts.

The way funding rules are being shaped and managed at the moment, however, appears overwhelmingly contradictory to such a system approach.

The obsession with cutting the huge and fast-growing NHS provider deficit reaches high up in government, in that the Treasury has specified it must be eliminated in 2016-17 (after the application of the £1.8bn “sustainability and transformation fund”) and given itself new levers to force this to happen.

National rule changes aimed at easing pressure on providers have been coming thick and fast. The award of an improved tariff uplift for 2016-17 was entirely sensible. Although it rankles with those wanting to see care built up out of hospital, there is good justification for giving trusts a fighting chance by awarding £1.8bn sustainability funding.

Severe restrictions

But commissioners weren’t expecting these moves to be supplemented with things like severe restrictions on use of the 1.5 per cent of their budget normally reserved for non-recurrent spending, nor a crackdown on the use of cost-saving block contracts.

Against the background of these rule changes, there has been a messy contracting round involving plenty of clashes (which threaten to become another “protracted fight”, in the words of our finance expert Crispin Dowler) between commissioners and providers.

Last week NHS Improvement made a strong intervention on behalf of the latter. There are reports of an upsurge in NHS Improvement intervening in local cases as the “union for providers” seeking to prop up trusts for the sake of it – and, in fairness, also of NHS England pressing in the opposite direction.

NHS Clinical Commissioners has been moved to speak up in defence of the sector.

Some of the recent disruption can be attributed to the usual clashes at annual contract-signing time, but not all of it.

There are some very good reasons to ease the pressure on providers: Treating all of them like they’re in turnaround is unhelpful, and they can’t be expected to manage themselves properly if they’re not receiving workable funding for activity provided.

I’m still left wondering, though, whether it’s right to spend so much energy and conflict on shifting the financial problem. We could be left wondering, in a year’s time, what we gained – other than, potentially, the positive mood music from a receding provider deficit.

This week in population health

Possibly the biggest risk linked to the vanguard project – from a commissioner point of view – is the prospect of handing responsibility for the population’s health to providers whose modus operandi to date has been to treat those who turn up at their door.

Let’s enjoy the symbolic value, then, of West Wakefield Health & Wellbeing Ltd – a group of GP practices and vanguard in West Yorkshire – which has launched a giant inflatable marshmallow outside its local Asda.

There’s nothing new about the NHS erecting temporary structures in public spaces as part of the desperate battle to get people to look after their health, but that’s no reason not to celebrate new efforts.

You can visit West Wakefield’s website to find out more about the “HealthPod”, which has been offering advice, risk assessments and screenings lately in West Yorkshire and recently drawn some national attention.

Dave West, senior bureau chief

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