Contingent liabilities in primary care trust accounts rocket to £661m
Clinical commissioning groups may have inherited unfunded liabilities for hundreds of millions of pounds worth of continuing healthcare claims made before they came into being, Department of Health records show.
The net value of the “contingent liabilities” in primary care trusts’ accounts rocketed to £660.5m in 2012-13, up from just £55.6m in 2011-12. According to the DH’s annual accounts, in which the figures are revealed, the PCTs’ contingent liabilities are “mainly in respect of continuing care liabilities”.
The news is likely to prove controversial with clinical commissioners, who warned last year that PCTs should not be allowed to record significant contingent liabilities in their final year before abolition.
PCTs last year faced a huge surge in retrospective requests for the funding, after the DH set final deadlines for anyone wishing to claim back the costs of care received between 2004-05 and 2011-12.
Continuing healthcare covers the full costs of a person’s ongoing out-of-hospital care - for example, community nursing or care home services - provided their primary need for that care is deemed to be a “health need”.
The volume of claims submitted left PCTs struggling to assess their liabilities before they were abolished. Where a commissioner was able to make robust estimates of the future cost of settling its claims, it could make a “provision” in its accounts - in other words, set aside money to be inherited by its CCG successors.
But where PCTs could not do this, their estimates had to be recorded as contingent liabilities - in these cases, no funding is set aside to cover the potential future costs.
In February 2013, NHS Clinical Commissioners warned that this meant CCGs risked being “saddled with inherited debt”. The representative group called on PCTs to be directed to “do all they can” to make provisions for the care claims, and not to leave CCGs “hamstrung” by contingent liabilities.
The DH accounts show that PCTs did increase their provisions for continuing healthcare by £629.7m last year, to £763.6m. However, on top of this their net contingent liabilities also increased by £604.9m.
Shane Gordon, clinical chief officer of North East Essex CCG, told HSJ: “A challenge of that order of magnitude is going to threaten the first year balance sheets of a significant number of CCGs, many of which are already facing significant financial challenges [such as] cost inflation and demand growth.”
By definition, contingent liabilities will not necessarily translate into actual costs. However, any unfunded costs shouldered by CCGs would potentially be controversial, as the government has repeatedly insisted the new commissioners will not be responsible for resolving their predecessors’ legacy debts.
A spokeswoman for NHS England said there were “no indications at this stage of a systematic shortfall” in the provisions PCTs had made for care claims, but the organisation would be “continuously monitoring this through the year”.
Some commissioners have issued warnings about the impact contingent liabilities could have on their finances. Mid Essex CCG inherited a £3.1m provision for care claims, and contingent liability for a further £6m. Its latest finance report warns it has inherited a “significant financial risk”, and a “substantial addition to the provision for the cost of claims could be required in 2013-14”.
James Roach, the CCG’s accountable officer, said: “The inherited contingent liability represents a significant addition to the financial constraints faced by Mid Essex CCG. Any further increase would exacerbate an already challenging situation. However, the CCG is doing all it can to mitigate the risk of this happening.”
However, others are more relaxed. One chief finance officer whose CCG inherited a significant contingent liability told HSJ that, in his case, the CCG’s inherited provision had been based on a “cautious” approach. He suggested the chances of the full costs of both the provision and the contingent liability “crystallising” were “not that great”.
A Department of Health spokeswoman said it was continuing to look at the financial implications of the increase in contingent liabilities for continuing care, and at “what might be required now that CCGs have taken over this work”.