Major allocations shakeup means real terms cuts for some CCGs

The decision came amid a number of important changes to allocations policy, as NHS England set out how it would distribute the real terms growth in its £101bn budget awarded in last month’s comprehensive spending review.

The meeting confirmed that the £7.7bn primary care budget is set for real terms growth in every year of the next half decade, with annual cash terms increases ranging from 4 per cent to 5.4 per cent. Specialised commissioning will receive 7 per cent cash growth next year – in the face of what NHS England chief financial officer called an “unprecedented stream” of effective but costly new treatments to be funded.

The £69.5bn CCG budget will grow more slowly, but will also be increased slightly above expected inflation in every year of the settlement.

NHS England also revealed that £2.1bn would go into its ‘sustainability and transformation fund’ next year. Of that fund, £1.8bn is earmarked to eradicate the provider sector deficit, while a further £340m is available for investment in the new model of care ‘vanguards’ and other transformation programmes. The fund will grow to £3.4bn by 2020-21, with NHS England anticipating that a growing share of the fund will be invested in transformation schemes from 2017-18.

On top of this, the national body effected a series of complex changes to allocations policy which aim to take into account the total amount of funding available to each area, across CCG, primary care, and specialised commissioning streams. The allocations agreed will ensure not only that no CCG is more than 5 per cent below its ‘fair share’ of allocations from next year onwards, but also that the total amount of NHS funding available to each area is no more than 5 per cent below its fair share.

The move to bring all underfunded CCGs to within 5 per cent of target in 2016-17 means some areas will see sharp increases in funding next year, with one severely below target CCG in line for a 10.79 per cent cash terms boost.

However, the CCGs judged to be the most overfunded according to the allocations formulas will see very low levels of cash terms growth in coming years. In what may prove to be one of the most controversial decisions taken today, NHS England has departed from its policy to date of ensuring all CCGs’ budgets are at least protected in real terms.

Instead, CCGs that are more than 10 per cent above their fair shares will now receive flat cash, plus some additional funding to meet “specific policy pressures”. Those policy pressures include a an increase of around £1bn in pensions costs next year, and additional costs of seven day services phased to come into effect in 2020-21.

This flat cash “cap” will be phased in for CCGs that are 5-10 per cent above target.

The effect of these changes is that the minimum cash terms increase for any CCG next year will be just 1.39 per cent, with six commissioning groups receiving allocations within 0.1 percentage points of that figure. By 2019-20, the minimum increase drops to 0.02 per cent.

Mr Baumann told the meeting that the past policy of ensuring real terms protection was “not getting us traction” in terms of bringing the most over-target CCGs down to a reasonable share of the funding. He added that some of these CCGs were “20 to 30 per cent over target and will never frankly get back to any alignment with their needs-based formula unless we accelerate that [pace of change]”.

However, NHS England chief executive Simon Stevens told the meeting that when the £2.1bn of sustainability and transformation funding was also taken into account, it was still to be expected that all CCG areas would see real terms increases in funding.

In another unprecedented move for NHS England, the policies set out today mean CCGs will need to meet nationally set conditions to access their share of real terms growth.

The board paper states that “the real terms element of growth in allocations from 2017-18 onwards for CCGs, as well as their access to the Sustainability and Transformation Fund, will be contingent upon the development and sign off of a robust local health economy strategic plan during 2016-17”.

The paper also indicated a willingness to explore the possibility of letting commissioners and providers agree a combined “control total” financial target. And it recommended that NHS England should “in principle support any proposals from groups of CCGs, particularly in areas working towards devolution, who wish to implement a more accelerated internal pace-of-change policy by mutual agreement”. This would in effect mean a redistribution of funding from overfunded CCGs to their underfunded neighbours.

Allocations for individual CCGs and CCG areas are expected to be published in early January. NHS England proposes to publish firm allocations for the next three years, and indicative allocations for the following two.