- Changes to be implemented from September with activity levels judged solely at system level
- Concerns that only a minority will exceed performance targets, and therefore be penalised
- Ongoing lack of statutory backing for system carries “significant risk”
New financial penalties and incentives for elective activity will be decided solely by system-level performance, prompting concerns from local leaders.
Providers have been on block contracts for the first half of the year, but under new rules for the second half of 2020-21, there will be a variable element determined by waiting list activity for each system.
The new rules were set out in a letter to local leaders from NHS England and NHS Improvement on Thursday, with new marginal tariff rates for activity above or below the expected levels.
As set out previously in phase three guidance, systems will be expected to reach at least 80 per cent of their 2019-20 activity for overnight electives and outpatient/daycase procedures in September, rising to 90 per cent in October. Many providers have raised concerns that the expectations are unrealistic, partly due to increased infection control measures.
According to the new rules set out in last week’s letter, notional baseline income levels for each system, which are yet to be determined, will be set using the phase three expectations.
To supplement this, if systems fall short of those expected activity levels, their baseline income will be reduced by 25 per cent of the tariff value of the shortfall. In effect, any shortfall will be paid at 75 per cent of the tariff value.
For those that exceed it, they will receive additional funding worth 75 per cent of the tariff value of the extra procedures.
There are similar penalties and incentives for outpatient attendances and follow ups, which are expected to reach 100 per cent of last year’s activity from September onwards.
While there been broad agreement about enhanced system working, some consider the new plans to be complex, statutorily risky and believe few systems will significantly benefit from its incentives.
Chris Hopson, chief executive of NHS Providers, said: “Given different capacity constraints in different trusts, it makes sense for providers in an sustainability and transformation partnership/integrated care system to work together to maximise the number of patients they treat.
“But if NHSE/I start allocating revenue at a system level – for example through system level financial incentives – they need to work on the basis that systems do not have a statutory underpinning, accounting officers or appropriate capability in place, and that this therefore carries significant risk.”
Under the new regime, a single provider could theoretically drive down the performance of an entire system, which could financially penalise its partner organisations even if they meet their targets.
Mr Hopson added: “We’ve spoken to a lot of chief executives since the original phase three letter was issued and they know that it’s NHSE/I’s job to set stretching targets….
“Our reading is that whilst a few might just exceed and a minority meet what’s required, we suspect the majority will get most of the way there but ultimately fall short. It will obviously help if those who struggle are balanced in each system by those who are able to meet the target.”
One finance director in the north of England said: “I suspect if we spent the same money as last year we’d only achieve about 70 per cent of the work. This is due to issues of infection prevention rules and fewer staff due to shielding.
“No one’s really thinking about the incentives as who can do it?”
Another finance chief in the Midlands region said the expectation would “certainly be too ambitious”.
The letter from NHSE/I, from chief operating officer Amanda Pritchard and chief financial officer Julian Kelly, said: “These activity levels were set based on feedback from across the service about what was possible, and from patients’ groups about our patients’ needs and concerns.
“We recognise that each system, trust and individual site will be dealing with their own specific challenges and are grateful for your commitment and determination in tacking these. The resources provided through the nationally determined, simplified financial arrangements for the remainder of the year will be sufficient to fund the performance expectations set out above.”
Baseline funding envelopes are yet to be decided but will be based on 2020-21 tariff prices set out in earlier consultation. Outpatient attendances will be valued at a different, nationally set flat rate.
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20 August 2020