PRIMARY CARE TRUSTS As PCTs come into operation this week, HAs, acute and community trusts will be waving goodbye - to a proportion of their funds. Alison Moore examines the implications

This week marks yet another fundamental shift in the NHS, with the arrival of primary care trusts not only giving primary care professionals the whip hand in commissioning secondary care but allowing them to run community services as well.

In an NHS wearied by brave new worlds, it is easy to dismiss PCTs as the latest in a long line of reorganisations which have had little effect on fundamentals - such as where resources are allocated and services delivered.

But could PCTs be the start of a true NHS revolution? Certainly, the 17 starting life on 1 April have a shared belief in the importance of locally delivered services, and put great emphasis on primary and community services. While few say it explicitly, their long-term policy may be to divert money into these services by cutting secondary care costs.

There are a number of obvious ways this disinvestment could happen. Many PCTs are interested in keeping people - especially elderly people - out of hospital through better community-based services and social care. A number are planning intermediate care centres, which may take some of the strain, in line with recent government policy.

In the short term, some PCTs argue, moving services into the community will help acute trusts balance their books. 'We have got plans next year to help the acute trusts out - moving services into primary care and helping them with their waiting list targets, ' says Aidan Thomas, chief executive of Epping Forest primary care trust.

'In the long run, it will certainly lead to disinvestment in some elements of secondary care. But we need to plan these with the acute trusts.'

South Peterborough PCT is looking at service provision specialty by specialty. 'We are saying probably the only way you can achieve your financial balance is if we do things and reduce your expenditure, ' says PCT chief executive Dr Lise Llewellyn. 'It is not about removing money - we are aware they are£1m overspent.'

But the longer-term effects could lead to reduced hospital budgets. PCTs say they are keen to avoid destabilising acute trusts - although some are already in the process of reconfiguration - and, in marked contrast to the internal market, talk is of co-operation and partnership in 'managing' difficulties.

But is disinvestment likely to happen? Reducing secondarycare budgets in times of rising demand has always been difficult, and community-based services devised as replacements for hospital services have a habit of turning into additions.

NHS Confederation policy manager Jane Austin questions whether disinvestment is easy to achieve or likely to achieve the expected savings, and says: 'Theoretically, it could have happened under GP fundholding and so on. It would be interesting to see whether they have examples of where it has worked.'

King's Fund primary care director Dr Steve Gillam agrees: 'Acute trusts are going to be difficult to extract money from.'

Fixed costs tend to be high and the option of closing hospitals or services is often politically difficult, he adds. Add to this the growing list of national priorities - effectively a first call on PCTs' money - and it is hard to see much significant disinvestment in the first two or three years.

It is more likely that any growth money PCTs have will be directed into community and primary services, rather than secondary care ones.

'New' unallocated money is rare in the NHS, but many first-wave PCTs are likely to benefit from the move towards equitable funding between different areas. In some cases, PCTs would be several million pounds a year better off if this switch was made in one go.

But, as the Department of Health is committed to a no compulsory cuts policy, this redistribution is likely to be through differential growth.

'What the PCTs are looking to do is take the new money and not put it into the secondary sector but into the primary and community services, ' says Mark Millar, chair elect of the Healthcare Financial Management Association. But the opportunities will be limited, he feels, questioning whether PCT stakeholders will start to feel frustrated without substantial investment in the first couple of years.

There are other areas where PCTs may face financial pressures. One issue is the need for services to be closer to the community they serve. Several first-wave PCTs are in areas some distance from a district general hospital, and where there is a feeling that locally based services have steadily been eroded in favour of centralised provision.

Although PCTs have shied away from promising the wholescale reintroduction of local services, several plan to re-equip local hospitals and make services more accessible, either by local provision or possibly by improved transport links.

But providing outreach services - whether done by an acute trust or by moving the work into the primary or community sector - may cost more. Economies of scale will be lost, and there is a danger of duplicating existing services. Ms Austin suggests there is little evidence of clear-cut principles underlying proposals to move services in this way.

Some of the most immediate effects of PCTs will be felt by community trusts, which will see staff and functions transferred and revenues cut - although the extent to which they are affected will vary greatly. Many PCTs will be taking on some services but leaving others to be provided over a wider area - recent NHS Executive guidance seeks to ensure that separate accounts are kept for services PCTs deliver and those they commission, which has done much to ca lm community trust fears that PCTs would want to provide everything themselves, regardless of the financial impact.

In Daventry and South Northants PCG, for example, around 200 staff will pass to the PCT but specialised services, such as menta l hea lth and learning disability, will remain with the community trust, which covers a much wider area.

Overall, the community trust is only likely to lose about 10 per cent of its budget.

But other trusts may find their numbers are up - even the arrival of a PCT is only one factor contributing to financial instability or unviability. Essex and Herts Community trust is likely to dissolve in April 2001, with many services transferring to Epping Forest PCT and others being managed by acute and mental health trusts. North West Anglia Community trust is likely to disappear a year later, although it is trying to carve a niche for itself in the interim (see box).

Health authorities will also feel the effect of PCTs, although for most it will be fairly small - at least until the next wave. But longterm they will become smaller, more strategy-orientated organisations. Some staff will find their jobs disappear - although they may transfer to PCTs - and there is likely to be strong pressure to keep management costs low.

The great challenge for PCTs will be working within a fixed budget - a problem many professionals at the top may not have experienced before. Even with fundholding, overspends were habitually soaked up by the HA, and PCGs, as sub-committees of HAs, did not have to balance the books in the same way.

Former HFMA chair Jaki Meekings welcomes the move to put PCTs on the same footing as other NHS bodies and says it overcomes some of the lack of accountability that PCGs had.

'PCTs are not allowed to exceed their cash-limited budgets: this discipline was not there under PCGs. Someone else picked up the tab and had to manage the risks - the HA chief executive. Now it will be the trust's chief executive.'

Unforeseen events, such as the sudden rise in generic drug prices last year, which threw many PCG and HA budgets off course, could impose real discipline on PCTs and force them to make tough decisions.

Chief executives seem sanguine about managing their own budgets and dealing with a cashlimited local health economy where other partners may face difficulties.

Julia Squire, chief executive at Daventry, suggests these aspects of financial management may be easier where there is a history of total purchasing projects with strong professional involvement in decisions.

It is going to take time - certainly beyond the next election - to see whether PCTs have affected some of the NHS fundamentals.

Mark Millar says the first wave should be seen as pilots, but there will be few opportunities to learn from mistakes before the second wave arrives in October - and potentially many more PCGs convert in April 2001. The first PCTs are viewed as low-risk, with strong leaders and without too many obvious hurdles to trip them up. But somewhere along the line ministers will have to approve PCTs with more to lose.

Seeing a lot less of HAs From 1 April, Hillingdon health authority will have just a couple of dozen employees, sharing a chief executive and director of finance with neighbouring Brent and Harrow HA, and buying in services from other agencies.

Hillingdon PCT, which covers the entire geographical area of the HA, will take on many of the functions and staff, and the HA will actually buy back some services from the PCT.

'It is going to be much leaner and sharper focused, ' says acting chief executive Kirstie Galbraith. Although the HA will continue with its own board and chair, its meetings will take on a broader perspective, concentrating on wider issues affecting health rather than day-to-day management. Staffing will be cut by three-quarters and the focus will be on strategy, performance management and statutory responsibilities.

But, Miss Galbraith argues, nothing is set in stone. 'We are in a very fluid position. It is evolutionary and organic.'

Keep on running

The great dilemma PCTs will face is containing management costs while employing sufficient effective and committed people to bring about potentially dramatic improvements in service.

In the short term, the issue for many PCTs has been getting staff on board and putting procedures and agreements in place to allow them to launch on 1 April. Staff have been seconded or recruited from other NHS organisations and many key services - including finance - are being bought in, although PCTs must have their own finance director. These arrangements may change over time as PCTs have more opportunity to consider the right management structure and what is best provided inhouse.

But once PCTs are established, they are certainly going to have to look closely at their management costs and overcome the suspicion in some quarters that they represent just another layer of managers in the health service.

Certainly, there will be some costs which are fixed: recompense for the professionals on the executive body and the costs of running the board.

Daventry and South Northants PCG chief executive Julia Squire expects these costs to double when the PCT is established. But she points out: 'If you can make better investment decisions then that money is repaid.' As new organisations, PCTs also have the opportunity to drive down management costs by developing flatter management structures, both in the services they manage and in their central staffing.

As the number of PCTs grows there may be opportunities for sharing staff between neighbours: Mansfield PCT and Newark and Sherwood PCT are already sharing a finance director.

Many of these roles will have been displaced from health authorities or community trusts, but there is likely to be pressure for the overall management cost envelope to be increased. Some regional offices are insisting that the envelope for PCTs and HAs as a whole should not be breached. But it will be hard for PCTs to achieve the economies of scale available to larger organisations: of the 17 announced so far, only one covers a whole HA area.

Going, going. . .

Most community trusts would feel threatened (or should that be challenged? ) by one PCT in their patch. North West Anglia Community trust is facing four - three setting up in April and another expected in October. Although the trust will continue to provide mental health and learning disability services, it will lose 40 per cent of its income and will be left with one community hospital to run, serving a fifth PCG area. But this year won't be the end of the changes - there will be consultation on successor trusts to run the remaining clinical services by 2002.

In the short term, North West Anglia Community trust will have to survive as a small trust - only£30m a year - with relatively high overheads. It has also formed a consortium - involving another trust, the HA and PCTs - to provide information, estates, human resources and financial support services. The aim is to ensure continuity of service provision and access to a range of specialist skills which individual PCTs would be unable to provide on their own. Losing£20m of income a year would obviously affect any trust's stability but the community trust has been guaranteed help from Cambridgeshire and Norfolk HAs and local PCTs. Andrew Williams, director of strategic development, says: 'There will be support for transitional costs associated with the trust's small size - such as high overheads.'

Mancunian Community Health trust is adopting a different approach.

Faced with one PCT starting in April and the prospect of the rest of the city join ing in Oc tober, it argues that it shou ld be a l lowed to retain a role providing specialist community-based services. Eventually it would like to provide such services beyond its current boundaries. Chief executive Elizabeth Law says there are services - including many children's services - which are better provided over a larger population than a single PCT.

Retaining them would reduce the trust's income from£45m a year to£30m, but she believes this could be viable. In the longer term, she would like the trust to provide these services to a population of around one million, rather than the current 500,000.

Another country

England may be the testing ground for PCTs but it is less clear what structures are likely to emerge elsewhere in the UK.

In Northern Ireland, the political turmoil of the past few years has led to the preservation of much of the old system. While England, Scotland and Wales abolished fundholding last year, it has been given a stay of execution until 2001 in Northern Ireland - and there is still uncertainty about what will replace it. Last March health minister John McFall proposed bodies with similar powers to PCGs but without the extra powers given to PCTs to run community services.

But even this plan was put on hold with the establishment of the Northern Ireland Assembly and since the Assembly's suspension all policy-making has stalled, leaving managers and staff frustrated.

In Wales, local health groups are functioning as sub-committees of HAs, with powers equivalent to level-two PCGs. They are not expected to evolve into PCTs in the near future, raising fears that English PCTs may offer better terms and conditions and attract key staff to work across the border.

In Scotland, PCTs have existed since April 1999 but have no power as purchasing organisations. Typically, they are made up of community hospitals and mental health services, and networks of GPs through local healthcare co-operatives. There are no current plans to move towards the English system.