Diverting billions of pounds into integrated care could have huge implications for the NHS, not least on CCGs, writes Julie Jordan

Sign post for town hall and health centre


This article was part of the Commissioning Legal Adviser channel, in association with Mills & Reeve. The channel is no longer being updated.

In the 2013 comprehensive spending review the government committed to make available £3.8 billion in 2015-16 to be deployed locally on health and social care through pooled budget arrangements. This funding is known as the better care fund, after initially being announced as the integration transformation fund.

‘It is worth reminding ourselves that the better care fund is not new money’

The combination of two main factors: an ageing population and an increasing number of people with one or more long term conditions, has been the driving force behind the implementation of the the fund, which provides a compelling financial incentive to councils and local NHS organisations to make joint plans to deliver integrated care “as the norm” by 2018. 

The first step in 2014-15 will be for £200m to be transferred from health to social care on the condition that there are joint agreed and signed off two year plans for the fund. The full £3.8bn will only be available in 2015-16.

This is all well and good, but what are the implications for the NHS of diverting this amount of money to integrated care? It is worth reminding ourselves that the better care fund is not new money; it merely brings together NHS and local authority resources that are already committed to existing core activity.

Three main areas of difficulty are likely to emerge.

1. Pressure on acute hospitals

The financial reality behind the better care fund is that the government must reduce demand for acute health services or many NHS trusts and foundation trusts will go under. 

The better care fund could be our last hope of balancing the NHS books, as it is generally acknowledged that there is simply no more scope for pay restraint and tariff reductions.

The money is designated to be used for joint NHS-local authority commissioning of integrated health and social care services. Some of this money, reportedly £2bn, will come out of CCGs’ budgets for commissioning acute services.

This effective cut in the acute care budget is bound to affect acute providers as clinical commissioning groups must pass it on in this year’s and next year’s commissioning rounds. During the next two years the cumulative effect of the fund on top of the usual 4 per cent efficiency target for providers could mean as much as 6 per cent coming out of the acute services budget.

‘We should expect to see a raft of public consultations on proposed service changes in the months leading up to April 2015’

Will the integrated health and social care services commissioned using the fund reduce the demand for acute services enough and in time to save the acutes from financial meltdown?

No wonder we see increasingly pessimistic predictions for the next financial year about local health and care economies from a significant majority of not only NHS trust directors and CCG finance leads, but also directors of adult social services.

2. Consultation duties

The mechanics of extracting such a large amount from acute services contracts must demand a degree of service reconfiguration, so we should expect to see a raft of public consultations on proposed service changes in the months leading up to April 2015.

Won’t that be jolly when it coincides with the final months of the current parliament, as we head for a general election on 7 May 2015?

3. Ringfencing the fund within local authorities

As well as fighting their acute providers over reductions in planned spending in 2015-16, unfortunate CCGs may find themselves fighting on another front with their local authorities, which may see the better care fund money as a means of cushioning the savage cuts that have been and must continue to be made in social care spending.   

Some CCGs have already expressed concerns that the pooling of budgets will in effect result in the NHS subsidising non-health social care services:. Not exactly the health and social care “happy families” the government intended.

So what are the next steps? The Department of Health and the Department of Communities and Local Government have called on every area to start planning now on how they are going to radically transform services. Draft plans have been agreed and submitted by Health and Wellbeing Boards (this forms an integral part of the constituent CCGs’ strategic and operational plans) in accordance with “full guidance” set out in annex 1 to NHS England’s Everyone Counts planning guidance.

The £200m made available in 2014-15 should be used to prepare for the implementation of pooled budgets in April 2015 and to progress the national conditions and performance measures within each locally agreed plan.

What statutory framework will underpin the fund?

In 2015 the better care fund will be allocated to local areas to be put into pooled budgets as described in section 75 of the NHS Act 2006. Accessing the fund will be conditional on the CCG and the local authority having joint agreed plans for how the money will be spent and those plans must satisfy certain requirements.

The DH will route the money through NHS England, which will be instructed via the NHS’s mandate in 2015-16 to ringfence the money to ensure it is used in pooled budgets.

But before this can happen we will need new legislation:

  • to ringfence NHS contributions to the fund at national and local levels;
  • to give NHS England powers to assure local plans and performance; and
  • to ensure that payments can be made from the pooled budgets to local authorities that are not party to it (via changes to section 31 of the Local Government Act 2003): these changes will ensure a) that the disabilities facilities grant can be included in the better care fund but can also continue to be transferred to local housing authorities which have the statutory duty to provide grants to qualifying disabled people for adaptations to their homes; and b) that DH adult social care capital grants will reach local areas as part of the better care fund, albeit that new terms and conditions will be attached to these grants so that they are used in pooled budgets for the purposes of the fund.

How will the fund be allocated locally?

Councils will receive their allocations as usual but, to encourage more effective planning, the NHS allocations will be for two years covering 2014-15 and 2015-16.

In 2014-15 the existing section 256, £900m transfer from health to local authorities for social care to benefit health will be combined with £200m of the better care fund (both these sums are to be transferred directly from NHS England to local authorities) and will continue to be distributed according to the social care relative needs formula. 

However, in 2015-16 there will be some changes to the distribution formula based on an agreed financial framework:

  • the current social care transfer of £1.1bn and the £134m of adult social care capital funding included within the better care fund will be allocated as in 2014-15;
  • the disabled facilities grant will be allocated on the same basis as in 2014-15; and
  • the remainder of the better care fund will be allocated on the basis of the CCG allocations formula and it will be for local areas to agree a joint plan of how to spend their allocations on integrated health and social care services.

In each health and wellbeing board area the local authority and the CCGs will be notified of their share of the pooled fund for 2014-15 and 2015-16 on the basis of the aggregate allocation mechanisms and this will include notification of the amount included for the payment for performance element. Initially in NHS England’s planning guidance it was very clear that payment of that element of the pooled fund was going to be contingent in part on planning and performance in 2014-15 and in part on achieving specified goals in 2015-16.

‘What would be the point in withdrawing funds from local areas that fail to hit their performance targets?’

But the DH has stepped in and the policy of payment of part of the fund being contingent on performance has now been changed, for 2015-16 at least, such that failing areas will now be supported to improve rather than penalised financially. Whether they succeed or fail all areas will receive their full share of the fund.

Sense has prevailed – what would be the point in withdrawing funds from local areas that fail to hit their performance targets when the people who will most feel the brunt of that are the very patients and service users who need an integrated care system?

The support offered to failing areas will include help to devise a remedial plan and if that fails to improve performance or the plan cannot be agreed by the CCGs and local authorities, more intensive intervention may be instigated from local authority peer support and NHS England. The allocation letters will only specify the minimum funds to be included in the pooled budgets and CCGs and local authorities will be free to increase their pooled budget for integrated service in line with their joint health and wellbeing strategy.

CCGs and local authorities are reminded that the better care fund does not in any way constrain their wider section 75 flexibilities to pool funds, share information and staff and that these powers can also be used in furtherance of their integration agenda alongside the better care fund pooled budget.

It has emerged recently that several local authorities are planning to pool their entire adult social care budget with the NHS to boost the integration of health and social care in their areas.

Julie Jordan is an associate at Mills and Reeve