Tracking everything that’s new in care models and progress of the Five Year Forward View. By integration reporter David Williams.

The week in new care models

Over the summer my output has been less than weekly. As the wheels in the policy contraption begin turning again this autumn, I will aim to put out one of these every week.

  • Sir John Oldham has written for HSJ about capitated budgets, and how useful they are for commissioning care for long term conditions. Sir John has been working in this area since at least the early days of quality, innovation, productivity and prevention (which was like the Carter agenda of its day but with more wage restraint). Superficially Sir John’s thinking is of a piece with new care models: care for a cohort of people rather than pay by activity; integrate services around primary care; data linkage; etc. But thinking about the detail, it is pretty clear from the MCP framework published a couple of months ago that national leaders prefer a capitated budget for an entire population, rather than trying to carve one out just for people with long term conditions.
  • Tameside council’s chief executive is going to take over Tameside and Glossop CCG, initially on an interim basis. Steven Pleasant’s joint appointment makes sense in the context of bringing together health and social care commissioning, as is the plan across Greater Manchester, and (as Mr Pleasant says) is “symbolic” of the integration under devolution.
  • Nuffield Trust chief Nigel Edwards tweeted this Harvard University analysis of accountable care organisations in the USA. It isn’t unambiguously encouraging. There is a good section on how the gains are privatised but the risks are nationalised (sound familiar?). “Almost every organisation is in a one-sided risk sharing program (ie: they don’t share losses, just the gains)”, it says, meaning the taxpayer pays out when ACOs save money – but doesn’t get money back when they lose money. “Senior policymakers need to continue to push ACOs into a two-sided model, where they can share in savings but also have to pay back losses. Barring that, there is little reason to think that ACOs will bend the cost curve in a meaningful way.”

The magic 5 per cent

Belatedly, I have been picking through some of the vanguard value propositions, which I FOI-ed a couple of months ago.

Vanguards had to produce these early in the year to bid for transformation funding. So they are a few months old now but collectively still give the most comprehensive account of what the new care models programme is trying to achieve.

A couple of observations:

The transformation funding shortfall

First, most people asked for more transformation funding than they actually got. For example:

  • Dudley MCP: asked for £8.8m for 2016-17, got £4.4m.
  • Morecambe Bay PACS: asked for £17.5m, got £4.3m.
  • The Royal Free hospital chain: asked for £20m, got £8m.
  • The cancer acute care collaboration: asked for £20.2m, got £7m.

I deliberately picked sites that did pretty well for investment compared to some of their peers.

The amount available to any one site looks as though it has been capped – North East Hampshire and Farnham PACS got about the same as Morecambe Bay but had only asked for £7.9m, meaning it got a much bigger proportion of what they asked for.

So funding for new care models was constrained at a national level, and the vanguards didn’t get as much as they wanted. What will be the effect of this?

There are a number of possibilities: vanguards have to proceed at a slower pace than they intended; they don’t do everything they said they were going to; vanguard sites have to put in more of their own money; projects have brought in funding from elsewhere to make up the difference. (Note to self: it would be interesting to know how many sites have succeeded in securing extra funding from outside the vanguard programme, for instance private partners – and if so on what terms.)

How much will vanguards save?

The second observation is about the projected return on investment. To my deep and lasting regret, I don’t have all the value propositions, so I can’t be completely scientific about this, but on the whole it looks like when they were drawing up their investment cases, the vanguards were looking to generate savings of 3-5 per cent of turnover through new care models.

Fylde Coast MCP (asked for £9.6m, got £4.3m), for example, was expecting a recurrent annual saving of £16.2m by 2020-21 – across two CCGs with a combined programme allocation this year of over £450m.

Four-ish per cent doesn’t sound like a lot, but if it brings about the promised quality gains in an era of rising demand, this would still be an impressive performance. It’s also worth noting that the gross savings would be a lot more than £16.2m – but the new care model will cost the system about an extra £22m to run, which has to be offset before any net savings can be declared.

Interestingly, Fylde Coast openly acknowledges the limits on the savings that are available. Even if it does cut the level of hospital admissions, the hospital’s fixed costs won’t come down in line with falling demand. And: “In the future case mix within hospital based provision will be higher in acuity and therefore opportunities for cost improvement will diminish. In future years, the cost of quality improvements such as seven day working and specified staffing ratios will also increase costs.”

Such realism is to be applauded.

Rushcliffe/Principia MCP (asked for £10.4m, got £3.5m) was predicting savings of £5.9m recurrently by 2020-21. Its allocation this year was £137m, so the savings predicted were again around 4 per cent.

At first glance the numbers submitted by the hospital chains seem more ambitious: the cancer specialist vanguard is predicting annual recurrent net savings of £61m by 2020-21. The Royal Free’s prediction is even more eye-popping: up to £157m a year – you could fit some entire trusts into that.

But the chains are assuming they will grow – the MCPs aren’t. The Royal Free’s modelling is based on a hypothetical group of six trusts. Very roughly, that could be a turnover of about £3bn, so the savings come in at around 5 per cent. Likewise the cancer vanguard expects to cover expenditure worth £1.2bn by 2020-21, which would make the savings worth about 5 per cent of turnover.