Bonus pot for trusts that hit financial targets confirmed

A letter sent to trusts by the regulator, seen by HSJ, says the bonus payments will come partly from sustainability and transformation funding allocated to providers that are unable to meet their financial targets. The rest will come from unallocated STF.

If official mid-year forecasts for the provider sector are correct, the payments would total more than £300m.

HSJ revealed proposals for the incentive pot in October, which had to be approved by the Treasury. Concerns were raised that the policy could “exacerbate” problems for struggling trusts, as they will have to rely on interest-bearing loans from the Department of Health instead.

Trusts that meet their control totals each quarter are already eligible for payments from the STF, which is worth £1.8bn in total, so the bonus payments are an extra incentive on top of the original allocations.

The letter, from NHS Improvement finance director Elizabeth O’Mahoney, said: “The policy aim is to fully utilise the STF in year, to make the full fund available to providers to offset deficits and not to hold it as an unspent contingency…

“The improvement will be rewarded on a pound for pound basis. This means that for every ‘agreed’ £1 of improvement above the control total the provider will be awarded £1 of STF revenue. This would result in a provider reporting an equivalent bottom line improvement of £2 in 2016-17.

“In addition, any residual finance STF at the year end will be paid as a year-end revenue bonus to those providers that deliver or exceed their 2016-17 control total.

“The bonus will be paid to all providers that deliver their control total but be weighted to reward providers that exceed their control total and commit to the improvement earlier in the financial year.”

The payments will be paid on the basis of actual full year achievement of an agreed control total position, rather than an interim achievement, the letter added.

The pot will be made up of “unearned” STF, which has been forecast to total £142m by year end, as well as unallocated funds that are forecast to be £185m.

However, the pot could grow significantly if more trusts fall behind their financial plans during the second half of 2016-17.