Feature / Give and take

Getting allocations right is the fundamental building block in equal access to services and addressing inequalities. Steve Brown looks at some of the issues being examined as part of NHS England’s fundamental review

In December, clinical commissioning groups will be told the size of their budgets for 2014/15 and 2015/16.

These budgets will be important for two reasons. They will enable CCGs to put firm numbers to fledgling plans for the two years ahead and to start real contract negotiations. But, following a ‘fundamental review of allocations policy’ by NHS England over the past 12 months, CCGs will also get an insight into how their budgets could increase – or decrease – over a much longer term.

First proposals for a CCG allocation formula were given to NHS England in 2012 by the Advisory Committee on Resource Allocation (ACRA). The basis of the formula – involving a new person-based resource allocation (PBRA) approach – had been used previously as part of a toolkit helping primary care trusts to set budgets for individual GP practices.

But NHS England had major concerns about using the further revised formula for the new CCGs. These concerns centred on the fact that, if implemented alone, the formula would have targeted more resources over time towards areas with better outcomes. Money would move from the ‘deprived’ north to the ‘more affluent’ south.

The conclusion was that the formula accurately reflected future need, but only based on how services had been used in different areas in the past. The fear was that it might be completely missing current levels of unmet need. Rather than help NHS England achieve its aim of reducing health inequalities, it could simply reinforce whatever inequities were already in the system. Instead, for their first year, all CCGs were given a 2.3% increase (0.3% real terms) on baseline allocations that had been set as part of a difficult technical exercise during 2012.

This baseline process needed not only to divide predecessor PCT allocations between constituent CCGs, but also factor in new changes in responsibility for different services.

While PCT allocations covered wide-ranging responsibilities, primary care and specialised care were now to be commissioned centrally by NHS England while public health was transferring to local government. The budgets needed to be unpicked and allocated to the right place.


NHS England review

So, alongside CCG allocations for 2013/14, NHS England also announced its fundamental review. However, this was not confined simply to how the whole CCG commissioning budget should be allocated among the 211 CCGs, but was set up to look at the allocation of resources across the full range of NHS England’s responsibilities. In short, are the various funding pots the right size? And how should they be distributed fairly and in a way that underpins the reduction of inequalities?

 As part of an engagement phase of the review, in August NHS England published details of what CCGs would have been set as target allocations, if the new ACRA formula had been implemented.  The key word here is ‘target’. As with allocation formulae in the past, the formula only sets the amount commissioners should receive as their fair share of resources. The more significant decision is often around pace of change – how quickly commissioners’ current baseline allocations are converged with their targets.

The published figures in general suggest that the proposed formula would have moved more commissioners away from target. In 2011/12, just over half of all PCTs were within 2.5% of their target allocation. Under the proposed formula, this would have fallen to 34% of CCGs. While just 10 PCTs (7%) were 10% or more from target in 2011/12 (all over target), the CCG formula would have put 28 CCGs (13%) in this position, with 10 of these being 10% or more under target.


Distance from target

The range of distances from target would also have extended. After a period of convergence (albeit relatively slow), in 2011/12 the range extended from North Somerset PCT at 7 % under target to Hammersmith and Fulham at 23% over. The new formula would have increased these extremities to 14% under target (South Eastern Hampshire CCG) and 37% over target (West London CCG). This range may well have reduced, as specialised funding issues have been revised during the year.

The change in the spread of distances from target  is not surprising. There were key changes in the proposed formula – the use of GP-registered lists rather than census populations and allocating funds to smaller populations using the PBRA approach.

But there are other differences that need to be understood in looking at old formula and new formula allocation figures. One issue in particular – how the formula looks to address inequalities – provides an insight into some of the challenges being grasped by the review.

 ‘The PCT formula had a weighting for disability free life expectancy,’ says John Bailey, head of financial strategy and allocations at NHS England. This weighting effectively assigned 10% of resources to PCTs in 2011 and 2012 (it had been 15% before this). ‘The ACRA review was unable to conclude if the current approach was the correct method [to adjust for health inequalities] or if 10% is the correct amount,’ Mr Bailey says. ‘So the numbers put in the public domain in August do not have any adjustment for unmet need or inequalities.’


Unmet need?

While the level of the inequalities weighting has always been a political decision, there is no guarantee that an inequalities adjustment would be reinserted in any future formula.

ACRA – which prefers to talk of ‘sub-optimal access’ rather than unmet need – believes a formula adjustment alone may not be appropriate for tackling unmet need and wants future research to focus on a selection of specific diseases/conditions.

 ‘We’d argue – and this is supported by ACRA – that there is no, or very little, unmet need in acute care,’ says Mr Bailey. ‘But it is the upstream areas where, if you can put money in there, you will have the biggest impact on inequalities, meeting unmet need and reducing deprivation.’

For example, unmet need in cancer services could show up as patients presenting later in some areas of the country, requiring more intensive treatment. Making primary care more accessible or targeting more funding at public health may in fact have the biggest impact on health inequalities. ‘So it may be that the standard CCG service doesn’t need as big an uplift because it is not responsible for those areas of the care pathway,’ says Mr Bailey.

Other changes are also being considered. Should public health funding be allocated to specific programmes, rather than on a geographical basis, for example?

There are lots of balls in the air, underlining NHS England’s description of its review as ‘fundamental’. As well as looking at what the target funding should be in future, the review is likely to have an impact on the starting baseline positions.

Changes around specialised commissioning budgets – where there have been difficulties moving the right amounts from local budgets to NHS England – mean CCGs are likely to start with different baselines in 2014 than those initially given in April. This suggests next month’s allocations could provide some major signals on future funding flows.

Any significant changes in target allocations – whether for different national funding streams or local CCG budgets – are likely to be mitigated by a pace of change policy.

The NHS has traditionally worked on the principle that removing funds too quickly from local health services could destabilise services, while there are limits to the amount of growth that can be spent cost-effectively.

It is already clear there will be no deviation from this ‘steady as she goes’ approach. In a letter to CCG leaders in October, NHS England chief executive Sir David Nicholson confirmed plans to announce two years of funding when it unveils allocations, expected in December.

But he also underlined that ‘stability is a key consideration’. ‘Pace of change is likely to be slow,’ he said, ‘given that we are operating with very limited financial growth overall.’