Guidance confirms ICBs’ financial starting positions
The approach to historic under- and overspends by clinical commissioning groups was set out in earlier draft financial guidance. But the finalised guidance has now confirmed the details. It said that ICBs’ opening position would be calculated by aggregating the net position of each constituent CCG, with this then adjusted for the 1% cumulative historical surplus requirement.
Where there is a net historical overspend, the balance will be frozen and then written off, as long as the system and the ICB achieve breakeven for each of the following two years. ‘ICBs would therefore be established with no outstanding obligation,’ it said. ‘ICBs failing to deliver this requirement will have this obligation reinstated at the end of the two-year period.’
For systems inheriting a net historical underspend, the balance will be retained as a system surplus. This will be useable for future non-recurrent investment ‘subject to affordability and national approval’.
The guidance covers ICB allocations, system business rules, the contracts and payments approach (including the tariff payment system), key financial commitments and planning assumptions.
Emma Knowles (pictured), HFMA director of policy and communications, said the NHS faced a challenging year as it looked to make significant progress with elective recovery, while continuing to deal with the Covid pandemic. ‘There are major operational and financial pressures in 2022/23,’ she said. ‘Covid-19 has not gone away and continues to add challenges in terms of infection control and workforce absences. NHS systems also face major productivity programmes as they look to deliver a balanced position in their first year of formal operation within a tight financial settlement. However, it is good to have the final guidance confirming earlier drafts so that contracts, spending and efficiency plans can be completed.’
ICB allocations – full details of which were also published – have been based on annualised system funding envelopes for the second half of 2021/22. These comprise CCG allocation with some adjustments. For example, back pay funding relating to the first half of last year has been removed. There has been a net growth uplift applied to reflect activity requirements, inflationary pressures and a general efficiency requirement of 1.1%. A further adjustment moves each system towards its fair share funding distribution – replacing the previous CCG pace of change approach.
Additional elective recovery funding has been allocated to commissioners to deliver 104% of 2019/20 levels of value-based activity across elective, day case, outpatient procedures and outpatient attendances. Under- or over-performance against this target will see funding withdrawn or paid at 75% of tariff unit prices.
ICBs will also be expected to reduce running costs in real terms compared to their former CCGs – with a flat-cash allocation.
With Covid cases currently running at a high level across the country, systems will continue to receive a fixed system allocation for Covid-19 services based on their provider and commissioner footprints. However, this will be reduced from the annualised levels received in the second half of last year.
Systems – made up of an ICB and partner trusts – will be expected to deliver financial balance, and ICBs will also face a similar individual duty. And where a trust is a formal partner of more than one ICB, its revenue resources will be fully apportioned to a principal system.
The guidance also confirms the recently published details of the national tariff payment system for the year ahead, which will see the service adopting a new aligned payment and incentive scheme. A fixed payment should cover the cost of agreed activity, while a variable element will adjust for under- and overperformance and for actual achievement of best practice tariff and CQUIN quality targets. The guidance sets out the steps that should be taken to set contract values, including the creation of the baseline and adjustment for service changes and efficiencies.
The requirement for signed contracts between commissioners and all providers has been reinstated, after two years where the measure was relaxed. All contracts, other than for core primary care services, must use the NHS standard contract.
There will be no formal process for arbitration where contracts cannot be agreed, with a reliance on local leaders to resolve issues, although regional teams will mediate where necessary. A model system collaboration and financial management agreement will continue to be published, but it will no longer be mandatory, reflecting the new legal duty to achieve system financial balance.
The guidance also highlights programmes available to support the delivery of efficiency and productivity programmes. It calls for trusts to take action to reduce agency staff bills and move back towards compliance with agency controls and for systems to ensure the necessary infrastructure is in place to optimise the use of medicines. It also identifies opportunities for improvement in procurement through adoption of the procurement target operating model and calls on systems to consider opportunities to consolidate corporate services.
NHS England and NHS Improvement have also underlined that the mental health investment standard will continue to apply to ICBs – meaning ICBs will need to increase spend on mental health by more than their allocation base growth. A number of NHS long-term plan recurrent commitments on mental health are currently supported by non-recurrent service development fund allocations. The guidance states that the allocations are recurrent within the NHS mandate and will continue to be funded beyond the current planning period, with the allocations due to be moved into ICB baselines at some point.
NHS England and NHS Improvement have also published
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