NHS announces elective funding details

by Seamus Ward

21 August 2020

NHS England and NHS Improvement have set out further details of how block payments to systems will flex from 1 September to reflect delivery of patient care.

A letter written by chief financial officer Julian Kelly (pictured) and chief operating officer Amanda Pritchard, expands on phase 3 guidance. A July letter and August guidance set out how the NHS would return in phase 3 to near-normal levels of activity in the ‘window of opportunity’ before winter.Julian Kelly

Trusts and systems were told to increase their NHS (non-independent sector) activity:

  • Ensuring that in September they reach at least 80% of their last year’s activity for both overnight electives and for outpatient/day case procedures, rising to 90% in October (while aiming for 70% in August)
  • To support this, systems must swiftly return to at least 90% of their last year’s levels of MRI/CT and endoscopy procedures, with an ambition to reach 100% by October
  • 100% of their last year’s activity for first outpatient attendances and follow-ups (face-to-face or virtually) from September (and aiming for 90% in August).

Currently, providers and commissioners receive prospective and retrospective payments, issued to ensure they break-even against reasonable expenditure. However, September is the last month of the retrospective top-up. Under new arrangements, systems will receive funding envelopes for providers, equivalent to the current block and prospective payments and system-wide Covid funding. Systems are expected to break even.

The latest letter says nationally determined funding arrangements – introduced at the start of the financial year in response to the pandemic – will provide sufficient resources to fund the expected activity.

However, it adds that local systems will be supported to recover service levels. This will include:

  • A notional baseline of months six to 12 2019/20 activity for ordinary electives, day cases, outpatient procedures and outpatient first appointment and follow-ups will be calculated for each system
  • Elective and outpatient procedures will be valued using the 2020/21 tariff prices. However, outpatient attendances will have a nationally determined flat rate for first and follow-up attendances
  • The notional expected value of payments for September to March 2021 will be set, based on the activity targets above.

Systems will be given details of their funding envelopes in due course. NHS England and NHS Improvement said funding will be paid in full if actual activity is in line with the levels set for phase 3. However, if a system's performance is below these levels, the shortfall will be deducted from their nationally determined funding envelope – 25% for elective and outpatient procedures and 20% for outpatient activity.

If activity exceeds the targets, systems will receive additional funding – 75% (for elective and outpatient procedures) and 70% (outpatient activity) of the difference will be added to their funding envelope.