Planning guidance details financial framework

• Meet its trajectory for 2020/21 and the following three years
• Achieve cash-releasing productivity growth of at least 1.1% each year
• Reduce the growth in demand for care via integration and prevention
• Reduce unwarranted variation in performance
• Make better use of capital investment and existing assets

Operational plans for the year will have to set out the detail of how financial trajectories, agreed by systems with NHS England and NHS Improvement as part of system-wide strategic plans, will be delivered. And cost improvement plans will need to be fully developed and agreed before the start of the financial year.

Additional recurrent allocations for clinical commissioning groups have been published to take account of tariff inflation and other adjustments. And similar top-ups will be made to specialised and direct commissioning budgets too. CCG running cost allocations will remain at the level published in January 2019.

The guidance says that service development funding allocations have already been made for all systems on a fair shares basis. A statement will be sent to each system providing details of its long-term plan funding for 2020/21, including any additional targeted funding allocations where these have been agreed.

The tariff proposals, out for consultation during January, will see a cost uplift factor set at 2.5%, offset by an efficiency factor of 1.1%. The proposals also see an extension of the blended payment approach to outpatient attendances and maternity services.

All CCGs are also being asked to complete the national tariff local variations template so that the national bodies can develop a comprehensive picture of how local areas are agreeing reimbursement for services.

The guidance highlights a number of key financial commitments:

• Mental health investment standard: for 2020/21, every CCG is required to increase spend by at least their overall programme allocation growth plus an additional percentage increment to reflect the additional funding included in CCG allocations. CCGs also need to increase their share of total mental health expenditure spent with mental health providers and the share spent on children’s and young people’s mental health. Any shortfall in meeting the 2019/20 MHIS will need to be recovered in 2020/21.
• Primary medical and community health services funding guarantee: with the long-term plan committing to a real-terms increase of £4.5bn in these areas by 2023/24, commissioners need to plan to spend the primary care medical allocations in full to increase GP numbers and increase overall spending from core service budgets on primary and community services.
• Commissioner underspends: Historical CCG debt will start to be written off subject to conditions. These include the level of total overspend being more than 4% and a repayment profile being agreed for an amount that will typically be 50% of the cumulative debt.
• Better Care Fund: Specific planning requirements for the fund will be published in February. CCG minimum contributions will grow by an average of 5.3% in cash terms.

The planning guidance also details the financial framework for providers and CCGs. Financial trajectories that were issued in October 2019 will be updated shortly to reflect the impact of material changes to costs and the national tariff. This update will ensure efficiency requirements will remain consistent with the original goals.

There are a number of changes to the financial architecture that emphasise the importance of system working and the move to ‘system by default’. System finances will govern access to a range of funding pots. Key changes include:

• System control totals will continue to operate across the country. System leaders will be able to agree changes in individual organisations’ financial trajectories – both in the planning process and in-year – if they are net neutral

• The Financial Recovery Fund (FRF) will be the only source of sustainability funding for providers and CCGs. Payment will be made at the beginning of each quarter (25% per quarter), rather than at the end of the quarter as now, to aid cash flow

• FRF payment will not depend solely on the financial performance of individual organisations. Half of FRF payments will be tied to system financial performance. This will avoid financial pressures being passed between commissioners and providers

• A taper will be introduced, allowing organisations and systems to earn FRF if they do not meet their financial trajectories – £1 of FRF will be lost for each £1 of organisational or system underperformance. Systems will agree with regional teams whether organisations that miss their individual trajectories will be eligible for FRF allocations earned by the system

• Some capital and revenue transformation funds will be transferred to local systems to be used to deliver national frameworks and objectives through locally agreed schemes. This will begin in the planning round and the centre hopes to increase the proportion of funds that are allocated in this way. However, access to the funding will depend on the delivery of system financial trajectories

• To release revenue transformation funding, system plans must be agreed with NHS England and NHS Improvement

• Local service providers can join together under NHS-led collaboratives to manage the budget and patient pathways for specialised mental health, learning disability and autism care. This will support the move towards greater integration of specialised services across health and social care. The planning guidance said that during 2020/21 local systems would be supported to join up care pathways and improve patient outcomes and experience. A review of the underpinning financial architecture will be carried out

As previously notified, providers that achieve breakeven or surplus will have access to additional funding. Those that broke even or delivered a surplus control total before sustainability funding in 2019/20, and deliver a breakeven or surplus position again in 2020/21, will receive a one-year transitional payment worth 0.5% of relevant income. Providers with a deficit control total in 2019/20 before sustainability funding, that reach breakeven by 2023/24, will receive a reward payment of 0.5% of relevant income at the end of the year in which breakeven is achieved. A further payment of 0.5% will be made should they achieve breakeven in the following year.

Where payroll contracts are due for renewal in the next 12 months, or where organisations are not in contract, plans should be developed to collaborate as part of the local system (STP/ICS). Payroll arrangements should be reviewed ‘at every opportunity’ to increase collaboration, and improve workforce and service resilience.

The planning guidance also requires a review of finance back office financial services and software and IT systems to align with other regional providers. This should ensure interoperability; standardisation of services; and the better use of technology. Transactional processes should be reviewed to identify opportunities for automation.

The HFMA has written a summary of the planning guidance. It is available here