Planning guidance: recovery route outlined

The guidance replaces the preparatory document issued in December, which indicated that a proportion of the PSF would be transferred to national prices. Some PSF funding will also be moved into the new financial recovery fund – outlined in the long-term plan published earlier this week and created to support sustainability of essential services.

NHS operational planning and contracting guidance 2019/20 reiterates that the tariff uplift will be 3.8%, subject to consultation. The uplift includes the additional funding for the Agenda for Change pay rises, which are being paid directly to employers in the current financial year. However, the tariff uplift excludes the transfer into urgent and emergency care prices of £1bn of the PSF; the transfer into national and local prices of 1.25% from CQUIN; and the impact of funding for pension changes.

The tariff efficiency factor will be 1.1%, but all trusts with a deficit control total will be expected to deliver additional efficiency of 0.5%, which will be retained by the trust to support financial recovery.

The planning guidance confirmed the intention to re-set the provider financial framework, encouraging system working and beginning the removal of control totals from 2020/21. In 2019/20, provider control totals will be rebased; and the capital and cash regime will be changed, with a review of interest rates payable on historic debt and all new loans. NHS Improvement and the Department of Health and Social Care are considering a process for restructuring historic debt on a case-by-case basis once a recovery plan is agreed.

The financial recovery fund will play a key role in re-setting the financial picture and will receive £200m transferred from the PSF. With £1bn transferred to urgent and emergency care tariffs, the value of the PSF will reduce from £2.45bn to £1.25bn. A further £155m of the PSF will be allocated to the non-acute sector. The remaining £1.1bn will be allocated to acute and specialist trusts using the same methodology as in 2018/19.

The total value of the financial recovery fund will be £1.05bn in 2019/20, including the allocation from the PSF. The recovery fund will be paid non-recurrently and in 2019/20 only trusts in deficit that sign up to their control totals will be eligible. From 2020/21 the fund will be restricted to trusts in deficit where they have an agreed financial recovery plan. Any funding released by over-delivery against plan will, where possible, be redeployed in transformation and further cost reduction.

As outlined in the NHS long-term plan, it is expected the recovery fund will help reduce the number of deficit trusts by more than half in 2019/20. NHS England and NHS Improvement hope the recovery fund will mean the end of control totals and associated PSF for all trusts from 2020/21, but by 2023/24 no trust should report a deficit.

Initially, the distribution of the financial recovery fund will be set nationally to maximise the sustainability of services. However, organisations will be required to produce recovery plans during 2019/20 as a condition of receipt of the funds – all systems and trusts should have recovery plans in place by December 2019 as part of their five-year system-level strategic plans. STP and ICS capital plans must be ‘an investable proposition’.

From 2020/21, multi-year financial recovery plans agreed with NHS Improvement and NHS England regional teams, must be in place to access the recovery funds. As the number of deficit trusts reduce, more of the PSF will be transferred into the financial recovery fund. The national bodies said they would consider amending the provider financial regime to require delivery of a minimum surplus standard as the definition of sustainability.

The planning guidance confirms the intention to introduce a blended payment mechanism for emergency care, where a provider’s expected annual emergency activity is above £10m. It is aimed at systems that are still using the payment by results model. A ‘break glass’ clause will apply if actual activity is significantly different from plan.

The marginal rate emergency tariff (MRET) and 30-day readmission rule will be abolished as national rules from 2019/20, on a financially neutral basis between providers and commissioners.

Under the blended payment rules, in 2019/20 the contract value for emergency care will be reduced by the agreed 2017/18 value of both MRET and 30-day readmission rules. Providers will be eligible to receive central income equal to the MRET value; control totals will be set based on an expectation that the bottom line position improves by an equivalent amount – for every £1 of MRET funding, the provider must improve its bottom line by £1.

An updated market forces factor (MFF) will be used from 2019/20 and phased in over five years. The revenue impact will be reflected in provider control totals, while the updated MFF will impact on CCG target allocations.

And, while it is proposed to make maternity pathway tariffs non-mandatory, NHS England and NHS Improvement expect the prices to be used for contracting in 2019/20.

All providers must submit a narrative that supports the finance, activity and workforce returns, alongside the approach to quality. A draft – which should represent a full account of the operational plan at that point – is due by 12 February and the final form by 4 April. Technical guidance is due to be published this month, covering requirements for the narrative; provider-specific guidance on finance, activity and workforce; and full details of the PSF, financial recovery fund, MRET and financial control totals.

NHS Providers chief executive Chris Hopson (pictured) said: ‘The provider sector will welcome the overall new financial regime set out in the guidance – the extra investment in the sector, the increase in prices paid to trusts for the care they provide, the new provider financial recovery fund, the changes to funding emergency care and a more realistic efficiency assumption than before of 1.1%.’

He added that trusts will want to assess the impact of a complex set of changes, recognising that each has an important contribution to make to returning the sector to financial balance. ‘But, taken as a whole, this should enable the provider sector to start moving from deficit to surplus, an important and significant achievement.’