NHS HDL(2002) 39 abcdefghijklm. Health Department Directorate of Performance Management and Finance
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1 NHS HDL(2002) 39 abcdefghijklm Health Department Directorate of Performance Management and Finance Dear Colleague FUNDING ARRANGEMENTS FOR SPECIALISED AND OTHER PAN-REGIONAL HOSPITAL SERVICES Summary 1. This circular: reports the recommendations of a joint NHSS/SEHD advisory group that considered the future funding arrangements for specialised hospital services provided to more than one NHS Board area summarises action taken to date provides an initial indication of the amount NHS Boards will pay under new arrangements for commissioning specialised services provided by NHS Trusts outwith Scotland details the payment process for cross-border specialised services. 14 May 2002 Addresses For action Chief Executives of NHS Boards For information Chief Executives of NHS Trusts, Special Health Boards and CSA Directors of Finance for NHS Boards and Trusts Enquiries to: Chris Naldrett Health Department Basement Rear St Andrew s House EDINBURGH EH1 3DG Tel: Fax: chris.naldrett@scotland.gov.uk Background 2. Our National Health a plan for action, a plan for change contained a commitment to simplify the funding of those specialist hospital services provided to more than one NHS Board area. An Advisory group, comprising representatives of NHS Chief Executives and Finance Directors, the National Services Division (NSD) of CSA and SEHD, was established to consider the changes required. The Group also considered funding issues with regard to other clinical services that can be commissioned on a cross-border or cross-nhss boundary basis. 1
2 3. Details of the Group s recommendations are provided at Annex A. In summary, they set the principles to be adopted for funding regional planning agreements (paragraphs 4 to 8). Its other key recommendations were that: from 2002/03, NSD should be responsible for managing the planning and funding (by NHS Boards) of cross-border specialised services the current unplanned activity (UNPAC) arrangements should be abolished with activity presently funded under this heading to be managed in future through new arrangements (still to be developed) consideration should be given to the introduction of financial risk management arrangements for high cost/low volume treatments that fall outwith service level agreements development of the Group s recommendations be taken forward by a joint NHSS/SEHD Technical Issues Group (TIG) 4. The Group s work was closely linked to that of another joint review group that considered the NHS Plan commitment to introduce a more systematic approach for planning healthcare services that are best provided on a regional or national basis. 5. The recommendations of both groups were presented to and endorsed by NHS Chief Executives in January Guidance on regional planning was issued in March under NHS HDL (2002) 10 (copy available on the SEHD website 6. The TIG has been established and begun a series of planned meetings. Further guidance on the issues covered by this circular will be issued by SEHD over the coming months. New arrangements for funding cross-border specialised hospital services (ie those provided for Scottish patients outwith Scotland) 7. The arrangements are detailed at paragraphs 11 to 14 of Annex A attached. In brief they introduce a financial risk pool, funded by NHS Boards and managed on their behalf by NSD, which will meet the cost of all cross-border specialised services in 2002/03. Whilst the arrangements were effective from 1 st April 2002, NSD has still to conclude its service agreement work with cross-border NHS Trusts. However, NSD currently has SLAs totalling 3 million in place and estimate that a further 2 million may be required. 8. The Advisory Group recommended that NHS Boards should fund cross-border SLAs on a weighted capitation basis, and this will be the case for the 3 million reported above. However, following TIG consideration, the funding basis will be reviewed in October 2002 when actual cost and activity data for the first 6 months of 2002/03 is to hand. Further advice on this, and on any additional resource requirements, will be issued shortly thereafter. In the meantime, NHS Boards should note that further resources might be required after October. Any surplus in the pool will be duly refunded to NHS Boards. 2
3 Process for Accessing the Cross-Border Funding Pool 9. Activity that falls within the listing at is eligible for cross-border pool funding. Provider Trusts will continue to submit their invoices for such activity to the relevant NHS Board. Where the activity is not listed on the definition set, the invoice should be returned to the Trust with advice that it has been classified as an OAT and should be dealt with under OAT arrangements. Otherwise, once duly checked and authorised, the invoice should be forwarded to NSD for payment. 10. Where a NHS Board has already paid for services provided from 1 st April 2002 to date, NSD will reimburse the costs on receipt of the documentation detailed above. Action 11. NHS Board and Trust Chief Executives should note and follow the arrangements for funding regional (intra-scotland) planning decisions in line with the guidance in this circular and in NHS HDL (2002) 10. that new procedures for funding specialised hospital services provided outwith Scotland came into effect from 1 st April 2002 and, in particular, that: payments on behalf totalling 3 million will be made for all NHS Boards, by weighted capitation, to fund specialised service SLAs that are already in place further resources may be required after October once a review of SLA activity until then has been undertaken, and that the review will include an assessment of whether weighted capitation is the most appropriate method for funding the risk pool in future the procedures for accessing the funding pool detailed at paragraphs 9 and 10 above that work on the Advisory Group s recommendations is being taken forward by a recently established Technical Issues Group, and that further advice and guidance on the funding arrangements for pan-regional hospital services will follow. Yours sincerely JOHN ALDRIDGE Director of Performance Management and Finance 3
4 FUNDING SPECIALISED AND OTHER PAN-REGIONAL HOSPITAL SERVICES ANNEX A PURPOSE & BACKGROUND 1. This Annex summarises the action to be taken to deliver the commitment in Our National Health - a plan for action, a plan for change to simplify the funding of those specialist hospital services provided to more than one NHS Board area. It also summarises a number of procedural changes with regard to the funding of other, essentially non-specialised, services provided on a cross- Border and/or cross-nhss boundary basis. 2. The recommendations and proposals detailed in this Annex were made by an Advisory Group comprising NHS Chief Executives, Finance Directors, and representatives from National Services Division (NSD) of the Common Services Agency and SEHD staff. It should be read along side HDL (2002) 10 that provides guidance on Regional Planning for Healthcare Services (copy at 3. In summary the Group s recommendations were: The adoption of a standard list of specialised services for regional planning purposes (see paragraph 6) and the planning framework set out in HDL (2002) 10 SEHD should provide an annual bulletin on health service inflation trends to assist NHS Boards and Regional Groupings in forward planning processes for both regional and local SLAs Consideration should be given to introducing financial risk management arrangements for clinical procedures that cannot be readily or practically covered by SLAs The unplanned activity (UNPAC) arrangements should be abolished with activity currently funded under this heading managed through new arrangements detailed elsewhere in, or stemming from, this guidance On behalf of the NHS Boards, the National Services Division should manage the planning and funding of cross-uk Border NHS specialised services from April 2002 SEHD should establish a technical issues group (TIG) to: Develop arrangements for funding and administering the proposed financial risk pools Provide advice on the development of revised out of area treatment (OAT) arrangements with other UK Health Departments Establish an action plan and timetable for ending UNPAC arrangements Provide proposals for a common protocol on the terms and process for reviewing and/or renewing SLAs SEHD should collect and provide NHS Boards with summary data on non-nhs service provider activity, for possible consortia/joint SLA action in selected service areas 4
5 REGIONAL SLAs FOR INTRA-SCOTLAND SPECIALISED SERVICES AND OTHER HIGH COST/LOW VOLUME ACTIVITY 4. NHS HDL (2002) 10 provided new guidance on regional planning for health care services. Whilst it requires NHS Boards to review and revise their planning arrangements accordingly, it is assumed this will not be to the detriment of non-specialist service provision and that the funding consequences (revenue and capital) will be prioritised accordingly. 5. At a macro level, the definition of a specialised service is one where the planning population is significantly greater than that of a single, average sized, NHS Board area and a critical mass is required to ensure, amongst other things: Optimum outcomes and sustained clinical competence Ready and equal access for all Scottish patients Cost effectiveness of provision 6. HDL (2002) 10 provided a summary list of services to be covered by the new regional planning arrangement in Scotland. The list was drawn from work developed by England s Department of Health (DH) and adjusted for Scotland in consultation with NHSS. A full version of DH s definition set is available at Section 5 of HDL (2002) 10 outlines the costs and charges issues. For ease of reference, elements of that guidance have been incorporated into the following finance related sections. In summary, the planning and funding process will be as follows. Regional planning group (RPG) to agree service provision requirements, i.e. current and possible future activity levels, development needs (including capital requirements), and clinical quality/outcome measures Regional service provider to provide validated costings (capital and revenue as appropriate) for planned service(s) RPG to formally agree SLA terms, including basis for inflation uplifts and/or efficiency requirements Unless the RPG collectively considers it inappropriate or unwieldy, the revenue cost of regional services should be divided between the participating NHS Boards on a weighted capitation basis. A similar default position needs to apply to any capital requirements with apportionment aligned to the capital formula calculation. Confirmation of regional SLAs and associated funding commitments should be in each NHS Board s Local Health Plan 7. Once a regional SLA has been approved by a RPG, details should be notified to SEHD to arrange payment(s) to the provider s host NHS Board, on the terms advised by the lead NHS Board, which may not necessarily be the Trust s host Board. Resources will be secured through payment on behalf arrangements for the NHS Boards in question. Where the terms include quality and/or activity measures linked to a release of funds, the lead NHS Board will be responsible for advising SEHD accordingly. 5
6 Financial Risk Pooling 8. Not all specialised services, and other high cost/low volume treatments, will be provided under a regional SLA in the immediate future, and some will never be covered at all. There are a number of reasons for this. Firstly, it will take time for some of the defined services to be covered by SLAs. Secondly, there are those that occur too infrequently to rank for SLA cover. And thirdly, there will be instances where specialised services need to be accessed on the back of non-specialised treatments, e.g. a hip replacement for a patient who is HIV positive with Hep C. 9. To assist NHS Boards financially manage such situations, consideration will be given to establishing a risk pool for the following areas: Specialised serv ices planned to be covered by a regional SLA in a subsequent financial year. It is expected that this element of the risk pool will be time limited, to prevent it being a disincentive to establishing regional SLAs, with access to the pool subject to the NHS Board meeting a proportion of each claim thereon. Specialised services not covered by the above, i.e. where the activity is deemed too infrequent to warrant SLA cover, again subject to the NHS Board meeting a proportion of any claim on the pool. Non-specialised treatments that require specialised or high cost services/facilities, as illustrated at paragraph 8 above. 10. The costing methodology and operational arrangements for the risk pool will be developed by the NHSS/SEHD technical issues group referred to at paragraph 3. The underlying principle is that the pool will be resourced on a weighted-capitation/formula basis with payments to the provider trust made by SEHD through the host health board. REVISED CROSS-BORDER OAT ARRANGEMENTS: (1) SPECIALISED SERVICES Need for Change 11. Whilst the current out of area treatment (OAT) arrangements cover mainly emergency treatments that require relatively low cost treatments, there have been occasions where it was necessary to access specialised services, which are high cost/low volume in nature. Such activity has had a financially de-stabilising effect on smaller specialist trusts (more of a feature in England) and the UK Health Departments agreed that, for 2002/03 onwards, all cross-border specialised service activity must be funded through service agreements or, in certain circumstances, on a case specific basis. Cross-Border Specialised Services (i.e. between UK health authorities) 12. It was the policy to strip out all specialised services from the OATS arrangements that led DH to develop the National Specialised Services Definition Set, referred to at paragraph 6 above, which NHSScotland will use for planning and implementing specialised service agreements with other UK health bodies. 6
7 13. It was decided that the Common Service Agency s (CSA) National Services Division (NSD) will lead for all NHS Boards in negotiating, and arranging payment for, specialised service agreements with other UK health bodies. The following are the current heads of agreement between SEHD and HD on this issue. From 1 st April 2002, OAT arrangements across the UK will exclude specialised service activity. Specialised services are those listed in DH s National Specialised Services Definition Set. From 1 st April 2002 all cross-border specialised service activity between England and Scotland will be covered by service agreements. NSD will negotiate service level agreements (SLAs) for Scottish residents treated in English trusts. For 2002/03, specialised service provision not covered by a NSD SLA will be funded through single patient agreements (SPAs), which will also be managed by NSD. For 2002/03, there will be no de minimis level for single patient agreements (SPAs). However, SPAs will be monitored and all activit y/cost levels reviewed for possible 2003/04 SLA/de minimis action. Any specialised service treatment by Scottish trusts for English residents provided outwith a previously negotiated SLA, to be funded by the appropriate English health authority under a SPA. The current expectation is that there will be no SLAs between Scottish trusts and English health commissioning authorities. The charge for all SPA activity to be on a one price list basis, i.e. no on-cost for the fact the service was provided outwith a SLA. Funding for cross-border Specialised Service SLAs and SPAs 14. Resources for cross-border specialised service agreements will be drawn from NHS Boards on a weighted capitation (Arbuthnott) basis. The contribution will include an element to fund a risk pool to provide cover for specialised service activity not covered by SLAs. This too will be managed by NSD, i.e. on a cost per case basis, funding the relevant provider Trust direct. Any unspent balances in the risk pool will be refunded at or near the financial year-end, or retained to reduce the subsequent year s contributions. REVISED CROSS-BORDER OAT ARRANGEMENTS: (2) NON-SPECIALISED SERVICES Need for Change 15. The current cross-border funding arrangements rest on a system that requires an annual data collection and verification exercise involving input from most UK NHS trusts and health commissioning authorities. In practice this results in trusts being funded on the basis of activity up to two years previous. At an UK level, the net result is a single sum Vote transfer between the Health Departments. Net of specialised service costs, the transfer amounts between the countries appear to have remained relatively constant over the 4 years that OAT arrangements have existed. 7
8 The Change Agenda 16. SEHD is in consultation with the other UK Health Departments in an attempt to streamline the current OAT arrangements for non-specialised service activity. All change proposals will be considered by the NHSS/SEHD TIG. 17. It is expected that any new arrangements will come into effect for 2003/04. Whilst no final decisions have been taken to date, NHS Trusts should be aware that their 2003/04 OAT adjustment (payment) may not be based on actual patient activity for 2001/02. Further advice on this issue will issue as and when it is possible to do so. The cross-border and intra-scotland allocation adjustments for 2002/03 have been as in previous years, i.e. based on the 2000/01 activity. UNPLANNED ACTIVITY (UNPAC) ARRANGEMENTS Need for Change 18. UNPAC arrangements (unique to Scotland) were introduced at the same time as cross-border OAT arrangements and were designed to be a simpler alternative for intra-scotland OAT activity. The arrangements were to cover activity not covered by a SLA and the presumption was that most previous ECR activity (ex-contract referrals) would be transferred to SLAs. However, in practice, Trusts have used the UNPAC arrangement to levy additional charges for activity that is outside SLAs (e.g. specialised services), or fell outwith the specification of an existing SLA (for both specialised and non-specialised services). 19. In 1999/00, approximately 16m worth of previous ECRs activity was reportedly transferred to SLAs. In 2000/01 some 13m was still circulating as UNPACs (net of known non-nhs provider expenditure) and, as such, reflects an operational gap in current service planning arrangements. The Change Agenda 20. Given the policy intention for UNPACs, and the recently issued guidance on regional planning, the Advisory Group considered that the funding mechanism of UNPACs should be withdrawn and activity currently funded by this means managed through the new planning and funding arrangements detailed elsewhere in this guidance. In summary withdrawal of the UNPAC arrangements mean that: UNPAC activity falling within the definition of specialised services (paragraph 6) should in future be covered by a regional SLA or, for an interim period, the financial risk pooling arrangements summarised at paragraphs 8 to 10 above. UNPACs for non-specialised high cost/low volume activity should be covered by the financial risk pool arrangements summarised at paragraphs 8 to 10 above. All other non-specialised service activity processed currently as an UNPAC should be incorporated into existing or new SLAs from 2002/3 onwards. 21. To avoid financial turbulence it will be necessary to phase in the termination process. The timetable and arrangements for this process is an issue that the TIG has been asked to address. 8
9 NON-NHS PROVIDER ACTIVITY 22. A SEHD exercise revealed that in 2000/01 expenditure on services delivered by non- NHS providers amounted to approximately 70m. Analysis revealed considerable commonality in the providers and services obtained and SEHD will circulate a full listing of these to all NHS Boards to consider the possible opportunities for working collaboratively in securing the services in question in future. CROSS-NHSS BOUNDARY FLOW 23. The Advisory Group also considered the scope for streamlining the current cross-nhss boundary SLA arrangements. A short consultation paper was issued to all Trust and Health Board Directors of Finance with a proposal to replace such SLAs with a funding matrix arrangement. The consensus was against a change of this nature. Whilst welcoming the overall aim to reduce bureaucracy, the view was that it could not be at the expense of destabilising the financial position in any one NHS Board area. However, there were repeated requests for SEHD to develop guidance and/or a protocol for SLAs in general and this has been remitted to TIG for consideration and possible development. SEHD Performance Management & Finance Directorate May
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