Contents. CNST Contributions from April Consultation

Transcription

1 Clinical Negligence Scheme for Trusts (CNST) NHS Litigation Authority Consultation March 2016

2 Contents 1 Foreword Background Purpose Current approach to pricing Element 1: Risk level Element 2: Paid claims experience Element 3: Known outstanding claims Adjustments Principles for setting contributions Pricing objective Extent of risk pooling Options for development Voluntary excesses Coinsurance Delegated authorities Interaction between different exposure measures Building a forward view Early reporting of very high value cases Larger and/or older claims Incentives Additional services Interaction of options How to respond Confidentiality of information Further information Annex A: List of consultation questions Page 2

3 1 Foreword A core purpose of the NHS Litigation Authority (NHS LA) is to provide the best value indemnity to the NHS in England. We do that whilst managing claims fairly and effectively and making sure that injured patients receive the compensation to which they are entitled. We also support and incentivise the NHS to improve safety and so reduce the harm which leads to claims. The Clinical Negligence Scheme for Trusts (CNST) helps manage liabilities arising from clinical negligence in England. It is a not-for-profit membership scheme that aims to spread and smooth the financial cost of those liabilities over time. By pooling risks and resources across the membership, CNST enables the NHS to achieve economies of scale in specialist claims handling and legal services and helps to reduce burden and cost. The services delivered under CNST currently include: unlimited and comprehensive indemnity for clinical negligence with no conditions, limits or excesses; a state backed model for the funding of claims over time without the cost of annuities, insurance premium tax, insurer profit, broker fees etc.. a specialist, in-house national claims handling service, with over 20 years experience of handling claims against the NHS, for the NHS; the services of a panel of leading clinical negligence solicitors both in managing claims and litigation but also in supporting Members locally with risk management forums, claims analysis and education; an inquest service, providing financial help with legal representation, early resolution of fatal claims and learning; expertise in mediation and other forms of alternative dispute resolution to deliver solutions which are not just about money; Group Litigation and precedent management, working across the NHS to manage actions brought at scale or where legal precedents are being set in the higher courts; protecting the NHS against claims fraud; data analytics with a bespoke Extranet for Members giving real time access to claims data and trends and scorecards for individual Members which highlight areas for focus; and a Safety and Learning Service, providing resources via a knowledge sharing portal, specialty based events and working locally with Members and nationally with the Royal Colleges and others to support improvement. The CNST operates on a pay-as-you-go basis, which means that we collect in every year what we expect to pay out. This means that, unlike commercial insurance, NHS funds do not have to be used to pay upfront for claims that will be settled in future years. Page 3

4 The significant and rising costs of clinical negligence are driven by the rising number and value of claims against the NHS. We are committed to working with our Members and others to reduce these costs. We want to hear your views as to how we might develop CNST to better support: system wide learning where clinical error is identified so that lessons can be learned and shared quickly; incentives for improvement, with a price which is responsive to reductions in risk; a swift and fair response for patients and healthcare staff with support provided early in the process for candour without blame where unexpected outcomes occur; more flexible indemnity which can be tailored to the requirements of individual organisations, without losing the collective benefits of membership; utilisation of the buying power of CNST, working with Members and national bodies to ensure access to the very best risk management expertise at best value for the NHS; and a fair mechanism for pooling risk for very rare, high cost events. It is, of course, important that the annual costs of paying claims (contributions) are charged in a fair way to individual Members and that the scheme operates in a way that supports the provision of clinical services across the NHS. We welcome your response to this consultation which should be submitted by 17 th May We will evaluate all feedback to inform our approach to setting member contributions from April 2017 and any change which is required to transition over more than one year. Whilst the focus is the CNST, we are also interested in comments that you might have about the other indemnity schemes we operate and how your suggestions could affect those schemes in the future. We look forward to hearing your views. Ian Dilks Chair Helen Vernon Chief Executive Page 4

5 2 Background The NHS LA is a Special Health Authority that runs the CNST on behalf of, and operates under Direction from, the Secretary of State for Health. The CNST provides cover against clinical negligence claims for NHS Trusts in England and Independent Sector Providers of NHS care. The NHS LA aims to pay proven claims promptly and fairly and defend unproven claims robustly. We also support the NHS to learn from incidents and reduce costs and harm by improving safety within the NHS. Membership of the CNST is optional for NHS Foundation Trusts (and for Independent Sector Providers) although currently all NHS Trusts are members of the scheme. Operation of the scheme is governed by Regulation and the Scheme Rules. The CNST operates as a risk pool with the contributions for trusts being calculated on a pay-as-you-go basis. Claims are paid by the scheme on behalf of a Member on the proviso that they are a Member of the scheme both at the time that the incident occurred and when the claim is paid. As the scheme is pay-as-you-go, Members will not yet have contributed fully to the costs of claims which have yet to be settled. These future costs relate to claims which have been notified (known claims) and to incidents which have occurred, but have yet to be reported (Incurred But Not Reported IBNR). In addition, as many very high value claims settle by way of a future income stream for the life of the injured claimant, those costs are provided for but need to be met on an annual basis (periodical payments). Organisations seeking to leave the scheme pay their share of these future claims liabilities when exiting, in order that such costs do not unfairly fall on remaining Members. Page 5

6 3 Purpose This paper sets out proposals for the approach for setting the CNST contributions. In addition, we have set out some options for the development of the CNST. It will be important to understand how the principles interact with each other and identify where they might conflict. Contributions for 2016/17 have been set, so any new approach would only take effect from 2017/18 with some modelling over 2016/17. Page 6

7 4 Current approach to pricing The CNST must collect in what it expects to pay out in any one year. How that total amount is charged to individual members is outlined in the approach to pricing. Each Member s CNST contribution is currently determined by splitting the total amount to be collected between Members according to their relative size, their activity levels and their recent history of claims (claims experience) and contributions. Contributions are calculated as a weighted average of three elements. A risk based element, based on staffing size and activity levels. A contribution based on paid claims experience over the previous five years. A contribution based on known outstanding claims. Each Member s contribution is then adjusted to reflect the gap between past claims and contributions over the past five years, and to limit the percentage change in contribution from the previous year. This means that Members do not substantially contribute substantially more or less to the scheme than is paid out on their behalf over time and help keep their price stable. Page 7

8 4.1 Element 1: Risk level The risk based element of the contribution reflects the relative size and activity level in each clinical speciality, compared to other Members of the CNST. The risk based contribution is calculated separately for general and maternity services. Each clinical specialty is allocated to a Whole Time Equivalent (WTE) and a Finished Consultant Episodes (FCE) risk group, and each group is given a relative risk weight. A higher risk weighting means that the activity is considered more risky per WTE or FCE. The risk based contribution is calculated by multiplying the number of WTEs or FCE each Member has in each risk group by the risk weighting for that group. The risk based contribution for general services is then the total of the WTE and FCE parts. The larger part of the contribution comes from the WTE component. The risk based contribution for maternity services is based mainly on the number of births during the year, but staffing levels can adjust the contribution up or down by up to ten per cent. The adjustment is based on the number of midwives per birth and the number of obstetrics and gynaecology staff per birth (WTEs). The greater the number of maternity staff per birth compared to the average across the CNST, the lower the contribution. Page 8

9 4.2 Element 2: Paid claims experience The element of the contribution based on paid claims experience is proportionate to each Member s share of the total paid claims for the whole of the CNST over the previous five financial years. This is calculated separately for general and maternity services. Page 9

10 4.3 Element 3: Known outstanding claims The part of the contribution for known outstanding claims is determined in proportion to each Member s share of the total known claims for the whole of the CNST. This is calculated separately for general and maternity services and creates a link between price and current claims volumes, in addition to historical paid claims experience. Page 10

11 4.4 Adjustments After considering the previous three elements, the contribution is subject to two further adjustments: an adjustment to reflect the gap between past claims and contributions. If contributions have significantly exceeded claims, the contribution is reduced; and a final adjustment to limit the percentage change in contribution from the previous year. Both adjustments are subject to the fact that the total contributions collected must cover the estimated total cost of claims and scheme expenses to be paid during that year. A reduction in contribution for one Member is balanced by an increase in contribution for (at least some of) the others. Page 11

12 5 Principles for setting contributions At a high level, the current method to calculate individual Member contributions takes in to account three broad principles to: reflect each Member s risk based activity - achieved by the exposure and experience elements of the pricing formula - for example, a Member with more staff and performing a greater number of operations each year than another Member should contribute more; reflect each Member s contribution and claims record - achieved by further adjustments to reflect the contributions received and claims paid by and outstanding with the NHS LA on the Member s behalf, currently focusing on the previous 5 years; and minimise sudden changes in pricing - for each Member, achieved by limiting the year on year percentage change in contributions for each Member. Taken individually, each of these principles is reasonable, however there can be conflicts when attempting to take all three into consideration. This may result in a Member querying their contribution on the basis of one principle alone. For example, a Member might question their contribution on the basis that it significantly exceeds recent past claims, whereas another Member might question their contribution on the basis that it is a significant increase from the previous year. In general, any compromise between conflicting principles results in none of the principles being met exactly. This is further complicated by the fact that any favourable treatment for one group of Members must be offset by an increase in contributions for another group of Members (because each year, the contributions total must cover expected claims payments). Page 12

13 6 Pricing objective The current objective for setting Member contributions for the CNST is to create a cost sharing methodology that follows clear and acceptable design principles that: encourage improvements in safety; fairly reflect the risk of each Member; adds value by pooling (at least some of) the risk between Members; and collects the required funds. Page 13

14 6.1 Extent of risk pooling A fundamental principle to consider is the desired extent of risk pooling within the CNST. At one end of the spectrum, the CNST could share risk between its Members by setting individual contributions purely with reference to exposure measures (and without consideration of past claims record). This would involve a cross subsidy from Members with a good claims history to those with higher claims, and so might generally be preferred by those Members with a high number of claims. At the other end of the spectrum, the CNST could operate in such a way that each Member can expect to pay contributions broadly in line with its own claims experience over time. The effect of cross subsidies between Members will be small, or none at the extreme. The CNST would essentially act as a funding mechanism to allow each Member to (separately) achieve a degree of smoothing of their claims out over time. This might generally be preferred by better performing Members, but does not meet the idea of a risk pool. In practice, the current approach is intended to be a middle ground, where a Member s contribution partly reflects its exposure measure and partly reflects its own claims history (to an equal extent on aggregate). In particular, this produces the incentive that a reduction in a Member s claims record will, in time, reduce its contribution. Page 14

15 7 Options for development 7.1 Voluntary excesses An excess is the unindemnified portion of any claim, and applies to the first part of the loss or liability. If excesses are applied to the CNST, the financial burden of the amount of the excess (for each claim) would rest with the Member. The scheme would not be liable for the amount of the excess or any lesser amount for which a claim may be settled. Once agreed, a voluntary excess cannot be varied or removed, without consequence. Members would therefore assume a level of risk in the form of the excess and in return the contribution would be reduced. When the CNST was created in 1995, variable excesses were applied to all qualifying liabilities, but excesses were abolished in 2002 when the NHS LA centralised the funding of all CNST claims. Excesses have always applied to employers and public liability claims and non-clinical professional indemnity claims under the Liabilities to Third Parties Scheme (LTPS). Page 15

16 7.2 Coinsurance An alternative approach to an excess (which is not mutually exclusive), would be for Members to pay a share of some or all of each claim (for example ten or twenty per cent) above an excess, where this is applicable. This would enable the NHS LA to reduce the contribution, but would expose the Member to a share of the agreed claim payment. The benefit to scheme Members who believe that they have measures in hand to reduce claims costs would be a more direct and potentially earlier reduction in contributions but would expose Members to a greater fluctuation in costs in the event of a large claim or claims. Page 16

17 7.3 Delegated authorities The NHS LA already offers a voluntary scheme of delegated authority to Members for clinical negligence liabilities covered by the CNST. This arrangement has been in place since The authority is granted to individuals, not to the Member itself. Four Members currently have individuals holding delegated authority. Approximately 0.3% of CNST claims are currently being handled under Member delegated authority. Delegated authority requires strict control with limits to claims size and the need for NHS LA to be kept informed of all claims in order to retain the learning and experience across the service. Sanctions may apply if a claim escalates above the authority limit and costs more as a result of the handling. In addition, there may be no reduction in contribution in return, due to the likely minimal impact on cost. Page 17

18 7.4 Interaction between different exposure measures The interaction of different exposure measures may be a helpful predictor of risk. For example, the risk based contribution for maternity services is currently based mainly on the number of births during the year, but staffing levels can adjust the contribution, up or down, by up to ten per cent. Currently the more maternity staff per birth, compared to the average across the CNST, the lower the CNST contribution. This type of adjustment could be either removed, amended or extended to other medical specialties. Page 18

19 7.5 Building a forward view Claims which are paid in any given year, generally relate to incidents which took place several years previously. In that sense, each Member s claims record is slow to respond to changes in underlying claims risk. This can lead to some difficulties in creating suitable incentives for Members to invest in risk reduction measures, because even though such measures might prove to be effective they could take several years to feed through to improved claims experience. In order to incentivise improvements in safety and improve clinical and local engagement a forward view could be built into the CNST pricing linking an element of price to measures which demonstrate whether an organisation is taking steps to reduce the harm that is likely to lead to claims in the future. This means identifying other data sources or indicators which are a reliable predictor of harm/risk/a claim. Those sources would need to be held in a form which can readily be collected across the membership, benchmarked and assessed against claims. The calculation of contributions is currently based on data from a number of sources. For each Member, the size and activity levels are WTE staff headcounts and number of finished consultant episodes and attendances (weighted to allow for the different risk between different specialities). That includes the number of births and A&E attendances, for Members offering those services. Each Member s individual claims and contribution history are also used. Increasing the use of forward looking data sources or indicators (either preexisting, or collected for the purpose) could improve the NHS LA s ability to predict risk and incentivise investment in safety improvement. That would enable contributions to be calculated more in line with the agreed principles. Additional measures could also be qualitative (in a similar fashion to the risk management discounts which have now been removed). Page 19

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21 7.6 Early reporting of very high value cases There is currently a significant time-lag between when an incident occurs, when it is reported as a claim and then ultimately, when it is paid out under the CNST. For cases involving brain injury at birth, the lag from incident to payment (excluding interim payments) is on average 11 years. This is because the needs and prognosis of the injured child generally cannot be determined until they are of school age and a complex assessment of needs is then required. An alternative is to move to a position where the NHS LA is notified of an incident which may become a very high value claim as soon as possible after it happens. This would enable an early investigation of the incident and potential for liability at a time when the event is still fresh in the memories of the staff involved and so supports the capture of evidence and the identification and proofing of relevant witnesses. In certain cases expert advice could be obtained at an early stage and early admissions of liability could be made where appropriate together with apologies and explanations. Improved data capture would ensure that learning is extracted earlier and families can be supported in navigating the availability of health and social care provision for their child s needs. Such an approach would however significantly increase the number of incidents required to be notified to the NHS LA and views are sought on the trigger for reporting in the event that this approach is preferred. Reporting of high value claims could in itself provide a forward view indicator to inform contribution setting. A counterbalance may be required to ensure that Members are not discouraged from reporting due to the impact on their contributions. In cases involving brain injury at birth an early high quality investigation which involves the family is paramount. In addition to limiting or withholding cover when an incident is not reported the NHS LA could also place conditions on cover which limit the indemnity in the event that an investigation of serious injury at birth has not occurred. Page 21

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23 7.7 Larger and/or older claims Because of the time-lag between an incident occurring and a claim being paid, Members are feeling the effect of claims which occurred many years ago which are now starting to appear as expenditure and therefore impact their claims history. Nevertheless the scheme has to meet the liabilities in year of claims which relate to incidents which did occur many years ago. The older claims tend also to be the highest value which relate often to brain injury at birth. The quantum of such claims (currently the highest award equates to c 15 million) is likely to be influenced by factors which are beyond the control of the Member or the NHS LA, such as the individual circumstances of the claimant and as rare incidents, may not be reflective of measures taken by a Member to reduce harm. It is possible to segregate out those liabilities from the remainder of the expenditure and treat them in a different way. This may mean a greater degree of risk pooling for those liabilities than for those which relate to incidents in the recent past. Page 23

24 7.8 Incentives In 2015 the NHS LA was able to allocate just over 18 million of funding to trusts who submitted safety improvement plans which would tackle the causes of their claims. This programme, which provided up-front central funding to support a number of initiatives, will be evaluated in Where there is robust evidence of steps which could be taken and investment which could be undertaken to make safety improvements and reduce the risk of claims, incentives could be offered via a discount to the CNST contribution. Bearing in mind that a discount to one trust will require an additional charge to another, as the total amount required to be paid under the scheme as a whole will remain the same. The NHS LA would work with other national bodies to ensure that there is no duplication and that incentives are aligned with existing work programmes. Page 24

25 7.9 Additional services The NHS LA supports members of the CNST to improve safety by the provision of data analytics via a bespoke member Extranet and interactive Scorecards. In addition the buying power of the CNST is currently utilised for the purchase of legal services, offering value for money and benefits such as volume discounts for the membership as a whole. We also have the ability to use the buying power of the CNST to procure other services, including international expertise and sophisticated data analytics which may be of benefit to Members in supporting the reduction of harm. These services could be available for Members to opt into by payment of an additional subscription or alternatively, the cost could be apportioned across all members. As with incentives, the NHS LA would work with other national bodies to ensure that any additional services complement and support existing work. Page 25

26 8 Interaction of options The above options are inter-connected and Members may have a preference of some over others. We would welcome any views on options for the development of CNST which are not covered in this document with a mind to the objectives set out in the foreword. Page 26

27 9 How to respond We would like to hear your views. The consultation questions that appear in this document are listed at Annex A. This consultation runs from 08 March 2016 to 17 May Please send us your response by noon on 17 May 2016 By your response to: By post Write to us at: NHS Litigation Authority 151 Buckingham Palace Road London SW1W 9SZ Page 27

28 10 Confidentiality of information Information provided in response to this consultation, including personal information, may be published or disclosed in accordance with the access to information regimes - primarily the Freedom of Information Act 2000 (FOIA) and the Data Protection Act (DPA) If you want the information that you provide to be treated as confidential, please be aware that under the FOIA, there is a statutory Code of Practice with which public authorities must comply and which deals, among other things, with obligations of confidence. In view of this, it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information, we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding. We will process your personal data in accordance with the DPA and in most circumstances this will mean that your personal data will not be disclosed to third parties. Page 28

29 11 Further information If you have any comments or concerns relating to the consultation process that you would like to put to us, please write to: NHS Litigation Authority 151 Buckingham Palace Road London SW1W 9SZ Or Page 29

30 Annex A: List of consultation questions Question 1: Question 2: Question 3: Question 4: Question 5: Question 6: Question 7: Question 8: Question 9: Do you agree with the principles that currently determine the CNST contributions? What other principles do you think should apply? Should the calculation continue to minimise disproportionate impacts of changes to the CNST contributions, and if so, how should this best be achieved? Are you content that the current approach to setting contributions sufficiently meets this objective? Would you like to see any change to the approach to setting contributions? To what extent should the CNST pool risk between its members? Is the current balance appropriate? Should the CNST reintroduce voluntary excesses, and if so, to what level? Should the CNST introduce co-insurance and if so, at what level? Should the NHS LA offer members of the CNST an extended scheme of delegated authority allowing them to manage their own clinical negligence claims? If so, what sort of delegated authority scheme would be of interest? Should contributions reflect the joint interaction of staffing and activity levels, and in which specialities? Are you aware of any evidence which suggests that a higher headcount for a given activity level reduces the risk? Do you agree that an element of the CNST contributions should be linked to outcome measures linked to harm which is likely to lead to claims in the future? Question 10: Can you suggest any data sources or indicators which may be a helpful predictor of claims risk? Question 11: Do you agree that the NHS LA should be notified of incidents which are likely to become very high value claims as soon as possible after the event? If so, what do you think should be the trigger/definition for reporting? Question 12: Do you agree that notified incidents (as outlined in 11) should be linked to the CNST contributions? In the event that an incident giving rise to a claim is not reported and/or a high quality investigation is not undertaken, should the NHS LA be entitled to withhold part or all of the indemnity for any subsequent claims arising from that incident under the CNST? Question 13: Should the CNST treat older and or larger claims differently for pricing purposes? If so, what should be the threshold e.g. 10 years old and/or more than 2 million in value? Page 30

31 Question 14: If older and/or larger claims are treated differently, what alternative approach should be taken? Should there be a greater degree of risk pooling for these liabilities? If so, should risk pooling be restricted to a particular segment of the membership e.g. trusts delivering maternity services? Question 15: Should the NHS LA provide incentives under the CNST in order to fund safety initiatives? If so, can you suggest initiatives or actions which are evidenced to reduce the harm that leads to claims which should benefit from funding? Question 16: Should the NHS LA offer additional services under the CNST to support the reduction of harm? If so, what types of service would be of most benefit? Question 17: If such services are provided, should they be funded by way of purchase of a subscription or the cost apportioned across all members? Do you have any alternative suggestions for the funding mechanism? Question 18: Are there any other options that the NHS LA should consider? If so, please provide details. Copyright 2016 NHS Litigation Authority Page 31