Commissioning Toolkit for Providers

Transcription

1 Commissioning Toolkit for Providers A world in which rheumatological musculoskeletal conditions are diagnosed early, treated effectively, and prevented where possible

2 Introduction to the Commissioning Toolkit for Providers This toolkit has been created in response to changes to the NHS introduced by the Health and Social Care Act, which passed into law in March It is aimed at assisting healthcare professionals involved in rheumatology MSK services to understand the future map of the NHS and provide them with helpful resources that facilitate local service improvement and redesign. Context: The Health and Social Care Act This legislation sets out a timetable for the abolition of primary care trusts (PCTs) and strategic health authorities (SHAs) and their replacement by new primary care and community-based services, most notably Clinical Commissioning Groups (CCGs) that will assume responsibility for the commissioning of services. The NHS reforms are intended to: widen patient choice deliver 20 billion savings by 2015 improve health outcomes through quality standards, with providers being paid via Payment by Results (PbR) according to the quality of their performance The devolution of responsibility for commissioning to GPs, who will come together to form CCGs, shifts resources from secondary care to primary care. The reforms also mean services can be commissioned from any qualified provider, opening the door to the independent sector. In this changed landscape, clinicians and allied healthcare professionals involved in the delivery of rheumatology MSK services must look to the development of new services outside of a secondary care setting. Commissioning Toolkit for Providers 1

3 About this toolkit This toolkit aims to help rheumatology MSK healthcare professionals to develop new skills and roles, together with new care pathways, that will deliver services for the benefit of patients. It has been designed as a series of modules that can be read either as a complete package or as separate workbooks. The reforms introduced by the government will change the way we work. The creation of new pathways of care and new services will not be without its challenges. But the move towards primary care and community-based services also presents opportunities, not least for the earlier diagnosis and treatment of rheumatic diseases, long a goal of our community. This guide aims to provide professionals engaged in rheumatology MSK services with the tools and knowledge they need to make the most of these opportunities. Topics covered include: Module Understanding the NHS Reforms 1 Payment by Results (PbR) 2 Clinical Commissioning Groups (CCGs) 3 Redesign of Healthcare 4 Matching Capacity and Demand 5 The Need for Patient Involvement in Service Redesign 6 Business Cases 7 Alternative Provision 8 Procurement and Tendering in the NHS 9 Project Management 10 What You Need to Know about Common Data Used by Commissioners 11 Marketing Yourself in the NHS 12 Decommissioning and Disinvestment: An Overview 13 2 Commissioning Toolkit for Providers

4 Understanding the NHS Reforms 1 Understanding the NHS Reforms A world in which rheumatological musculoskeletal conditions are diagnosed early, treated effectively, and prevented where possible BSR The British Society for Rheumatology

5 Understanding the NHS Reforms This opening module looks at the current and recent reforms to the NHS. It outlines the main levers for change and examines the possible impact some of these may have on the delivery of outpatient-based clinical services. This chapter is intended as a brief introduction to the issues. Some of the key areas of the reforms will be looked at in greater detail in later modules. Why the need for healthcare reform? One of the main aims of reforming the current NHS system is to modernise the way the commissioning system operates to satisfy the increasing healthcare needs and expectations of the population; another is to ensure the NHS remains sustainable in the tighter current financial circumstances 1. The government has pledged to focus on the way the NHS responds to patients, and the outcomes it achieves, by tackling variations in healthcare delivery and outcomes through improved productivity. Its reforms concentrate on the form and function of healthcare commissioning, the delivering of value for money and the promotion of full integration of patient pathways across all sectors of the NHS. - Sir David Nicholson, the Chief Executive of the NHS in England 2, has stated that:...it is critical that we continue to innovate for our patients as we design the health and care system of the future, ensuring we improve the quality of care for our patients, whilst making historic levels of financial savings to reinvest in frontline services. The drive to tackle inequalities in healthcare delivery and outcomes, as well as deliver value for money, continues work undertaken by the previous government. It set up the National Clinic for Health and Clinical Excellence (NICE) in 1999 to produce guidelines on health technologies, Commissioning Toolkit for Providers 3

6 clinical practice and public health. Of most relevance to providers of musculoskeletal rheumatology services are its guidelines on osteoarthritis and rheumatoid arthritis and its recommendations on the use of biologics in the treatment of rheumatic diseases. BSR and ARMA take an active role in the consultations that lead to the development of NICE guidelines. In addition, they have produced guidelines of their own, most notably BSR s Top Ten Quality Standards for RA published in January NICE has also sought to improve standards in primary care through the introduction of the Quality and Outcomes Framework (QOF) for GPs. This voluntary scheme rewards GPs for how well they treat patients. A basic QOF benchmark for musculoskeletal conditions has been published, with a further set of targets for RA currently in development. In order to try to understand the continued need for healthcare reform, it is first necessary to try to understand and identify the drivers that influence the constant policy changes: Rising public expectation: While the NHS continues to deliver: shorter waiting times improved access to services better clinical outcomes it still falls short of giving people the control, choice and convenience they expect in other parts of daily living. Services in the future need to be more: responsive convenient accessible Changing demographics: The UK has an: aging population increasing number of people with long-term conditions this means that the NHS, with its local authorities and other partners, needs to focus more on promoting good health wellbeing independence and as a consequence there will be implications for how services are organised and provided. Medical technology: Changes to technology are transforming the ability of the NHS to: prevent cure and manage disease however, they are also creating new costs and a need to change where, and how, services are provided and configured. Variations in quality, safety, access and value for money: While the NHS professes to be a national health service, there continue to be variations in the care and treatment on offer in different parts of the country and in clinical outcomes. 4 Commissioning Toolkit for Providers

7 It is the government s wish that all of these, and other, issues are addressed via the implementation and rollout of the next phase of NHS reforms. NHS reforms under Labour ( ) The previous Labour government initiated reforms which had, and continue to have, a profound impact on the NHS system. The introduction by Labour of Payment by Results (PbR), practice-based commissioning (PBC), wider patient choice and the active introduction of the independent sector resulted in major changes to the way that NHS functions and services were commissioned. The emphasis moved quite appropriately from transactional processes, to ones that were more patient focused, and determined by quality and clinical outcomes, as money began to flow with the patient through the system. It is not about doing the old things differently, or doing the old things faster, but the need for true transformational change The Labour reforms were intended to reinvigorate the system, and were aimed at providing more balanced incentives for service providers. Through more effective commissioning, they aimed to ensure transparency, plurality of providers, and patient choice all of which became key components of healthcare. In 2000 with the publication of the NHS Plan 3 the then Labour government set out a vast and ambitious rolling programme of investment and reform. Initially the focus was on building and developing both the workforce and physical capacity. Priority was given to tackling elective waiting lists, improving the experience within primary care, and reducing waits within emergency departments. From 2002 the NHS received unprecedented levels of investment 4 with increases on average of 7.4% in real terms, year on year. In addition, there was an increase in capacity with the introduction of the private sector into the traditional NHS market to tackle long waiting lists and help achieve the 18 week maximum referral to treatment (RTT) time for elective care. At the time, the achievement of the 18 week RTT target was, arguably, the most challenging target the NHS had faced, and was the main thrust of organisational activity for many clinicians and managers in provider Trusts. While this target was an initiative introduced by the previous administration, the principles that underlay it were enshrined into the NHS Constitution 5 before the election of 2010 and remain in place today. The Labour government set out a clear direction of travel for the delivery of healthcare for the future, with the delivery of more care closer to home, improvements to community services, and the development of new models for community hospitals 67. All of this investment was key to ensuring the Commissioning Toolkit for Providers 5

8 systematic reform needed to commission more consistent services in order to deliver improved health and a reduction in health inequalities, and to deliver the best possible care for the population within the resources available. Main themes of the coalition government NHS reforms (2010- ) Published in July 2010, the government s White Paper Equity and Excellence: Liberating the NHS 8 pledged that only by putting patients first and trusting professionals will we drive up the standards, deliver better value for money and create a healthier nation. The government vowed to uphold the values and principles of the NHS... comprehensive... available to all, free at the point of use and based on clinical need, not the ability to pay and the White Paper put forward the following strategies for the government s redesign of the NHS: 1 Putting patients and public first with shared decision-making and no decision about me, without me. 2 Improving health outcomes with highly developed quality standards, vigorously implemented and providers paid via PbR according to their performance. 3 Devolving power and responsibility for commissioning to the clinicians closest to the patient: the General Practitioners (GPs), who will come together and form Clinical Commissioning Groups (CCGs). 4 Cut bureaucracy and abolish Primary Care Trusts (PCTs) by March Deliver 20 billion of savings by 2015 to reinvest in clinical services. The challenges Quality, Innovation Productivity and Prevention (QIPP) The QIPP initiative remains the most important priority for the NHS over the coming 3-4 years 910, and is the umbrella term used to describe the approach the NHS is taking at local, regional and national levels to reform its operations and redesign services in the light of the economic climate 11. The NHS is expected to achieve 20 billion savings across the service over the next four years to March 2015, you may hear this referred to as the [David] Nicholson Challenge. Savings will then be reinvested back into the service to continually improve the quality of care. The savings are expected to come from the following areas: 40% savings from provider efficiencies (driven by tariff) 20% from service change or redesign 40% from input costs or NHS costs where the level is centrally controlled, e.g. pay increments. 6 Commissioning Toolkit for Providers

9 NHS organisations at regional and local level have QIPP plans in place to address the challenge and, supporting these, are twelve national workstreams Five workstreams relate to the commissioning of care. Five workstreams relate to the running and staffing of NHS organisations. Two workstreams focus on primary care commissioning and contracting, and digital technology. Each will be directed by an experienced NHS lead. The commissioning landscape of the future Clinical Commissioning Groups (CCGs) These new organisations, currently under development, will take over their new role from April 2013, when they replace PCTs and become statutory organisations in their own right. They will be responsible for approximately 60% of the total health budget, and it is the intention of the government to shift the commissioning process and decision-making as close as possible to the individual patient. CCGs will require the full input of all clinical and professional staff working together with the local community. They will have to work alongside local authorities, the third sector, and other partners to gain the best value for money services for their local population. CCGs are explored in much more detail in module 3. The NHS National Commissioning Board (NCB) The new NCB will have prime responsibility for ensuring that the NHS delivers better outcomes for patients within current budgetary constraints. The NCB will support, develop and hold to account CCGs, but will also commission directly around 20bn of services, including specialised services and all 35,000 primary care service contracts. At Department of Health (DH) level, the Secretary of State will set the objectives for the NCB and will hold it to account for performance and delivery. In addition to authorising, monitoring and performance managing CCGs, the NCB will also: Promote equality, diversity and reduce health inequalities Develop commissioning guidance, standard contracts, pricing mechanisms and information standards. Set the strategic direction for the NHS and CCGs. Work with patient and public involvement to ensure that healthcare is truly patient led. Clinical networks and senates National clinical networks for cancer, stroke and heart, and critical care have been in place for over 5 years and have worked hard to encourage collaborative and integrated working across their specialist areas. At present their long-term structure and future is still to be decided, but their role of supporting improvements in pathways and outcomes of care looks likely to continue. Commissioning Toolkit for Providers 7

10 The formation of clinical senates is a recommendation that has come out of the consultation following the publication of the 2010 White Paper and their form, function and structure is also still to be fully decided. However, they are expected to bring clinical leaders together across broad areas of the country to provide expertise and strategic advice and innovation to support CCGs. They may also provide advice on the clinical aspects of commissioners proposals for large-scale service change or reconfiguration 12. So what about the current strand of reforms? The diagram gives a high-level view of the main reform drivers for 2011/12 13 and beyond: So why are further changes necessary? We live in a fast-moving consumer-led age. Many facets of daily life, such as transport, banking, shopping and telecommunications have been radically modernised and transformed over the past decade but, according to the government, health services lag behind. While significant work has been undertaken at individual organisation and speciality levels, the government intends to transform the entire system of care delivery through its clinically led reforms. All parts of the NHS system need to embrace the concept of transformational change at system and organisational level if the entire system is going to achieve the objectives set out by the government and deliver the QIPP 20 billion by March This frontline-driven CHOICE A stronger voice for patients CCGs commissioning on behalf of patients VALUE FOR MONEY & IMPROVING OUTCOMES Money following the patients, rewarding the best and most efficient providers, giving others the incentive to improve Providers challenge of 4% overall efficiency saving alongside 1.5% cut to tariff Shared decision-making Better patient experience No decision about me, without me Value for money QIPP 20 billion to be saved by 2015 Innovation and service redesign utilising savings from fully intergrating services The main emphasis of the current reforms is to ensure that patients are at the centre of the reforms, care, and commissioning is strengthened to make sure the NHS is fit for purpose and plans are future-proof ANY QUALIFIED PROVIDER Freedom to innovate and improve services Commitment to shift care into community settings 8 Commissioning Toolkit for Providers

11 transformational change will not only affect current processes, but challenge and change mindsets, cultures, activities and organisational powerbases, and be based on long-term sustainability and continuous improvement. The reforms are far-reaching and not just tinkering at the edges of the current system. They will introduce: More choice and voice for patients, giving patients real power, backed up by stronger commissioning. The development and implementation of clinically led commissioning by the new CCGs. More diverse competing providers entering the market place, challenging the historical monopoly market, under the initiative of Any Qualified Provider (AQP) (see module 9). There will be greater freedom to innovate and improve services for patients. The new emphasis will be on quality, not quantity. Further development of PbR with a wider range of incentive-based payments for achieving best practice, promoting innovation (see module 2), integrated pathways and delivering value for money. Lastly, there will be a sustained focus on technology and information management, in order to underpin both the reforms and the delivery of better clinical outcomes, safer care and treatment. Summary It is clear that the NHS needs to continue to evolve, develop, innovate and change in an extremely challenging financial climate. The reforms now being implemented will transform the NHS forever. As we have already seen, one of the key drivers for these radical and far-reaching reforms is the implementation of clinically led commissioning. While recent years have seen incredible levels of improvement in waiting times, these will prove difficult to sustain in the long term. However, the progress made to date is real and should not be dismissed or underestimated. As you will see from module 4 of this handbook, we do not always know the full story. Previous and current waiting time pledges focused on parts of a patient s journey not the entire continuum of care. The only way the 18 week RTT pledge and the 2 week cancer wait pledge will continue to be delivered is to concentrate on the entire patient process, seek to ensure integrated care and to redesign the entire pathway from beginning to end. This can be achieved through genuine clinical engagement, the development of new alternatives to existing services and the effective use of information management and technology. As we have already seen, doing more of the same is no longer an option. Commissioning Toolkit for Providers 9

12 While we cannot be certain of what the NHS will look like by 2015, one thing we know for sure is that rheumatology MSK services will be encouraged to develop and change as part of the new system. There will be no let-up in the pace of reform. The only certainty is that the control will be held by local clinicians. The reform strands are to be used as tools to transform local services, while improving quality, outcomes and efficiency with central control giving way to local innovation, dialogue and implementation. The challenge to you, as a frontline clinician and/or manager delivering rheumatology MSK services, is to embrace these reforms and transform your service at a local level. 1 Department of Health. Developing the NHS Commissioning Board. London 8th July (Gateway ref:16222) 2 Health Service Journal supplement 29 th September Department of Health. The NHS Plan: a plan for investment, a plan for reform. London HM Treasury, 2002, 5 Department of Health. The NHS Constitution. London and quote (Gateway ref: 13506) 6 Department of Health. Our Health, Our Care, Our Say, A New Direction for Community Services. London Department of Health. Our Health, Our care, our community investing in the future of community hospitals and services. London Department of Health. Equity and Excellence: Liberating the NHS. London. July (Gateway ref: 14385) 9 Department of Health. Dear Colleague letter from the Office of Sir David Nicholson. Equity and Excellence: Liberating the NHS managing the transition and the 2010/11 Operating Framework. London. 15 th December (Gateway ref: 15272) 10 Department of Health. The Operating Framework for the NHS in England 2011/12. London. 15 th December (Gateway ref: 15216) 11 British Medical Association Health Policy and Economic Research Unit. Briefing note. London. May Department of Health. Dear Colleague letter from Dr Kathy McLean, medical director, NHS East Midlands. London 15th September. (Gateway re: 16614) 13 Judith Smith & Anne Charlesworth. NHS reforms in England: Managing the Transition. Nuffield Trust. London. March Commissioning Toolkit for Providers

13 Payment by Results (PbR) 2 Payment by Results (PbR) A world in which rheumatological musculoskeletal conditions are diagnosed early, treated effectively, and prevented where possible

14 Payment by Results (PbR) In this module we will look at what Payment by Results (PbR) is and what it is not. We will see how it works and will set some challenges for you and your team. It is aimed at providing practical guidance and can be used in conjunction with the links as a separate work resource to guide you through PbR. Background and history In July 2000, the NHS Plan 1 introduced the government s intention to link the allocation of funds for hospitals to the activity they undertake. The Plan stated that to get the best from extra resources there would be major changes to the way money flows around the NHS and there would be a differentiation between incentives for routine elective surgery and those for emergency admission. Historically, hospitals were paid according to block contracts a fixed sum of money for broadly specified services or cost and volume contracts which attempted to specify in more detail the activity and payment. But these arrangements offered little incentive for providers to increase throughput, since any extra activity over contract specifications was rewarded at a marginal cost of between 20% and 40%. The early aims of PbR were to pay different types of providers fairly and transparently to support patient choice, reward efficiency and encourage activity to reduce waiting times. If introduced overnight, PbR would have had a significant impact on the income of some NHS providers and the purchasing power of the Primary Care Trusts (PCTs) that commissioned services from them. To avoid this, there was a transition period designed to ensure that the move to the tariff was manageable and, by removing discussions on price in contracts, ensure that the financial impact did not destabilise NHS organisations. A brief summary of the introduction of PbR: In 2003/04 the new system of PbR was introduced. PbR was extended in 2004/05. By 2005/06 it covered elective care for the majority of hospitals. In 2006/07 PbR was extended to include non-elective, accident & emergency, outpatients and emergency admissions for all Trusts. Commissioning Toolkit for Providers 11

15 In 2009/10 the national tariff for admitted patient care and outpatient activity was underpinned for the first time by Healthcare Resource Group 4 (HRG4) currency. (HRG4 included new unbundled HRGs for areas such as critical care, chemotherapy, radiotherapy and specialist palliative care, but the underlying data was not considered robust enough to introduce national tariffs for these areas). In 2009/10 a planned same day (PSD) tariff for day cases and outpatient procedures was introduced. Like the combined elective and day case tariff, it was designed to incentivise a further shift in care towards more cost-effective settings. In the first best practice tariffs (BPTs) were launched in four high volume areas where there was significant unexplained variation in clinical practice: cataracts, cholecystectomy, fragility hip fracture and stroke. In 2010/11 saw the introduction of mental health currencies. The tariff began the process of a change in direction brought about by the tougher economic climate, e.g. the tariff uplift was 0%, including a 3.5% efficiency requirement that offset the 3.5% inflation in pay and prices. The 2011/12 Tariff was launched in early 2010 (updated in August 2011) and is guided by the following key principles: (a) incentivising quality and better patient outcomes (b) embedding efficiency within the tariff (c) integration and patient responsiveness (d) expanding the scope of PbR. During 2011/12 we have seen no significant structural changes to the tariff. However, it must be born in mind that less than 65% of hospital activity is PbR by tariff, so areas of discussion and negotiation on price and local prices remain. How PbR differs from the previous system PbR moves the commissioning and contracting of services from an historical (and often inaccurate) block basis, where income is not linked to the number of cases treated but merely relies upon the uplifting of historical budgets by: inflation agreed service developments/reductions agreed cost pressures cost-reducing efficiency saving (CRES) targets While this system was easy to administer, i.e. 1/12 of the agreed annual contract was paid to provider Trusts by commissioners on a monthly basis: it did not allow for changes in activity, it was not sensitive enough to identify inefficiencies in the system, it was not sensitive enough to identify expensive services which were being financially supported by more cost-effective departments, it did not necessarily reflect actual clinical need, but merely historical provision (which can be, and often are, different). 12 Commissioning Toolkit for Providers

16 PbR was introduced to support healthcare policy and the strategic aims of the NHS and, as these change and develop over time, so will PbR. The tariff is increasingly seen as a vital means of supporting quality outcomes for patients and delivering additional efficiency in the NHS. A quick recap of what PbR is PbR is the current financial system across the NHS in England that directly links the amount and type of work healthcare providers undertake and the amount they are paid for, together with the amount commissioners are charged for this activity. The system is underpinned by a national tariff of prices, which is set annually. PbR, when linked with the other reforms outlined within this guide, is aimed at ensuring clinical services are commissioned based on need, quality and outcome, not price. Which services are covered by PbR? PbR now covers: all elective care the majority of non-elective care 90% of outpatient services accident & emergency services The main thrust of this new, transparent, rules-based finance regime is to encourage commissioners to commission services based on need and ensure that providers only receive payments for the actual activity they undertake. There are, however, some exclusions from PbR and these include: high cost low volume interventions expensive drugs and interventions Mental health and community services were previously excluded from PbR, but this has recently changed. Mental health Mental health has emerged as the number one priority for expansion of the scope of PbR, and the DH is committed to make national mental health currencies available for widespread use. In 2010/11 the DH published a national mental health currency the care cluster. Developed initially by the NHS in Yorkshire and Humber and the North East, the clusters reflect patient need over specific periods of time and apply to both admitted patient and community care. Mental health providers will have to allocate their patients to the care clusters by the end of 2011 and in 2012/13 the clusters will be used as the contract currency, with local prices agreed. Community services Liberating the NHS 6 announced plans to accelerate the development of currencies and tariffs for community services. Services (such as health visiting and district nursing) have had issues with the collection of consistent data, which has impeded the move away from block contracts, but there have been recent developments in community service tariffs, e.g. the introduction of a smoking cessation currency that pays providers on the basis of patients who quit smoking at four and 12 weeks. A currency for podiatry is in development. Commissioning Toolkit for Providers 13

17 How does PbR work? The National Price (Tariff) Each year the DH publishes a national tariff of prices for all services covered by PbR 7. The 2011/12 tariff published in December 2010 provided prices for: inpatient and day case healthcare resource groups (HRGs) outpatient specialities including prices for procedures undertaken within an outpatient setting A&E attendances and details of PbR exclusions. Within the national tariff the DH distinguishes between elective and non-elective activity. Three key principles guide the design of the tariff: Incentivising quality and better patient outcomes, for example through expanding the number of best practice tariffs (BPTs). Embedding efficiency within the tariff, for example by changing the way in which long stays are reimbursed. Laying the foundations for further expansion of the scope of the tariff, for example by mandating the use of currencies for contracting. In addition, commissioners are charged for patients with extended lengths of stay (past what is referred to as a trimpoint), but may also receive a reduction in the tariff price for short stays. National tariff prices also take into account the age of patients and the complexity of treatment. Elective and non-elective activity for example, within the 2011/12 national tariff: HRG HRG Name Elective Elective Non- Non- Code Spell Long Stay elective elective Tariff ( ) Trimpoint Spell Long Stay (days) Tariff ( ) Trimpoint (days) HB22C Major knee procedures for non-trauma cat1 w/o cc HB56C Minor hand procedures for non-trauma cat1 w/o cc HB61B Major shoulder & upper arm 5, ,119 6 procedure for non trauma w/o cc HD21C Soft tissue disorders w/o cc HD23C Inflammatory spine, joint or connective disorders w/o cc Outpatient services As part of the tariff, the DH publishes prices for all outpatient attendances. The national tariff covers 57 specialties, including rheumatology MSK services, and is split between first and follow-up attendances it also differentiates between single and multi-professional attendances. 14 Commissioning Toolkit for Providers

18 Outpatient Treatment Function First First Follow-up Follow-up Attendance Attendance Attendance Attendance Single Multi- Single Multi- Professional professional Professional professional ( ) ( ) ( ) ( ) 110 Trauma & Orthopaedics Pain management Rheumatology Prices for initial consultations are higher, a differential designed to reflect the greater amount of time clinicians spend with patients at their first attendance. Note also the higher price for multi-professional attendance, which is aimed at the recovery of all of the MDT costs associated with this activity. The current PbR rules make no provision for providers to charge commissioners for patients who do not attend their appointments (DNAs). How are tariff prices calculated? The tariff price is based on the national average NHS costs for that HRG. Because of the complexity of the system there is always a time lag. The 2011/12 prices, for example, are based on 2009 prices (adjusted for inflation). These national average costs are derived from the annual reference cost* submission. All NHS providers are required to calculate the actual cost of providing their service on an annual basis. *The reference cost reflects the actual cost, or as close to the actual as the current system allows, as opposed to the budgeted costs. Reference costs, (as a consequence, the tariff price) include an appropriate share of the provider units overheads and support functions. The tariff price also takes into account medical and surgical supplies, drugs and diagnostics, etc., except where specifically excluded. National price and regional variation While there is a national price, the DH recognises that the cost of running a hospital varies across the country, i.e. the cost of living in Camborne, Cornwall is not the same as living in Belgravia, London. As a consequence, an adjustment is made centrally to reflect this cost difference. A regional adjustment, the Market Forces Factor (MFF) is applied to each NHS Trust and PCT on an annual basis. MFFs are applied to the tariffs in the form of a multiplier to smooth out bumps. Differences across the country are to be expected, but within a smaller geographical patch their impact can be surprising and can cause up to a 20% difference in actual costs. The MFF is paid directly to provider Trusts, with corresponding adjustments made to commissioner budgets on an annual basis. On average, the MFF adds about 8% to the value of the tariff. Action required Using the Department of Health published tariff ( check to see what the MFF is for your Trust, compared to a neighbouring provider calculate and compare the impact on income generated for both your and your neighbouring trust with the application of the index Commissioning Toolkit for Providers 15

19 So what about the independent sector? At the present time both non-acute services and the independent sector are outside of PbR. In fact, it could be argued that the DH deliberately excluded this area to encourage plurality of providers. (See modules 4, The Redesign of Services and Module 8, Alternative Service Provision). While the introduction of PbR has been seen by many as a stick, it should be considered alongside the other reforms, such as increased plurality, choice and the introduction of CCGs, as an opportunity to understand activity and patient flows, and to encourage clinicians to explore new ways of developing and redesigning services. The clinical boundary between primary and secondary care has never been very clear, and this is often true when providing outpatient-based specialities such as rheumatology MSK services, which do not always need the highly technological and costly infrastructure of an acute hospital setting. CCGs will be looking to save money, and many could see the provision of rheumatology MSK services as a quick win and redesign opportunity for them. With acute Trusts looking to make considerable efficiency savings over the next 3-5 years, traditionally hospital-delivered services may be reviewed, and in some cases re-modelled. To ensure that PbR is not detrimental to you as a clinician and your patients, learn the rules of PbR and use its power in forging new relationships with CCGs, and even perhaps consider what options are available to you as an alternative provider to make sure that the money really does follow the patient. So what are the key elements of PbR? There are five main elements: NHS Reference Costs Healthcare Resource Groups (HRGs) NHS National Tariff (as already discussed above) Market Forces Factor (MFF) Best Practice Tariffs (BPTs) NHS Reference Costs These costs are an accurate analysis of what the NHS actually spends on an annual basis, i.e. Speciality by speciality Type of activity by type of activity HRG by HRG The reference costs are produced annually and reflect the expenditure within the NHS for the most recently completed financial year. They use a standard costing methodology and a standard system for presentation, which allows easy comparison of provider Trusts and services. Reference costs indicate whether your organisation is above or below the national average. With 100 being the national average, for example, a trust with a reference cost of 117 is 17% more costly than the national average, and an organisation with a reference cost of 82 is 18% below the national average. Reference costs form the basis of the national HRGs and tariff price list. While they take into account all costs and all 16 Commissioning Toolkit for Providers

20 recorded activity, as mentioned before each tariff is several years in the making, so there is always a catch-up. Cost and activity data from year 1 are collected in year 2, analysed in year 3 then used for prospective payments in year 4. This lag between collecting data and publishing a tariff is of limited significance if costs are fairly stable over time, as long as prices are updated in line with inflation, some account is taken of changing clinical practice and technology, and time is allowed for the testing of the tariff within the NHS. Healthcare Resource Groups (HRGs) HRGs are groupings of treatment episodes that are similar in resource use and clinical response. They are a standardised method of analysing clinical procedures and therefore hospital activity. Similar systems have been used in Norway, Australia and the US for a number of years. The groupings are set nationally and are widely accepted and understood. However, they have not necessarily been set with a true flow of funds following the patient in mind, and in many areas remain relatively unsophisticated. It is recognised that HRGs need further refinement for complex cases, i.e. in critical care, mental health and for patients with long-term chronic conditions such as arthritis. In addition, further refinement needs to be achieved for some outpatient-based specialities where procedures undertaken are, perhaps, not being costed and therefore charged to commissioners at the appropriate rates. HRGs directly contribute to the formation of the national tariff with some 1,500 HRG s being listed across 21 chapters for 20011/12 in HRG 4. Each HRG is supported by a detailed clinical definition. Market Forces Factor (MFF) This is an adjustment made to the tariff as a multiplying index factor reflecting the different costs of providing healthcare across the UK. The index used to calculate the MFF has many component parts which include: staff costs, London weighting, land and building costs. In 2011/12 the MFF has been updated to reflect the most recent available data but there have been no changes to the methodology for calculating the MFF. What are Best Practice Tariffs (BPTs)? A number of BPTs have been priced and structured for chosen service areas to improve quality and value for money. BPTs have been developed in conjunction with clinical experts, providers, commissioners and other key PbR governance groups. Current BPTs focus on service areas characterised by significant unexplained variation in current practice, where an evidence base and clear consensus of clinical best practice is available. These are: Primary hip replacements Primary knee replacements Interventional radiology uterine fibroid embolisation Interventional radiology endovascular aortic repair (EVAR) Day cases Cholecystectomy (gall bladder removal) Commissioning Toolkit for Providers 17

21 Adult renal dialysis Transient Ischaemic Attack (TIA) Cataracts Acute stroke Fragility hip fracture For a bunion operation carried out with keyhole surgery on a day case basis (HB35C), under the BFP payment mechanism the provider receives an additional 200 on top of the base tariff price for achieving best practice when treating patients. The same principle will apply where best practice has been adopted for major hip procedures. Both these examples are detailed right: In 2011/12 revisions were made to the existing BPTs for fragility hip fracture and stroke to increase the payment differential between best practice and non-best practice approaches. 2011/12 also saw the introduction of additional mandatory BPTs as listed below: Interventional radiology Endovascular Aortic Repair (EVAR) for patients with Abdominal Aortic Aneurysm (AAA) and Uterine Fibroid Embolisation for women with uterine fibroids. This is to achieve improved patient outcomes and experience by incentivising these procedures, where clinically appropriate. The aim is to develop specific HRGs to make reimbursement for them more visible in the payment system. HRG HRG name Best practice Base Best practice Code tariff ( ) tariff ( ) differential ( ) HA21C Major hip procedures cat1 for trauma w/o cc HA21C Major hip procedures cat1 for trauma w/o cc HB35C Major foot procedures for non-trauma cat1 w/o cc Incentivising higher day case rates for cholecystectomy and 12 new procedures in 2011/12 (see below). This is to incentivise surgery on a day case basis, where clinically appropriate, that provides a service that is not only more efficient but also provides a better experience for patients. The DH will set a price differential so that day case prices are relatively higher than the ordinary elective price to reflect the cost of providing higher day case rates. Breast surgery: Sentinel node mapping and resection Simple mastectomy General surgery: Repair of umbilical hernia Primary repair of inguinal hernia Repair of recurrent inguinal hernia Primary repair of femoral hernia Gynaecology (/Urology): Operations to manage female incontinence 18 Commissioning Toolkit for Providers

22 Orthopaedics: Therapeutic arthroscopy of shoulder subacromial decompression with or without internal fixation and soft tissue correction Dupuytren s Fasciectomy Urology: Endoscopic resection of prostate Resection of prostate by laser Primary elective total hip and knee replacements to incentivise best practice clinical management, improve the patient experience, clinical outcomes and reduce lengths of stay. Adult renal dialysis in order to improve care for patients undergoing haemodialysis. Transient ischaemic attack (TIA) a tariff for timely and effective outpatient systems for treating patients with TIA to complement the acute stroke BPTs. Paediatric diabetes a non-mandatory payment to encourage the running of high quality paediatric diabetes clinics. In 2012/13 the DH is planning to introduce further currencies for: Chemotherapy ( 0.8 billion) Radiotherapy ( 0.3 billion) HIV outpatients ( 0.2 billion). Acute services remaining outside the scope of PbR include a number of specialised services such as burns, palliative care and transplants, and other services such as non-consultant led outpatient attendances where there is a concern about the under-reporting of activity. Why should commissioners adopt Best Practice? Improved health service for the local population. Increased value for money. Alignment with the NHS Quality, Intervention, Productivity and Prevention (QIPP) agenda. Improved and sustained Care Quality Commission (CQC) Commissioning rating. Reduced tariff prices over time as uptake increases. Why should providers adopt Best Practice? Achievable, i.e. BPTs are built on widely accepted clinical evidence. Improved quality of service and patient experience. Quality is recognised and rewarded, i.e. financial incentives. Clinical and financial engagement. Increased ability to meet longer-term efficiency and quality challenges. Improved and sustained Care Quality Commission (CQC) Quality of Services rating. Efficiencies and reductions for 2011/12 There is a national efficiency requirement of 4% and pay and price inflation of 2.5%. Overall, there is a tariff reduction between 2010/11 and 2011/12 of 1.5%. The DH will introduce new flexibility that will allow commissioners and providers, in exceptional circumstances, to agree a price below (but not above) the mandatory tariff. This must not in any way affect choice, quality or competition. Commissioning Toolkit for Providers 19

23 However, the introduction of this flexibility is not intended to herald the development of price competition and its use will be closely monitored. Non-payment for emergency readmissions In 2011/12 there will be no payment for an emergency admission within 30 days of discharge from an elective admission (exemptions to this are children under 4 years of age, maternity and cancer patients). There will be no payments above a locally agreed threshold, set to deliver at least a 25% reduction in readmission rates over the previous year where possible, for an emergency admission within 30 days of discharge from a non-elective admission. There will also be an introduction of year of care tariffs, agreed locally, for a number of named, frequently admitted patients. Commissioners are also going to be required to declare savings made as a result of this policy and to work jointly with providers, GPs and local authorities to support post-discharge schemes. Expanding the scope of PbR The DH intends to significantly expand the scope of PbR, which will gather pace in future years. In 2011/12 the expansion of PbR will focus mainly on: Currencies rather than mandatory tariffs. It will bring adult renal dialysis into the scope of the best practice tariffs by mandating a transition path to national price. It will mandate currencies for contracting for adult and neonatal critical care. It will seek to amend the scope of ambulance service reference cost data collection to underpin currencies for use in 2012/13. A national currency for cystic fibrosis services will be mandated. A local currency for podiatry services will be developed. Mental health care clusters will be mandated. Commissioning for Quality and Innovation (CQUIN) A further framework that has been developed for healthcare commissioning is the CQUIN scheme 8. Introduced in April 2009, the CQUIN scheme is a national framework for agreeing locally agreed quality improvement schemes that enables commissioners to reward excellence by linking a proportion of English healthcare providers income to the achievement of local quality improvement goals. The aim of CQUIN is to embed quality within commissioner-provider discussions and to create a culture of continuous quality improvement, with stretching goals agreed in contracts on an annual basis. The CQUIN framework is also important for implementing NICE Quality Standards, for improving patient experience and for driving improvement against outcomes. So how do CQUINs work? CQUINs make a proportion of provider income conditional on the achievement of ambitious quality improvement goals and innovations agreed between a 20 Commissioning Toolkit for Providers

24 commissioner and a provider. A CQUIN scheme should address the three domains of quality: safety, effectiveness and patient experience; and reflect innovation in healthcare provision. If achieved, it enables the provider to earn a full CQUIN payment of 1.5% of the actual outturn value of the provider contract. Commissioners can also set CQUIN goals that describe a quality improvement incentivised through a CQUIN scheme, e.g. to improve post-operative rehabilitation of patients following total knee replacement. CQUIN schemes can be used to address variations in different provider performances and can incentivise changes across care pathways and between organisations. They do this by requiring individual providers to contribute in a specific way to a wider change across the health economy, which can generate improvements in prevention, patient focus and productivity. Some challenges for you Because reference costs and the national tariff are derived using: cost data, taken from your Trust s accounting system activity data, which is collected throughout the year You need to be sure that your service activity is reflected in the best possible light. Budget and cost awareness under PbR The national tariff reference costs and provider unit income will only be accurate if all clinical activity undertaken within a provider unit is recorded in a timely and systematic manner. A clinical service needs to ensure that all activity is recorded and recorded accurately. Ensure that all activity undertaken as outpatient, day case, or inpatient are recorded. Ensure that all clinic outcomes are closed down, and all interventions with all members of the MDT are recorded within your organisation s patient administration system. Unrecorded activity will not only mean loss of income, but will also mean you are undervaluing your service outputs. Using the tariff and your services clinical work programme schedules, you can simply and easily see if income and expenditure are accurate. Counting your activity Action required Action required Are you able to accurately cost your service (with appropriate help from the relevant finance team)? Are you able to measure the expected income? Ensure you record all your activity Undertake a small audit to ensure all of your clinical activity is being appropriately recorded and charged to commissioners Ensure the clinical activity undertaken is coded correctly Can you easily measure what you do? Are you able to measure who does what within a care pathway? (This is really important when looking at unbundling the tariffs and costing out what you do as part of a tender to provide services). Working through module 4 will help you to map out and cost a typical patient journey. Do you have input into the reference cost process within your trust? Are you aware of how the costs/activity associated with your service are apportioned? Commissioning Toolkit for Providers 21