On the money? NHS England gets serious about allocations

In times of austerity it's particularly important that money gets to the areas that need it most. And in the health care system, it's the arcane – but vital – process of resource allocation that tries to do that. Amidst the complexity of the reforms, there were some changes announced to allocations; with the biggest ones being the new allocations to local authorities for public health, and NHS England being given responsibility for allocating the NHS budget, something that had previously been the Secretary of State's responsibility.

One of the first things NHS England did was to announce a fundamental review of resource allocation, following concerns that the current formula favoured healthier areas over less healthy ones, and underplayed unmet need. Last week – after a hiatus – it published more details of the terms of reference for that review, and trust me, they make fascinating reading.

The headline grabber is the frank admission that it might have to cut the budgets of some areas or organisations in real terms, to protect against instability in other services. This is a sign of the seriousness of the funding squeeze and a clear example of NHS England asserting its independence – no Secretary of State has ever been willing to tackle these issues so explicitly or so publicly.

But there's much more in this short document. For instance, you'll start to see the impact of the fragmentation of commissioning as a result of the reforms, with allocations to clinical commissioning groups and to NHS England’s local area teams, and the interaction with public health funding, as opposed to the single focus on primary care trusts previously.

You'll also find a determination to be more transparent about decision-making. The review will seek to tackle head on some of the criticisms of the way resources have been allocated in the past; for example, it explicitly states that previous decisions about the rate at which allocations grow (the pace-of-change policy) have been judgement-based rather than evidence-based; and it acknowledges the need to focus on better measurement and allocation for unmet need.

The terms of reference also raise the question of whether NHS England could go beyond its legal duties to reduce health inequalities. The current narrow definition of these duties as relating to access to NHS care and the specific outcomes from it ignores the huge economic, employment and social roles that the NHS plays in every community and therefore its much wider potential influence on people's health. The musing on this in the terms of reference is another indication of independent thinking. It also suggests – albeit in the longer term – that it will reappraise the reliance on utilisation-based approaches to resource allocation and consider the pros and cons of multi-year allocations.

But there are blind spots too. We argued in April that the most important thing for NHS England to define was whether resource allocation was simply a fair way to get money from the centre to where it was needed or whether it was a powerful and active policy tool. A lack of clarity on this has always been the Achilles heel of NHS resource allocation; with much of the work locked up in the dusty corridors of the Department of Health’s finance department, in isolation from wider policy goals. The refreshing focus on inequalities is welcome, but NHS England has the opportunity to transform resource allocation by aligning the money transparently with its wider policy objectives. In our review of the allocations process, we speculated how resource allocation could be designed to promote wider goals such as a clinically led NHS; an outcomes driven one; or an NHS more integrated and aligned with wider public services.

This review is more encompassing than anyone assumed when it was announced last year. Hopefully, given the ambitions on transparency we won't have to wait until its end-date, this time next year, to get the chance to see if it's really on the money.

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Comments

#40776 Doctor Alan Cleary
Member
The Law Society's National Committee Supporting Disabled Professionals

I am astounded that NHS non-medical staff managers have doubled in number since 1990.
Over the same period new inventions have doubled the theoretical output per manager. During the past 10 years the number of District Nurses has gone down by 40%. Off the record senior people have expressed the view that most NHS admin work would be done better and more cheaply by staff of a well-motivated and high-performing local authority where one exists nearby with the function just added on to the existing management structure.
AC

#40777 Ed Macalister-Smith
NHS Leadership Coach, ex-NHS CEO

Resource allocation has been the constant companion of my 25 year career in the NHS, working as I have done across the "affluent south" of the country. I'm not a specialist in this, so I make a few observations from the pragmatic position of a manager who has always worked from the assumption that it is government's job to allocate resources, and my job to live within those resources whilst delivering excellent services. I have also assumed that trying to change the weighting from a local level is a waste of time, having seen various very well argued efforts over the years completely fail. Politicians will always want the final say as it affects their votes. I am also very happy to make the general case for significant positive skewing of resources to deprived and poorer areas.

Bear with me through a few numbers... when I took on Buckinghamshire PCT 6 years ago, it's allocation was then the third lowest in the country by crude head count, and the lowest allocation in South Central (which itself had the lowest allocation of all SHA's). If you imagine a pie chart of the PCTs expenditure, around 25% of that was spent on Family Health Services, and their associated prescribing costs. Now despite the Carr-Hill formula for GMS spend, spending on FHS is relatively even across the country, so while our overall allocation was 17% below the national average, the 25% of the pie chart which was FHS was at around the national average - which means that the 75% of the pie chart for hospital, mental health, specialist and ambulance spend in Buckinghamshire was actually significantly more than 17% below national average - probably around 20-21% below.

Given that we are talking about national averages here, you will also be able to imagine a normal distribution curve of allocations, with a shorter tail at the lowest funded end, and a longer tail at the highest funded end with the national average in the middle. So the highest funded areas of the country were getting a small bit short of twice the level of funding that Buckinghamshire was.

At that point, you might think "hang on a sec, while I understand and support a weighting to deprived and poorer areas, is that a reasonable balance?"

Two observations on that question - firstly, while the burden of disease in more affluent areas is lower, actually people still get old and die, and given that most healthcare spend happens in the last few months of life, even though people live longer in the affluent south, they also rack up appropriate health service costs which are not disproportionately lower than poorer areas (certainly nothing like half).

Secondly, there is an issue about what the role of the voted funds for the NHS is supposed to be for. While CEOs in the tough old north would tell us in the south that life was tough up there and why couldn't we manage our services in the better climate "down south", we just occasionally observed that their costs were noticeably lower, and what on earth were they doing spending money that we didn't have on issues that our cost-benefit analysis told us would certainly not have been value for money for us. NICE never did get around to that bit of analysis, although they did helpfully start to focus on opportunities for dis-investment as well as new spend.

This all probably sounds a bit irrelevant in the face of the £20bn Nicholson challenge, let alone the new £50bn challenge, but I might just observe in closing that the lowest funded bits of the country have been managing on exactly those levels of funding for years...

#40810 Mr Davis
Business Intelligence Manager
Independent

The proposed funding allocations are set via the application of person based resource allocations (PBRA); these are based upon a combined predictive model style risk stratification methodology in order to assign resource defined by age and perceived morbidity.

There are several issues with the application of the PBRA derived risk scores...
Primarily PBRA guidance claims that the forecasts are correct between 75 and 85 percent of the time (at practice level); what happens if the model consistently predicts incorrectly for high cost and highly morbid patients or alternatively it does not identify unknown patients on the cusp of high resource use?
This 15% to 25% failure of the model at practice level may result in massive over or under funding when aggregated to CCGs.

Secondly, the model utilises data derived from Hospital Episode Statistics (HES) which introduces all manner of issues. Secondary User Services (SUS) data is subjected to myriad data cleansing rules and algorithms prior to inclusion within the HES dataset; any record failing a specific number or type of rules results in the exclusion of the record. There is also an issue surrounding provider coding; comorbidities not coded in SUS will not be included in the model.
This fails one of the main principles of data use; rubbish in rubbish out. How can a national overhaul of funding have a foundation in massively under representative data?

The document published recently "Working paper on 2013/14 CCG allocations, Indicative Target Allocations and Distance from Target" demonstrates a drop in funding for some of the most elderly populations in the country.
The Office for National Statistic population forecasts for 2021 identifies outlier population proportion / growth in the over 90 year olds for the majority of CCGs in the South of England who will be receiving less funding under this proposal.

All in all this doesn't seem quite right to me and a lot more work needs to be done to ensure these funding allocation changes are based upon something a lot more robust.
If the data were sourced from Primary Care at least the onnus would be upon the responsible clinician to ensure the patient is fully coded prior to modelling their prospective needs.

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