Operating Framework 2010/11 – Analysis

The Operating Framework 2010/11 follows hard on the heels of the government’s five-year vision for the NHS in England  – From Good to Great. Both documents aim to communicate an urgent message to the NHS in this last year of financial growth:  it must transform itself into a much more productive and efficient public service with an emphasis on maintaining quality, improving prevention and reducing reliance on acute hospitals. 

The Operating Framework spells out the detailed policies designed to deliver this transformation. Many of these rely on financial incentives to change the behaviour of local health organisations, but there remains some uncertainty about how local health trusts will behave in practice.

The changed context: a future without funding growth

The financial realities are that services need to be delivered for significantly less money now so that savings can be carried forward beyond 2011, when growth will be zero.

Some of this is to be achieved by tight control of resources from the centre. This year PCTs will receive an average of 5.5 per cent growth: 1 per cent of this is to be kept back as a surplus and a further 2 per cent should be allocated to ‘non-recurrent’ spending to enable changes to services – for example, one-off costs to set up new services, redeploying or retraining staff or even redundancy (which the government hopes it can avoid amongst frontline staff in return for pay restraint).

Hospitals are to receive zero increases in the tariff, which should drive efficiencies as costs of staff, drugs and supplies will rise. Another blunt target has been set for PCTs and SHAs: to reduce their costs by 30 per cent. Since ‘most progress’ on this needs to be made in the next two years, it is unlikely it will all come from natural wastage and job losses might result.

The biggest savings will have to come from redesigning services and changing the way NHS trusts work together at a local level. The ambition for high-quality, clinically led services set out in the NHS Next Stage Review in 2008 remains, but there is a strong emphasis on delivering this with a service that has ‘more care closer to home, fewer acute beds, more standardised pathways, reduced variations and early and more upstream intervention’.  This vision was first articulated in the 2006 White Paper Our Health, Our Care, Our Say, but in recent years it has been a lower priority than delivering greater choice of hospital services for patients and speeding up access to and increasing the safety of those services.  

National priorities: are they consistent with the new vision? 

In common with previous years, the Operating Framework sets out the priorities for the NHS and the indicators (Vital Signs) to monitor progress against the priorities. Some of these are national requirements (Tier 1), which are compulsory and performance managed from the centre, some are national priorities for local delivery (Tier 2) ‘without interference from the centre’ for strongly performing organisations (suggesting that poorly performing organisations can expect some level of interference)  and some are purely local priorities chosen at the discretion of PCTs (Tier 3).

Despite the altered financial environment, the Department of Health has chosen not to change the five national priorities: reducing healthcare-associated infections; improving access to hospitals (via the 18-week target) and GPs (via extended opening hours); keeping people well and reducing inequalities; improving patient experience; and being ready for emergencies such as a ‘flu pandemic.

Although the Operating Framework (and From Great to Good) clearly sets out a vision for better care of people with long-term conditions and a desire to see more care closer to home, none of the Tier 1 indicators allow the government to monitor where care is being delivered or to measure the quality of long-term care, for example, the potentially avoidable admissions for conditions such as diabetes or heart failure. Indicators relating to diabetes control and mortality from conditions thought to be amenable to health care exist only in the Tier 3 ‘optional’ category.

There is clearly a dilemma here. As the Operating Framework makes clear, more work is needed on many of the existing national priorities: healthcare-associated infections can be reduced much further in some trusts; some specialities are still not meeting the 18-week target and some GP practices still have inconvenient opening hours; not all stroke patients are being admitted to specialist stroke units and cancer services need to meet a 31-day target on radiotherapy by the end of 2010.

Much remains to be done to fulfil these existing national priorities and there is no appetite in the NHS for more targets. Nevertheless, delivering the vision for better preventive care, especially for those with chronic conditions, which has proved so elusive in the past, calls for a clearer prioritisation by the centre and the ability to identify and monitor progress at a local level.

New financial arrangements

The government is relying on financial incentives as the main agent of change. There is very little reference to choice, competition or primary care commissioning, which were seen as powerful levers in the past.

Instead, there are significant changes to the hospital payment system. The most significant of these in relation to shifting activity out of the hospital sector is the decision to limit payment for emergency activity: trusts will receive only 30 per cent of the tariff payment for any emergency activity beyond a threshold based on 2008/9 activity levels. More than 35 per cent of inpatient episodes of care were classified as emergency cases last year (just over five million episodes) and in some hospitals emergency cases make up more than 50 per cent of their activity. The change is designed to force PCT commissioners and providers to collaborate to reduce emergency admissions. However, it is unclear what incentives there are for PCTs, as any ‘savings’ are retained by SHAs.

Improvements in quality are also to be reinforced by the tariff. Four new ‘best practice’ tariffs will be introduced in 2010/11. These are likely to be below the existing tariff levels and are designed to encourage hospitals to be more efficient, for example, by using day case surgery or conducting all relevant tests in one outpatient appointment.  

More income for hospitals will be available under the CQUIN scheme – from 0.5 per cent to 1.5 per cent of income – which will look attractive to hospitals in the context of a 0 per cent rise in the basic tariff. CQUIN schemes are designed locally: some address the quality and location of services for long-term conditions but many do not. It is important that the CQUIN scheme does not become an automatic top-up of the tariff for hospital trusts. The government has specified that all schemes should include an element related to patient experience. This should incentivise trusts to measure patients’ views even when resources are limited, but patient surveys will need to become more detailed if they are to give commissioners an accurate picture of quality.        

A fundamental change to the payment system beyond 2010/11 is the removal of mandatory fixed tariffs in favour of maximum tariffs. This will mean that hospitals and commissioners will have to negotiate over price as well as quality. While this will allow commissioners to benefit from efficient hospitals it underlines the need for commissioners to have robust information about quality as well as costs.

There is also provision for SHAs to ‘exercise discretion to temporarily suspend contractual arrangements between PCTs and providers…where these arrangements are demonstrably not operating in the interests of their patients’. This prepares the ground for the competitive market to be replaced with command and control if it fails to withstand the financial pressures.

Changes to local services: can integration be achieved?

Better integration of services is a consistent theme. A bigger role is seen for foundation trusts in the delivery of community and primary care services. PCT provider services have been given a deadline to deliver convincing plans about their future viability or face takeover. There is a commitment to streamline the process of mergers and changes, but the ‘NHS First’ policy of giving incumbent NHS providers ‘preferred’ status remains (although the government says it will not ‘freeze out’ private or third sector competitors). More detail is promised in the forthcoming White Paper about how social care services can be integrated with the NHS. Whether there will be change locally is uncertain: there is exhortation from the centre but not much in the way of tangible levers or mechanisms to make this happen.

Summary

This is the fourth Operating Framework issued by the Department of Health. The framework of rules and expectations has grown more complex since 2006. Faced with an unprecedented financial challenge, the NHS has been clearly told that they will have to change services while preserving quality. Unwilling to add new targets or national priorities from the centre, the government is relying on financial incentives to deliver radical change. Inevitably, there will be some uncertainty about how the incentives will interact with each other and whether they will change behaviour within the NHS as expected.