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Is there such a thing as a fair shares budget?

Sandy Briddon, consultant and lecturer in healthcare commissioning, takes a look at the complexities of moving towards fair shares budgets

Sandy Briddon, consultant and lecturer in healthcare commissioning, takes a look at the complexities of moving towards fair shares budgets.

What is a fair shares budget?

The existing indicative budget-setting process has produced winners and losers because of a failure to take full account of local factors such as ethnic minorities, student populations, sheltered housing and asylum seekers.

Using historical expenditure as the basis for setting budgets has also meant practices who have limited referrals and been effective gatekeepers can be losers whereas those practices that have referred lots of patients have been winners.

A fair shares budget is one that addresses such imbalances.

So how do you move towards one?

Over the past three years the Department of Health has invested considerable time and effort in testing the methodology for setting budgets and has carried out fieldwork with academics, GPs and PCTs to look at current budget-setting methodologies and ways in which methods could be improved.

This has resulted in a fair shares toolkit being produced, which factors in various health needs indicators – most notably prevalence data, socioeconomic factors such as unemployment levels and housing, and the number of people over 75 living alone.

You can find the toolkit in a DH guidance document called Practice based commissioning – budget setting refinements and clarification of health funding flexibilities, incentive schemes and governance1.

This guidance also sets out an appropriate rate of change towards a fair shares budget for 2008/9 and emphasises the need for PCTs to ensure that they support PBC through their financial flexibilities.

When will my practice get a fair shares budget?

The aim is for PCTs to bridge the gap between an indicative budget and a fair shares budget to within a range of 10% in the coming year. The case study of north-east Lincolnshire, opposite, gives you an idea of how even a 1% gap can make a big difference to a practice.

All PCTs should be using the fair shares toolkit now to see what they need to do to plug the gap. The toolkit is relatively easy to use and requires populating with practice data as well as using the health needs indicators.

To ensure a smooth transition from weighted capitation to fair share budget, the Department of Health has come up with the following rules for PCTs.

• Where the last 12 months of costed activity (at 2008/9 prices) and fair share target budget are within 10% of each other, there should be no pace of change movement (everyone is happy).

• Where the last 12 months' costed activity and fair share target budget vary by more than 10% then the difference should be reduced. The minimum reduction to a budget in these circumstances is expected to be 1%. However, consideration must be given to prevalence and exceptional circumstances in each case and practices could challenge their PCT's decision to make any change.

• Given that budgets should be consistent, fair and transparent, and assuming that the PCT has used the Department of Health 's toolkit, then the maximum movement is at the PCT's discretion. Any movement should be based on the level of practice secondary care activity, prevalence and deprivation and again any movement should be negotiable with the PCT.

Sounds like a big job for PCTs...

From a recent survey, the Department of Health concluded that 70% of indicative budgets would fall within the 10% accuracy threshold but this still means there are 30% of practices likely to be receiving budgets that are significantly higher or lower than their fair share.

The DH guidance also says PCTs should take care not to be too rigid in applying the principles of the fair shares toolkit but should also rely on local intelligence to ensure that allocated resources (indicative budgets) are in the right place to support the needs of the population.

Will all PCTs move to fair shares budgets in 2008?

There is a national variation in the degree to which PCTs are engaging with their practices and consortiums on PBC and this variation can be directly linked to local satisfaction or dissatisfaction in the budget-setting process.

In the areas where PCTs are working with practices and PBC consortiums to get PBC moving, the setting of a fair indicative budget has been critical to success.

It is generally agreed that these PCTs and practices will move more quickly towards a fair shares budget.

So fair shares is also about getting people to change how they work?

Absolutely. One of the aims is to encourage GPs to consider how NHS resources are used locally, where the development of new patient pathways could be introduced to improve the patient experience in a cost-effective way and, over time, ensure better use of local NHS resources.

How can I find out what my fair shares budget is?

Practice-linked population data and needs variables can be requested from the DH's PBC helpdesk mailbox – email This is an excellent way of testing the accuracy of the system and capability of those setting a practice budget.

Once the PCT has calculated the fair shares it is advisable to compare those results against the practice historical spend – which in turn will identify whether the fair shares reflect:

• disease prevalence of the population or deprivation

• activity patterns – under and over users of acute services outside of a 10% accuracy range

• whether the pace of change to fair shares budget-setting can be progressed.

What if my practice is a loser under fair shares?

Challenge your PCT by asking for an in-depth breakdown as to how your budget has been calculated and what percentage of the total PCT budget relates to your practice.

Currently there is no formal appeals process for practices who remain dissatisfied with their budgets – having said that, if practices are kept in the loop about the budget-setting process by PCTs it should be possible to avoid any potential conflict.

The box above contains some simple steps to avoid such a confrontation between practices and PCTs and keep all stakeholders on board with PBC.

I hope what is becoming clearer to you is that none of this is set in stone and the guidance document reflects this and contains useful tools for PCTs to determine local needs (see box below).

Why should budgets be set at practice level, not consortium level?

This question is probably the most simple to answer. It is because practices are a legal entity and therefore are empowered to access NHS resources.

However, where a local consortium exists and its members agree, budgets can be aggregated – thereby hopefully smoothing out individual practice anomalies by consensus and improving transparency.

What if there is no information to calculate a budget?

I am sure that we would all agree in principle that if hospital activity can be counted and costed it is reasonable to assume historic activity as the starting point for setting a budget.

I would also suggest that if there isn't any activity data to support specific services, such as district nursing, the budget can be calculated on a weighted capitation basis by using age, sex and demographic information, which is similar to the way in which a practice prescribing budget is set.

Sandy Briddon is a consultant and former PCT director of primary care. She is also senior lecturer in healthcare reform at Thames Valley University

Simple rules to avoid conflict between practices and PCTs

Here are some simple rules that can be applied to relieve the tedious process for calculating a budget and hopefully avoid suspicion and disappointing results.

• Use the DH fair shares budget-setting toolkit – it has been tried and tested.
• If there is confidence in the historic activity and that activity can be counted and costed at current tariff, use this as a starting point.
• Where activity cannot be costed or counted, a way forward would be to apply a weighted capitation formula to set a budget until such activity can be costed and counted.
• PCTs, consortiums and practices should spend time looking at the budget-setting results obtained by using the fair share toolkit against the results of using a historic and weighted activity methodology.
• By comparing the results from the two methodologies, questions should be asked if the results vary significantly or more than 10% above or below expectation.
• All methodologies and calculations for setting a budget should be shared with practices and PBC clusters or consortiums. Adopting this open approach should alleviate any doubt on the fairness for setting practice budgets.
• Practices and PCTs should set timescales and agree a way forward to move towards a fair share allocation over the next couple of years.

Determining needs

It is recognised that the fair share allocation toolkit remains a best estimate to support the needs of the local population. It can therefore be influenced by local factors, which could include such information as evidence of the need for resources. This could include:
• reported QOF prevalence across 16 disease groups
• expected QOF prevalence for those groups where expected formulae exist
• admissions per 100 population
• cost of admission for six QOF disease groups: CHD, diabetes, COPD, asthma, cancer and atrial fibrillation.
PCTs should also consider indicators for secondary care activity, such as:
• elective inpatient admissions by HRG and speciality
• elective day cases by HRG and speciality
• non-elective admissions by HRG and speciality
• outpatient activity by attendance, referrer and speciality group.
Annexe A of the DH guidance PBC – budget setting refinements and clarification of health funding flexibilities, incentive schemes and governance1 sets out some tests that PCTs can use to assess local health need at primary and secondary care levels.

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