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Analysis: CCGs left struggling to cope with budgetary uncertainty

CCGs have faced a perilous balancing act on a particularly narrow financial tightrope since day one, having been immediately tasked with meeting the ‘Nicholson Challenge’ for the NHS to find £20bn in ‘efficiency savings’ by 2015.

Still reeling from the headlong rush for authorisation, many CCG boards began the year in a mist of financial uncertainty that has hampered their commissioning plans from the word go.

During the Health and Social Care Bill´s bumpy progress onto the statute book, much of the concern around CCG finances focused on the legacy debts of PCTs and whether the new commissioning bodies would be saddled with their predecessors´ budgetary deficits. But, in the event, the most pressing financial headaches have come from elsewhere.

Lack of appropriate data

The scale of these - and their impact on fledgling CCGs - was laid bare by the National Audit Office in ‘Managing the Transition to the Reformed Health System’, a report published earlier this month (July).

The NAO pointed out that limitations in the accuracy of budgetary data supplied by PCTs meant that budget allocations for 2013/14 did not reflect previous spending patterns as closely as intended.

The Department of Health had asked the trusts to divide their spending to reflect the fact that, in the reformed health system, responsibility for commissioning would be split between NHS England, CCGs and local authorities. But, according to the report, PCTs faced a number of challenges in carrying this out.

For example, they were asked to divide some categories of spending at GP practice level. Data did not exist to do this in many cases and the trusts therefore had to make assumptions, which has affected the accuracy of the data and therefore the extent to which the budget allocations for 2013/14 reflect previous spending patterns.

In addition, NHS England´s indecisiveness over a new funding formula delayed matters and played further havoc with allocations. With time running out, NHS England simply increased each group’s estimated allocation for 2012/13 by 2.3% as a temporary measure for this year, pending a further review due in December.


Partly as a result of this, CCGs were unable to fully scope out their commissioning plans. Symptomatically, shortcomings in commissioning and financial plans were the most common reasons for CCGs having conditions attached to their authorisation.

The authorisation criteria most commonly breached by CCGs were those around having a clear and credible integrated plan - including an operating plan for 2012-13, draft commissioning intentions for 2013-14 and a high-level strategic plan until 2014-15. More than half of the total of 221 CCGs – 122 - had conditions imposed on these grounds, although this was reduced to 80 by April.

CCGs also struggled with the requirement to develop a financial plan that shows how it will achieve financial balance, with a total of 100 CCGs initially having conditions imposed by NHS England. This was reduced to 71 by April.

According to the NAO, the fact that so many CCGs´ authorisations snagged on these criteria shows how badly the financial uncertainty hit their ability to plan.

The report said: ‘This raises concerns about their ability to make savings and remain financially sustainable in the coming years. The number of CCGs that lacked detailed, credible plans raises concerns that they will not be well placed to make the necessary efficiency savings.’

‘NHS England was still adjusting CCG budgets after 1 April 2013 causing delays in the groups agreeing contracts with providers. Final adjustments for many CCGs were not made until July’.

Other financial uncertainties highlighted in the report include uncertainty over the charges NHS Property Services Limited would levy. CCGs were notified of the charges for the first six months of 2013-14 in May 2013. These amounts were based on estimates made by SHAs and PCTs during 2012-13. CCGs won´t know the actual charges they face until October, when NHS Property Services Limited expects to understand better the costs relating to each building.

Some CCGs also face uncertain liabilities relating to outstanding claims from patients. These liabilities were inherited from PCTs and relate to claims for reimbursement of ‘continuing care’ when a patient paid privately for care which should have been funded by the NHS. Not all claims had been processed by April 2013 so it was not clear what the final cost would be, or whether CCGs or the DH will have to cover that cost.

Specialised services

But according to Dr Amanda Doyle, NHS Clinical Commisioners’ leadership group co-chair and chief clinical officer of Blackpool CCG, these uncertainties pale almost into insignificance compared to that surrounding CCG budgets for specialised services, such as treatment for less common cancers and care for people with rare conditions.

‘The definition of what constitutes specialist services has changed this year so an exercise was carried out to allocate budgets between CCGs and specialist commissioners so that, in theory, each organisation had the correct allocation to meet its commissioning responsibilities. In practice there have been wide discrepancies with many CCGs left with large shortfalls in allocations.’

Although NHS England has agreed there is a problem with the process, ‘the bottom line hasn’t moved significantly’, she adds. This has left CCGs having to re-write their plans. ‘When you consider that a CCG has to have its commissioning plan agreed by its member practices, have some consultation with public and patients and agree it with the health and wellbeing board, then changing it, and stopping planned investments at this stage of the year is extremely problematic’

The shortfall will mean that the CCG´s plans for end-of-life care might be unable to go ahead

Dr Amanda Doyle, chief clinical officer, Blackpool CCG

In Blackpool, this has had huge significance, she adds: ‘The process has meant that, with regard to our contract with Lancashire Teaching Hospitals for example, our allocation was reduced by approximately £5m to account for changes to specialist services definitions but the contract value only reduced by about £900k, leaving us with more than £4m gap. Overall, in Blackpool, this issue has left us with a more than £7m shortfall - and in the CCG with the worst life expectancy in the country this is funding that is desperately needed to address health inequalities.’

The national budget for specialised services was increased by more than 40% this year to around £12bn for England as a whole. But as the NAO report points out, the DH had not set a firm definition of specialised services at the time PCTs provided spending data, so NHS England had to adjust the budgets initially allocated to its local area teams and CCGs.

The upshot, Dr Doyle believes, is that CCGs all over the country are having to modify their plans drastically. ‘There are discussions going on to try to rectify this. But in Blackpool, the shortfall will mean that the CCG’s plans for end-of-life care might be unable to go ahead. In addition, it will soak up the whole of our 2% non-recurrent allocation for the year which was to have been spent on pump-priming plans for integrated care.’

A spokesperson for NHS England said: ‘The move from PCT contracts with providers into CCG and specialised commissioning activities has been particularly complex, and the estimated split which formed the basis of allocations issued in December 2012 has been under significant review and refinement since then. We continue to work closely with providers using a set of defined ‘identification rules’ to confirm and challenge the baseline budgets.’

‘Where there is a clear case that spend has been allocated to the wrong commissioner in the baseline calculations, NHS England will make an adjustment. The adjustments are still being finalised; the impact on CCGs –– affecting both allocation and costs – is expected to be no more than 1% on average.’

‘The situation is very serious,’ says Dr Doyle. But for her and for other CCG leaders, the problems won’t be over even when the specialised services issue is finally resolved: ‘Specialised services is the here and now issue for CCGs but pooled budgets for health and social care is going to represent a huge challenge for the next two years.’

Pooled budgets

In his spending review last month, chancellor George Osborne announced a pooled health and social care fund worth £3.8bn aimed at helping to get elderly patients out of hospital. The fund will include a £1.9bn topslice from CCG budgets - an estimated average of £10m each - to be transferred to local authorities.

Dr Doyle warns that while the topslice will help support integrated care - a key priority for most CCGs - it could backfire in the short term if its impact isn’t seen quickly.

‘Integrated care is something that most CCGs are looking at and it´s a very positive thing. But the risk to CCGs is that if this money doesn´t immediately result in reduced hospital admissions and therefore the amount we´re spending on them, we´ll have to divert funds from elsewhere to plug the gap. We need to ensure a reconfiguration in acute services to match this transfer in allocations.’

For Dr Elizabeth Johnston, chair of South Reading CCG, the danger is illustrated by a remark made by an official from her local authority in a recent meeting. ‘He said the local authority was looking at putting the topsliced allocation “into their baseline”. It had to be explained that use of the funds would have to be jointly agreed by us, the local area team and the health and wellbeing board.’

Dr Johnston says the threat posed by changes to the budgets for specialised services is less of a worry in her area where the CCG inherited a strong financial position from the PCT. But she believes the next two years will nonetheless present a big financial challenge.

‘We´ve got the building blocks in place for integrated care. We´ve got a bid in for pioneer support and have 10 local organisations on board. We have agreed a joint [Commissioning for Quality and Innovation] with our two foundation trusts linked to the CCG´s largest QIPP item - reducing urgent admissions - so the system will all be pulling together.

‘However, the unpredictability is quite tricky to negotiate. A cold snap or a rise in influenza could change things. It’s tight. And my concern is that we´re already 30% down on PCT running costs and there´s going to be a further reduction of 10% next year. The danger is that we´re forced just to concentrate our efforts on the acute stuff.’

The pooled budgets will create even more pressure on commissioners. Dr Johnston adds: ‘If we´re losing 3% of our core budget next year, we have to try and make sure that doesn´t destabilise us. Because we´ve planned for it we should be OK. I think it will marry up. The risk is that local authorities don´t have the same outlook we do. In the end, it comes down to relationships. The relationships we have are good, so it bodes well.’

We´re already 30% down on PCT running costs and there´s going to be a further reduction of 10% next year

Dr Elizabeth Johnston, chair, South Reading CCG

For its part, a spokesperson for NHS England says: ‘NHS England wrote to all CCGs last month to explain the workings of the social care integration fund, which will involve some already-specified CCG funding, along with other CCG funding and investments by both NHS England and the Department of Health, and will be implemented in 2015/16. CCGs already have a duty to ensure integration of their services with social care, and NHS England will continue to work closely with CCGs, through the area teams, to ensure they are fully aware of their commissioning and budgetary responsibilities.’

Widespread issues

Further evidence of how widespread these problems are comes from Chris Naylor, fellow in health policy at the King’s Fund, who is researching the evolution of CCGs at a local level. He agrees that CCG boards are struggling with budgetary allocations which were different from what they expecting.

‘This is for two reasons: one because of NHS England´s decision not to use the allocations formula - which produced both winners and losers - and NHS England´s changing the boundaries of what are deemed to be specialised services. From what we´ve seen, those two factors have affected all CCGs to some extent and is making them look again at their commissioning plans.’

The result is that CCG leaders across the country are fighting to recoup their losses. Dr Clare Highton, chair of NHS City and Hackney CCG, says: ‘I am going to the Health and Wellbeing Board tonight to discuss the approximately £10m transfer to social care. Also, there are still quite a few queries around where money went when the contract was novated. The biggest is the specialist commissioners’ money - again £9m for us, although we may get this back depending on contract flows.’

The fight is being carried out at national level too. Dr Doyle revealed NHS Clinical Commissioners is pressing NHS England to supply pump-priming funds for integrated care to ease the impact of topslicing CCG budgets. ‘We can´t leave it to chance and hope that it sorts itself out. It should do in the long run. It is an opportunity - as long as we´re clear it´s about out-of-hospital care but we should be pump-prining admission reduction schemes too.’

Dr Johnston agrees but believes any extra funding should be aimed firmly at primary care. Referring to recent BMA figures she says: ‘Without a doubt general practice is getting busier. Attendance is rising and there´s more demand for appointments on the day. But GPs are really going to need to be managing chronic disease rather than reacting to the acute demand. I would say that´s where the investment should be - perhaps for a team shared by a cluster of practices to take care of urgent visits.

‘I would say that if you´re going to be investing more money in the system, it should be in primary care.’