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Should GPs be scared of fair-shares budgets?

Guesses range from a derisory £10 to a comparatively luxurious £35 a head. But the one thing those speculating about the management allowance agree on is that clinical commissioning groups (CCGs) need to know how much they will get, and soon.

But while all attention is focused on the allowance, another set of number crunching is looming for GPs in the form of budget setting. Neither the white paper nor the health bill set out an allocations formula. There is no mention of ‘fair shares', but the white paper makes clear that the NHS Commissioning Board will be expected to calculate practice-level budgets and allocate these directly to CCGs.

Starting out with a budget that doesn't reflect the needs and expenditure for patients could quickly put practices that don't make an effort to check their allocation is correct at the outset under pressure when peer review kicks in.

The ‘secret formula'

The Nuffield Trust told Practical Commissioning that it is currently working on a CCG budget formula, but is tight-lipped about what exactly this work involves. We do know that it will be based on the existing Person-Based Resource Allocation (PBRA) formula that was applied within the fair-shares toolkit of PBC as a way to help PCTs assess likely spend by practice. According to Robert Shaw, the DH's economic adviser and the man in charge of developing the new CCG formula, it will be ‘more sensitive to local need' and better reflect practice size.

A 2008 survey showed that 70% of PBC indicative budgets fell within 10% of the ‘fair-shares threshold'. However, the DH realises the current formula is far from perfect and is working through an ‘issues list' of factors to explain anomalies between allocation and actual spending. With this in mind, the Nuffield Trust was asked to develop the PBRA model using more recent data and examine how robust the model is in predicting future expenditure for hospital care for practices and CCGs covering different populations.


Where anomalies have occurred under fair shares, they can be spectacular – in a recent case reported by our sister magazine Pulse, a local MP waded in after the fair-shares budget toolkit landed a practice with a £192,000 overspend. In another case, a Lincolnshire trust reported that one large GP practice received only 6% less than its fair shares formula target – but this equated to around £1m.

Financial double-whammy

David Stout, director of the PCT Network at the NHS Confederation, says there will be winners and losers whatever the allocation method, but warns the budget-setting process harbours two other potentially devastating financial pitfalls for GPs.

‘There's a massive accountancy exercise going on as PCTs try to work out initial allocations for CCGs by breaking their existing spend down to practice level,' he says.

‘In some areas, there are more CCGs than PCTs – necessitating a process known as "novation" in accountancy jargon. PCTs are now having to break down the costs of individual contracts between different CCGs, which is fraught with complication. Add to that the fact that public health budgets must also be disaggregated from PCTs,and the likelihood of big errors in calculating the initial amount GPs get becomes great.

Mr Stout continues: ‘This is the big one, and the one where things are most likely to go wrong. But the second area for worry is in terms of how fast you move to target as predicted by the formula. The way it has worked up to now is based on growth. Everybody benefits from the growth. Now we're moving into a phase of zero growth, and so you're liable to see sums being slashed off budgets. There's going to be a real challenge for CCGs in meeting their patients' needs.'

Dr Michael Dixon, chair of the NHS Alliance, agrees budget setting is one of the key unresolved issues. But he has a pragmatic approach, believing you can't get it right first time whatever you do: ‘There needs to be a formula because there need to be budgets – and where the formula is different from historical spend, there will be problems. But my own feeling is we have to start somewhere.'

Time bomb

The Nuffield Trust is scheduled to report on its testing of the PBRA formula later this year, which suggests that the DH will know the score by Christmas.

But how much longer will GPs have to wait to find out? For David Stout, there's an in-built deadline because of the stipulation that CCGs have to show they can deliver within budget to be eligible for authorisation: ‘CCGs will need to know their budgets – and if they can manage on them – to get authorised. That means they're going to need to know the news sooner rather than later.'

NAPC Annual Conference 2011

The impact of the NHS reforms on practice finances will be one of the sessions at this year's NAPC annual conference in Birmingham on 1-2 November.