13 December 2002
The Department of Health will ignore finance directors' calls for ringfenced cash to help implement the new system of financial flows in the NHS, delegates to the Healthcare Financial Management Association annual conference in London were told.
Under the new system, commissioners (predominantly primary care trusts) will pay providers on the basis of the number of treatments they carry out. Fees will also be weighted to encourage greater efficiency – paying more for day case operations, for example – or to reduce waiting lists for problem specialities.
National tariffs will be introduced for almost every non-emergency procedure, although these will be weighted to account for cost pressures in each area.
Finance directors at the conference in London on December 5–6 said they were worried they do not have enough staff to carry out this overhaul of financial flows, which is due to begin in April and will be implemented in full after 2005.
They said a lot of work will be needed to collect the information to base the contracts on, and time will be required for negotiations and monitoring.
They pointed out that when the internal market was introduced in the early 1990s, funds were earmarked to hire extra finance staff to help implement and operate the new system.
But NHS finance director Richard Douglas told the conference that although the initiative – and the introduction of three-year budget allocations – were more far-reaching reforms than the internal market, no cash will be ringfenced to support the new system.
He said the record increases in allocations over the next three years should be enough to allow the NHS to meet the government's targets for patient care and introduce initiatives such as the new funding flows system.
Neil Wilson, the chief executive of Norfolk Health Authority who is on secondment to the Department of Health to work on the financial flows project, said: 'There isn't a policy to earmark any additional growth money for this. We must redeploy within existing resources.'
But one delegate insisted extra staff were needed. 'We are told the bureaucracy of the internal market won't be replaced because we are going to have standard prices, but then we get a list of exceptions to that. There are going to be arguments on price.'
Douglas acknowledged that some finance staff had 'serious reservations' about the new financial flows system both on the burden of change and the technical challenge of implementing the initiative.
But he insisted: 'We are changing the system because we know the current system is not fit for its purpose. It contributes to the feeling of mounting pressure even when things are getting better and to the perception that we are not getting value for money.'
Currently, many commissioners use block contracts, where providers are paid an agreed amount, regardless of the number of patients they see.
'This does not incentivise efficiency, it doesn't reward performance, it doesn't provide a firm basis for planning. It won't support a system where patients exercise choice and will not work with a diversity of providers,' Douglas continued.
He urged finance staff to get the new system right first time. 'If we fail, devolution of power to the front line will not happen and civil servants and ministers will revert to top-down management. We know that does not work in the long term. Don't see this as a burden, see it as an opportunity.'
The new system is needed to support a new era for the NHS – which ministers are increasingly referring to as a social insurance system – where health service patients are treated by a diversity of providers, including traditional NHS bodies, not-for-profit NHS foundation trusts, the voluntary sector, the private sector and overseas providers.
Health minister John Hutton told the conference that the private sector would embrace the new system and 'respond positively' to standard tariffs.
'Markets respond to business opportunities and it is worth remembering that the health care service in Britain is expanding at a faster rate than anywhere else in Europe,' he said.
'Providers look for growth opportunities and we are in a strong position to commission better value for money from the private sector.'
PFdec2002
