The recent devolution of the £6bn health budget to Greater Manchester is a positive step forward. It will remove some of the organisational barriers and constraints that have hampered progress.
The increasing pace of devolution will have a number of significant impacts. The government’s decision to hand the £6bn health and social care budget to regional councils in Greater Manchester is, to date, the most material. However, this is a wholly positive step towards integration and therefore, a positive step towards tackling the public sector’s biggest spending challenge: the ever-increasing burden of front line health care and social care costs. So, why is integration the solution and how can devolution help achieve it?
The integration of the delivery of health and social care is vital to overcoming significant spending challenges faced by both the NHS and local authorities. Whilst the Better Care Fund is a positive step towards supporting integration initiatives, the whole scale integration of health and social care is a hugely complex undertaking. In reality, however, integration is only a means to an end; the ultimate objectives of integration are broadly threefold:
- Enhanced outcomes for the public
- Improved value for money
- Increased sustainability of care provision
Integration has to be driven from the ground up in order to achieve the objectives stated above. In so doing, it allows commissioning bodies to effectively accommodate local needs and to identify local risks and opportunities.
For integration to work effectively, it also has to overcome some of the significant organisational hurdles that the UK’s public sector presents. The allocation of funding to regional councils will make pooling of budgets easier, but it is still not easy. Currently, pooling of budgets from pre-determined allocations places a strain on the ability of organisations to effectively apportion risk, control expenditure and align to organisational objectives, adding a degree of reluctance to initiatives that hinge on pooling. Greater Manchester will now have more authority to ensure it manages these considerations effectively.
The freedom that devolution will bring will benefit outcomes and improve value for money. Any entity with devolved control of health and social care budgets will be better able to establish robust outcome-based contracting frameworks. This would be undertaken with the benefit of having one ultimate commissioner, with one set of objectives. Whilst consistent commercial principles should be applied by all bodies seeking integration, including devolved ones, the mechanism of devolution should encourage innovation in commissioning and contracting, with outcome-based contracting being one example. Building in outcome-focused metrics to a contractual framework delivering both health and social care will cut out waste, will stimulate the market for the provision of care and will ultimately benefit the end user.
A fundamental benefit that should be derived through devolution is the coordination of more effective capital spend. With a regional council ultimately accountable for health and social care revenue spend, it will incentivise capital investments to be made with the integration of care at their very core. The cost of capital should be lower for any devolved entity, as opposed to the cost that individual local authorities and trusts may incur. This should stimulate capital investment for the benefit of care users, improving efficiency and quality in devolved areas.
However, the freedom to control health and social care budgets will only be effective if there is a corresponding transfer of accountability to regional councils. On the assumption that, in the case of Greater Manchester, the health and wellbeing boards will be subsumed within the regional councils, having a governance model that aligns with organisational boundaries and the control of all funding will increase effectiveness and provide them with much needed clout.
However, whilst there is benefit in such an arrangement, caution must be applied to both the composition of the governance model and importantly the relationships with the bodies that will sit underneath it. In particular, rigour will need to be applied to how councils interact with clinical commissioning groups. The method through which funding is allocated to CCGs and similarly control applied over that spending needs thorough review. Furthermore, questions should be asked as to what capabilities councils possess to determine the funding requirements for specialist care as well as the frameworks to control such a significant increase in the funds that they control. Support should be made available during the process of devolution to ensure that governance arrangements are fit for purpose and the corresponding frameworks for allocating and controlling spend are robust.
Significant focus should be applied to the governance arrangements and commercial frameworks that would support integration within a devolved area, as well as taking stock from the transfer of responsibility for public health budgets and the on-going Better Care Fund initiatives. Integration is a means to an end in achieving better outcomes, value for money and sustainability, and devolution should be seen similarly. Integration is crucial to overcoming the otherwise insurmountable pressures of health and social care costs in coming years. Devolution can provide the required freedom to integrate effectively.
Marcus Richards is associate director of KPMG’s local government financial management practice. Andrew Hine is a partner and UK head of public sector and healthcare at KPMG.
