2017/18 Financial Plan and Budgets. John Ingham, Chief Finance Officer, NHS Norwich CCG. Discussion and Approval

Transcription

1 Agenda Item: 13 NHS Norwich CCG Governing Body Tuesday 28 th March 2017 Subject: Presented By: 2017/18 Financial Plan and Budgets John Ingham, Chief Finance Officer, NHS Norwich CCG Submitted To: NHS Norwich CCG Governing Body 28 th March 2017 Purpose of Paper: Discussion and Approval Summary: Clinical Commissioning Groups (CCGs) have a fundamental financial duty to ensure that their expenditure does not exceed the amount allocated by NHS England. Part of the process for delivering this duty is for a CCG to produce a balanced financial plan each year that delivers the control total set by NHS England (ie the target surplus or deficit). Furthermore, CCGs are expected to meet key financial planning requirements set down by NHS England (the business rules ). As a result of the CCG being able to deliver an excess surplus in previous years, the CCG s control total for 2017/18 is to deliver an in-year deficit of 0.5m, which will bring the cumulative retained surplus down to 2.9m (1.2% of allocation). This paper outlines the Norwich CCG funding allocation of 246.8m for 2017/18 and proposes start year budgets totalling 256.5m and a QIPP (Quality, Innovation, Productivity, Prevention) plan of 9.7m in order to deliver the 2017/18 planning requirements. This QIPP target is a similar challenge to that faced (and delivered) in 2016/17 at just under 4% of annual expenditure. This paper also highlights key risks to delivery of financial balance in 2017/18 and associated mitigations. Recommendation: The Governing Body is asked to: Note the CCG funding allocation for 2017/18 totalling 246.8m; Approve the start year budgets proposed in Section 8, noting the QIPP (savings) requirement of 9.7m in order to deliver the required 1% surplus; Note the schemes contained within the 2017/18 QIPP programme which combines local CCG initiatives totalling 4.5m and 5.2m of schemes developed with other CCGs; Note the underlying recurrent surplus of 3.7m (1.5%) reflected within the start year budgets; Note the financial risks to delivery of the 2017/18 control total and potential mitigations for those risks.

2 1. Introduction Previous papers to the Finance Committee and Governing Body in November 2016 and January 2017 have outlined the CCG s emerging 5-year and 2-year financial plans as a result of national guidance and published allocations. The purpose of this paper is to present the final draft 2017/18 budgets for approval by the March Governing Body, having had prior scrutiny at the March meeting of the CCG Finance Committee. The information in this paper is consistent with that provided to NHS England in the latest financial plan submission as at 23 rd February 2017, which in turn reflected the position as at month /17. Changes resulting from any further submissions will be reported to future meetings of the Finance Committee and Governing Body. In particular, the information in this paper excludes the following two areas: Delegated primary medical care budgets that the CCG has agreed to be responsible for from 1 st April 2017; The funding and costs relating to Roundwell Medical Centre which is transferring to Norwich CCG from South Norfolk CCG with effect from 1 st April 2017, and for which the details continue to be finalised. 2. CCG Control Total The CCG s financial plan is formulated so as to deliver the control totals set by NHS England ie the in-year planned surplus or deficit. These are set in the context that CCGs are required to maintain a cumulative surplus of at least 1%. Norwich CCG is in the unusual position of producing a cumulative surplus of 1.4% ( 3.4m) in 2015/16 in 2016/17. Therefore the control totals for 2017/18 and 2018/19 are in-year deficits of 0.5m and 0.4m respectively, which will bring the CCG back to a cumulative surplus of 1% of allocation by 31st March 2019 as shown in the table below: Description 2017/ /19 m m Cumulative surplus b/f In-year control total (= return of excess surplus from previous years) (0.5) (0.4) Cumulative surplus c/f Cumulative surplus c/f 1.2% 1.0% 3. Resources Available in 2017/18 CCG allocations for the period 2016/ /19 were published in January For 2017/18, Norwich CCG s programme allocation (for commissioning activities) increases by 2.3% ( 5.6m), whilst the Running Cost Allowance remains static at 4.5m. The 2017/18 financial plan reflected in this paper is based on the recurrent allocation as at month /17, and is summarised in Table 1 below. Page 2 of 12

3 Table /18 Resource Limit Description Programme Running Total Notes costs costs /17 recurrent allocation b/f 237,872 4, , /18 recurrent growth 5,560-5,560 Other recurrent adjustments 1,343-1,343 1 Recurrent funding 2017/18 244,775 4, ,281 Non-recurrent adjustments: Reductions for national pricing changes (2,985) - (2,985) 2 In-year deficit control total Total non-recurrent adjustments (2,485) - (2,485) Total Resource Limit 2017/18 242,290 4, ,796 Notes: 1. These adjustments were all initiated in 2016/17, the main area being 1.224m for the transfer from Primary Care budgets of the funding for Musculo-Skeletal Therapy services previously commissioned via the Walk-in Centre. 2. There are two main areas of national pricing changes in 2017/18 for which allocations have been adjusted to mirror the reductions in costs anticipated nationally: the impact of a new acute pricing tariff (HRG4+), which has led to a cost pressure for Norwich CCG in line with many other CCGs; and the introduction of new Identification Rules to determine which services fall under the definition of specialised commissioning. 3. The CCG s in-year deficit control total is treated as a non-recurrent addition to allocation (effectively repayment of additional surplus generated in previous years). 4. National Planning Requirements 2017/18 Each year NHS England publishes its planning requirements for CCGs, known as the business rules. For 2017/18 these include the following: Establishment of a Contingency Reserve of at least 0.5% of allocation (as in previous years) to enable the CCG to manage in-year pressures and risks; Setting aside a 1% non-recurrent reserve, of which 0.5% is to be uncommitted at the start of the financial year. This 0.5% is to be regarded as a mitigation for financial risk throughout local health systems and is not available to be utilised by CCGs (and compares favourably to the 1.0% that was required for this purpose in 2016/17). The other 0.5% however is available to support transformation and change implied by STPs, including the funding of support for the development of primary care at scale within Norwich (there is a requirement to set aside 3 per head of population across 2017/18 and 2018/19); Page 3 of 12

4 Delivery of the Mental Health Investment Standard (previously known as Parity of Esteem for mental health services), such that overall CCG spending on mental health services increases by at least the same percentage uplift as a CCG s allocation. It is important to note that this requirement relates to the totality of spending on mental health services, including areas such as Continuing Healthcare packages and GP prescribing. Also, NHS England and NHS Improvement are responsible for setting the prices for payments to acute hospitals under Payment by Results (PbR), and by default for the price uplifts that are to apply to non-pbr / non-acute services. These prices are net of assumed efficiency requirements for providers. In 2017/18 the headline price (tariff) uplift for all NHS providers is 0.1%, with an additional uplift of 0.6% for acute Trusts as a result of further increases in the cost of the Clinical Negligence Scheme for Trusts (CNST). These uplifts exclude the further national pricing changes relating to HRG4+ and Identification Rules outlined in Section 3 above. 5. Budget-Setting Methodology and Local Planning Assumptions The 2017/18 financial plan (and therefore individual budgets) is created using the following approach: 1. Remove any non-recurrent issues from the 2016/17 forecast outturn position to understand the recurrent baseline to carry forward. 2. Apply inflation assumptions mainly driven by national tariff changes outlined above. 3. Apply NHS England business rules. 4. Apply activity growth, both demographic (population-linked) and non-demographic (the key areas are highlighted in Table 2 below). 5. Add specific cost pressures not related to price or activity changes, for instance to match budgets to agreed contract values. Table 2 - Local planning assumptions relating to activity growth 2017/18 Demographic growth 0.7% Non-demographic growth - acute services 1.7% (giving total activityrelated growth of 2.4%) Non-demographic growth - mental health services 1.6% (ie total growth of 2.3%) Non-demographic growth - continuing healthcare 2.3% (ie total growth 3.0%) Non-demographic growth - GP prescribing 4.3% (ie total growth 5.0%) Growth in non-tariff drugs 10.0% As per projections from the Office for National Statistics This planning assumption was tested and agreed with representatives from the Norfolk & Norwich University Hospital NHS Foundation Trust (NNUH) as part of the work involved in preparing the Norfolk & Waveney Sustainability & Transformation Plan (STP) This delivers the requirements of the Mental Health Investment Standard In line with historic trends In line with historic trends In line with historic trends and allows for future releases of new expensive drugs The main specific cost pressures reflected in 2017/18 budgets are 1.2m increase in NNUH contract value as a result of national tariff changes (HRG4+) not being at the same level as the allocation reduction; Page 4 of 12

5 0.8m final year of regional contract rebasing for the East of England Ambulance Services NHS Trust (EEAST) contract 1.2m increased support for the Protection of Social Care services as reflected in the 3-year agreement reached between Norfolk County Council (NCC) and the Norfolk & Waveney CCGs in /18 Financial Plan Summary - Application of Growth Resources As noted in section 3 above the CCG has received 5.56m growth in resources in 2017/18. In order to deliver a financial plan that meets the national planning requirements and local planning assumptions, this resource growth has been applied as shown in Table 3 below. Table 3 Application of growth monies 2017/18 Description 2017/ Allocation growth 5,560 Application of growth: Price changes (ie national tariff) 1, % Contingency & 1% Non-Recurrent reserves 3,682 Demographic growth 1,610 Other activity growth 5,184 Other cost pressures 3,786 Total applications 15,269 Balance = in-year savings target (9,709) Table 3 illustrates that despite the CCG receiving an uplift in funding of over 5.5m, the various national requirements and planning assumptions for 2017/18 lead to a Do nothing gap of 9.7m. This is therefore the level of savings that the CCG needs to make in order to achieve its in-year control total. The approach to delivering these savings is described in Section 7. One further point to note is that the additional non-recurrent allocation of 0.5m relating to the CCG s brought forward surplus (as outlined in Section 3 above) has been set aside in the 2017/18 financial plan as a non-recurrent reserve to support the delivery of the CCG s savings programme /18 QIPP (Quality, Innovation, Productivity and Prevention) Programme As identified in section 6 the CCG needs to deliver savings of 9.71m in 2017/18 in order to deliver the control total. This represents 3.9% of allocation, and is therefore a significant challenge for the CCG. Some comfort can be gained from the fact that the CCG has delivered a similar level of QIPP savings in 2016/17; however, the cumulative impact of savings requirements makes it harder each year to achieve additional efficiencies. Page 5 of 12

6 The QIPP Plan for 2017/18 comprises both Norwich CCG specific schemes and schemes being progressed with other local CCGs as part of the central Norfolk work programme. The CCG has developed its QIPP Programme for 2017/18 from a number of sources, including: The full year effect of savings from schemes initiated in 2016/17 Solutions being identified as part of the work on the Norfolk & Waveney STP A review of QIPP savings being progressed by other CCGs (locally and regionally) New ideas generated by CCG staff and clinicians. Project Initiations Documents (PIDs) have been developed for all QIPP schemes, either locally or as part of the central work programme, and are due to be approved by 31 st March This process will confirm the values attributed to each scheme, and an update will be provided to the May meetings of the CCG Finance Committee and Governing Body. Also, the revised Programme Management Office (PMO) processes for both the local and central schemes have been subject to review by the CCG Finance Committee. Appendix A details the CCG s 2017/18 QIPP programme, which contains a mixture of transactional and transformational initiatives as summarised in Table 4 below. The risk ratings in Appendix A reflect current progress with development of each scheme. Table /18 QIPP programme by type of scheme Description CCG-only Central Total Transactional schemes 2,195 3,435 5,631 Transformational schemes 2,280 1,798 4,078 Total QIPP Programme 2017/18 4,475 5,234 9,709 These initiatives can also be analysed by the area of spend as shown in Table 5 below: Table /18 QIPP programme by area of spend Description CCG-only Central Total Acute services 2,692 3,262 5,954 Continuing Care services Mental Health Services Community Health services Prescribing - 1,263 1,263 Other Programme services Running costs Total QIPP Programme 2017/18 4,475 5,234 9,709 Page 6 of 12

7 /18 Summary Budgets The budgets resulting from the application of growth funding outlined in section 6 and the QIPP schemes described in section 7 are summarised below. This reflects the application of the planning requirements and budget-setting approach described in sections 4 and 5, and therefore outlines the utilisation of the CCG s allocation of 246.8m. The March Governing Body will be asked to formally approve the budgets in Table 6. Table 6 - Summary 2017/18 Budgets by Expenditure Area Description Total before QIPP QIPP Savings Total after QIPP Acute services 126,466 (5,954) 120,513 Continuing Care services 16,783 (728) 16,056 Mental Health Services 31,784 (579) 31,205 Community Health services 23,432 (577) 22,855 GP Prescribing 32,752 (1,263) 31,489 Other Primary Care & Prescribing 5,994-5,994 Other Programme services 10,084 (200) 9,884 Contingency Reserve (0.5%) 1,234-1,234 Non-Recurrent Reserve (1.0%) 2,448-2,448 Other Reserves 1,023-1,023 Total Programme budgets 251,999 (9,301) 242,698 Running costs 4,506 (408) 4,098 Total budgets 2017/18 256,505 (9,709) 246,796 See Appendix B for a further breakdown of the 2017/18 total budgets before QIPP savings (total 256,505k above), showing the trail from 2016/17 forecast outturn expenditure (as at month 10) to 2017/18 start year budgets (before QIPP). A particular point to note within Appendix B is the growth in the budget for Mental Health and Learning Disabilities (LD) services. After allowing for planned QIPP savings on continued review of individual patient packages, the CCG is planning to increase spending on Mental Health & LD services by 2.3%, in line with the growth in the CCG s recurrent allocation. This therefore demonstrates the delivery of the Mental Health Investment Standard in 2017/ Underlying Financial Position The start year allocation and budgets are split between recurrent and non-recurrent elements as shown in Table 7 below. This shows that within an overall position of inyear break-even, the CCG s financial plan reflects an underlying recurrent surplus of 3.7m (1.5% of allocation) which is offset by a non-recurrent shortfall of 3.7m. This underlying surplus is a healthy position for the CCG to be taking into subsequent years. Page 7 of 12

8 A key assumption underpinning this analysis is that the CCG delivers 100% of QIPP savings recurrently. Table 7 Recurrent vs Non-Recurrent Position Description Recurrent Non-Rec Total Start year allocation (see Table 2) 249,281 (2,485) 246,796 Start year budgets after QIPP (see note below) 245,579 1, ,796 In-year surplus / (deficit) 3,702 (3,702) - Note: The non-recurrent elements of the start year budgets are as follows: ( 1.7m) Acute price adjustments relating to national changes to tariffs (HRG4+) and specialised services Identification Rules (note: the difference between this anticipated price impact and the allocation reduction of 3.0m represents a 1.3m cost pressure for the CCG); 2.4m non-recurrent reserve; 0.5m QIPP enabling reserve (created from the excess surplus brought forward as a non-recurrent allocation). 10. Risks and Mitigations In addition to the elements factored into the 2017/18 financial plan there remain a number of risks that could jeopardise delivery of the in-year control total. These are outlined in table 8 below, along with potential mitigations. It should be noted that any CCG declaring a net risk position is required by NHS England to produce a recovery plan. Table 8 - Risks and Mitigations Description of risk Full risk Probability Potential Notes / assumptions value risk value m % m Acute activity growth above planned level % 1.3 Assume excess growth 2% Under-delivery of QIPP % 1.9 Probability based on review of schemes Continuing Care growth above planned level % 0.3 Assume excess growth 3% Total risks Description of potential mitigation Full mitigation value Probability of success Expected mitigation value m % m Notes / assumptions Contingency reserve % 1.2 Assume all available to offset above risks Other reserves % 0.3 Potential slippage on QIPP reserve Further QIPP extensions % 1.0 Target 20% headroom in QIPP plan Other non-recurrent measures % 1.0 Inc potential slippage on non-rec reserve Total mitigations Net (risk) / mitigation (7.1) - Page 8 of 12

9 Three further potential risks not reflected in Table 8 are as follows: NHS Property Services (NHSPS) charges CCGs for void space within properties sited in a CCG area. Norwich CCG incurs such charges for vacant space at the Norwich Community Hospital (NCH) site, and in 2016/17 the national policy changed such that NHSPS now invoice for void space at market rent this increased the value of the NCH charges by 1.6m per year, which was offset in 2016/17 by non-recurrent funding from NHS England; for 2017/18 the CCG has obtained confirmation from NHS England that a similar level of allocation will again be available, but there remains an element of risk until this funding has been received; The CCG has a planning gap of 0.8m in the delegated budgets for primary medical services that will be transferring from NHS England from 1 st April These budgets are outside the scope of this paper, but various mitigations are being pursued within the delegated budgets, including the discussion of transitional relief from NHS England. Any remaining shortfall will need to be addressed across the totality of the CCG s budgets; Roundwell Medical Centre is transferring from South Norfolk CCG to Norwich CCG with effect from 1 st April Whilst the allocation adjustment relating to programme costs has been agreed (being based on South Norfolk funding per head of population), work is still underway to confirm the actual levels of spend expected against this allocation to determine whether there is any financial risk from the practice transfer. 11. Conclusion 2017/18 will be a very challenging year for the CCG as it seeks to maintain a positive track record of delivery against annual financial targets. This paper outlines a financial plan that meets the planning requirements of NHS England but which necessitates delivery of a QIPP target of 9.7m (nearly 4% of allocation). Page 9 of 12

10 2017/18 QIPP Programme APPENDIX A (p.1 of 2) QIPP Scheme Individual Transactional Schemes: Continuing Healthcare Continuing Care services 2017/18 Savings CCG-only Central Total m m m G GP Prescribing Prescribing A Acute Clinical Thresholds / Ratios Acute services A Acute pricing changes from 16/17 Acute services G Individual Patient Placements (16/17 Mental Health G cases) Services Mental Health Individual Patient Placements A Services Community Outpatients Acute services G High Cost Drugs Acute services A Pathology & Radiology Acute services A Demand Management initiatives Acute services G Reduce void property charges LD Package Review Community Contract redesign Area of Spend Other Programme services Mental Health Services Community Health services A G A Contract Challenges Acute services G Other misc schemes under 100k Misc G Total QIPP Transactional Schemes: Risk Rating Short descriptor of scheme Initiatives to look at tighter package control measures, case management, demand management. Proactive management of primary care prescribing across GP Practices by promoting cost effective medicines and managing wastage. Review of outpatient attendances in specialties where the CCGs have a higher first to follow-up ratio than the national benchmark. Full year impact of 2016/17 changes; no further action needed. Full year impact of package control measures taken in 16/17; no further action needed. Continue to review effectiveness, equity and value for money of packages Transfer of minor surgical procedures to alternative community-based providers at reduced cost. Scheme to ensure the use of commissioned high cost drugs from the NNUH is in line with NICE Guidance, using the most cost effective option (including biosimilar drugs where available). Review of requesting from GPs, also working with providers to develop and implement robust guidance on appropriate requesting. Range of initiatives including redesign of peer review of referrals, review of consultant to consultant referral policy, review of optometry referral processes. Continue to work with NHS Property Services and Community Health Partnerships to reduce void costs. Mitigate potential financial pressures from Transforming Care via robust package management. Reviews of specific services, some in conjunction with other CCGs. Continuation of enhanced claims service to ensure acute charges are valid and avoid cost growth. Minor schemes including full year benefit of MSK procurement, equipment recalls, and patient transport review. Page 10 of 12

11 2017/18 QIPP Programme (continued) APPENDIX A (p.2 of 2) QIPP Scheme Individual Transformational Schemes: Continuing Healthcare Continuing Care services 2017/18 Savings CCG-only Central Total m m m A Mental Health schemes Acute services R CCG/CSU Productivity Running costs A Review of Clinical Thresholds Acute services A A&E Frequent Attenders Acute services A Clinical Decision Support Acute services G Reduction in Avoidable Emergency Admissions Area of Spend Acute services A Prevention Savings Acute services R Pathway Review - Cancer Acute services A Pathway Review - Diabetes Acute services A Care Home Admissions Acute services G Other misc schemes under 100k Misc G Total QIPP Transformational Schemes: Risk Rating Short descriptor of scheme Continue to improve the way that the CCGs commission and manage packages of care, including fast-track patients and the implementation of a Discharge to Assess pathway for acute patients. Reductions in acute secondary care costs as a result of improved management of Mental Health patients, in particular those with Dementia. More efficient deployment of CCG administration budgets through transformation internally and with the CSU. Further work to be undertaken across all CCGs to progress additional efficiencies from closer working. Investigation into further restrictions on procedures of limited clinical value and more effective use of the prior approval process. To identify and develop a co-ordinated service structure to reduce the activity for patients identified as frequent A&E attenders. Provision of clinical decision support tools to GPs, including software and education. Savings assumes can reduce preventable outpatient appointments ie patients that are discharged without procedures or follow ups. Schemes including; HomeWard phase 2, introduction of Norwich Escalation Avoidance Team (NEAT), review of risk stratification & MDTs, and unplanned hub and locality-based services. All of these elements are within Norwich New Models of Care work programme. A range of prevention schemes including alcohol, diabetes, CHD, undiagnosed hypertension and social prescribing which are expected to reduce activity in acute providers. Opportunities identified from elective care variations through the RightCare programme. Opportunities identified from elective care variations through the RightCare programme. Continuation of local work to enhance support to Care Homes and therefore reduce emergency admissions. This will also link to a central project looking at work in Care Homes across the county. Includes review of community Dermatology service. Total QIPP Page 11 of 12

12 Analysis of 2017/18 Start Year Budgets (before QIPP) APPENDIX B Description 2016/17 Forecast Outturn Remove non-rec issues 2016/17 Recurrent Baseline 2017/18 Non-Rec Allocation 2017/18 Inflation 2017/18 Activity Growth 2017/18 Cost Pressures/ NHSE Business Rules 2017/18 Start Year Budgets (at Mth 10) Adjs Misc Adjs (before QIPP) Acute services 121,658 1, ,962 (2,985) 823 3,601 2, ,466 Continuing Care services 16,169 (69) 16, ,783 Mental Health Services 30, , ,784 Community Health services 22, , ,432 GP Prescribing 31,192-31, , ,752 Other Primary Care & Prescribing 6,163 (106) 6, (187) - 5,994 Other Programme services 9,719 (1,015) 8, ,212-10,084 Contingency Reserve (0.5%) ,234 1,234 Non-Recurrent Reserve (1.0%) 2,379 (2,379) ,448 2,448 Other Reserves ,023-1,023 Total Programme budgets 240,191 (1,548) 238,643 (2,985) 913 6,793 4,953 3, ,999 Running costs 4,506-4, (95) - 4,506 Total budgets 2017/18 244,697 (1,548) 243,149 (2,985) 1,008 6,793 4,858 3, ,505 Page 12 of 12