Regulatory fees scheme from April 2012

Transcription

1 Regulatory fees scheme from April 2012 Final regulatory impact assessment Introduction 1. The Care Quality Commission (CQC) has set out consultation proposals for registration fees for health and adult social care organisations from 1 April 2012 in accordance with section 85(1) of the Health and Social Care Act 2008 (the 2008 Act). 2. Regulatory impact assessments (RIAs) analyse the effects of proposed changes in regulation activities in terms of costs and benefits in the widest sense, and the likely impact on regulated bodies. 3. A regulatory impact assessment is normally a two-stage process. In the first stage an outline impact assessment is produced to accompany the consultation on the proposed changes. This sets out the principles of impact assessment being followed by the regulator. In the second stage a full impact assessment is produced after the consultation, which incorporates the responses and additional information that arise from the consultation. 4. CQC ran two consecutive consultations on fees and carried out a two-stage RIA process for each. 5. This RIA concerns the two sets of proposals that were published by the CQC for fees relating to registration under the 2008 Act. The fees are intended to apply from April 2012, for all providers that are required to be registered. CQC decided upon levels of fees and structure in the light of consultation and after seeking approval from the Secretary of State. Final regulatory impact assessment for regulatory fees from April

2 Purpose and intended effect of the measure Context 6. CQC registers and regulates NHS trusts, adult social care providers, and independent healthcare providers in England. They range from large organisations offering a variety of services to small, local, specialised organisations; and from commercial enterprises to public sector bodies and not-for-profit charitable and voluntary organisations. 7. Any provider of regulated activities must register under the Health and Social Care Act To date this includes: NHS Trusts Adult social care providers Independent healthcare providers Primary dental care providers Independent ambulance services providers Providers of out-of-hours services are in the process of registering in April 2012 where they provide regulated activities. The impetus for change 8. The April 2011 fees scheme integrated two former interim schemes and extended it to providers of primary dental care and independent ambulance services. This required us making a considerable number of changes to the previous schemes. CQC also took a significant step towards achieving the Treasury requirement for full cost recovery of regulatory activities. As a result of these two factors, many providers saw significant changes to their fee charges. These were discussed in some detail during the consultation. 9. We then needed to make some further, minor changes to the scheme so that we could make it more proportionate for certain providers and include other providers registering from 1 April Before we can make any changes to our scheme we have to consult on our proposals, and we did this in two consecutive consultations between October 2011 and February The intention of both consultations was to make minimal changes to the fees scheme, limited only to those that were necessary for us to make this year. However, we also said that we would consult further on a longer-term approach to our fees scheme, to address the more significant changes that are required in future. 11. The first consultation proposed: Extending one category to include providers of out-of-hours services. A reduction in the first band for adult social care providers without residential accommodation. A change to the third and fourth level bands for dentists and independent ambulances. 12. The second consultation proposed changes to the scheme for the following providers: Most primary care trusts (PCTs) Final regulatory impact assessment for regulatory fees from April

3 The Health Protection Agency (HPA) NHS Blood and Transplant (NHSBT) and NHS Direct (NHSD). 13. In addition to the above, the proposals also ensured that CQC collects an appropriate level of income so that, when combined with grant-in-aid, we are able to discharge our statutory obligations. Risks of not proceeding 14. If CQC were not to set a scheme of fees, we would have no powers to collect income from providers new to registration in April 2012 and would have to roll over the current schemes for all other providers. This could be challenged on the grounds of not being consistent or fair with existing fees arrangements for providers who are already subject to paying fees for registration under the 2008 Act. That situation would not be in line with HM Treasury Guidance on Fees and Charges, which requires all regulators to cover costs where they have fee-setting functions, nor reflect the requirements upon us from the Department of Health. 15. Also, CQC would not be able to address some of the issues that have come to light following the introduction of the April 2011 fees scheme. This would result in a small number of providers being significantly disadvantaged, paying fees far in excess of the costs of the work required to regulate them. Why is the proposed scheme of fees desirable? 16. The scheme is needed in order to avoid the risks outlined in paragraphs 14 and 15 above. It also enables the next stage of work needed to critically review elements of the scheme for future changes. We are doing this to: Enable sufficient income so that we can discharge our statutory functions related to registration. Make the scheme as simple as possible for providers and CQC to manage, especially given the context of a new regulatory system. Be fair and transparent. Provide a single framework for fees across all providers. Background 17. The 2008 Act began the process of changing the way that health and adult social care services in England are regulated. A new system of registration now applies to all providers of regulated activities, who must be registered with CQC. The registration system has been introduced in a number of phases, with NHS trusts registered first in April 2010, followed by most types of adult social care and independent healthcare providers in October In April 2011, providers of dental and independent ambulance services entered the registration system. All primary medical care providers were originally intended to be registered in April This has now been changed following a consultation by the Department of Health. Providers of out-of-hours services will be registered in April 2012, with the remainder of primary medical care providers, which form by far the majority, being registered in April The providers affected by this proposed scheme of fees either previously paid fees under the existing scheme developed by CQC, or are those providers who will be new to Final regulatory impact assessment for regulatory fees from April

4 registration from April 2012, and have therefore not been liable for paying registration fees before. Options 19. Five options were available to us. A) Set no fees and instead rely on grant-in-aid to finance regulation of these providers. B) Retain the current fees scheme. C) Make minor changes to the current fees scheme. D) Make major changes to the current fees scheme. E) Charge fees to cover our full regulatory costs of about 123 million. 20. We did not pursue option A. This situation would not be in line with HM Treasury Guidance on Fees and Charges, which requires all regulators to cover costs where they have fee-setting functions nor reflect the requirements upon us from the Department of Health. We considered this option inappropriate and did not develop proposals for it. 21. Option B, which involves no change, would result in the risks set out in paragraphs 14 and 15 above, which we wanted to avoid. 22. Similarly, we also considered option E inappropriate. Recovery of full regulatory costs is a requirement, but we are moving to this prudently to ensure that we do not over-recover costs against any sector. This means that some sectors are currently at a lower level of cost recovery than others. This cannot be maintained indefinitely. However to reach a more equitable state, we need to have a better understanding and analysis of a number of issues and assumptions than we currently have. We rejected this option as being too sudden a change from the current baseline. 23. Between Options C and D, we recommended C for this year that of minimal changes. However, we will do this in conjunction with a longer-term review, leading to a fuller consultation on the April 2013 scheme. In the next section, we describe our assessment of both options, and provide more details about the recommended option. Benefits and costs General benefits An assessment of options C and D 24. Our 2011/12 fees scheme made a number of fundamental changes to the previous schemes. We know that there are still a number of areas where further development will be needed. These include, but are not limited to: Reviewing the charging structure for providers of out-of-hours services as we gain a better understanding of the actual cost of regulating them in their first year of regulation. Recognising and supporting innovative concepts in the provision of health and social care within the scheme without discouraging such innovation. Monitoring of fee categories, particularly the healthcare other one, where there is a wide diversity in the types of healthcare providers under the same scale of charges. Final regulatory impact assessment for regulatory fees from April

5 Developing incentivisation and/or penalties to reflect providers with good and bad track records. We used this years consultation to highlight these themes and others which we thought we would need to consider in developing our longer-term strategy. We asked for feedback on these key topic areas and also for suggestions about others we had not included. 25. If we tried to address these themes now, it would result in significant changes, but without sufficient data to provide the analysis to underpin our proposals. Our costing model is beginning to deliver detailed data at the level of an individual provider, but it will take some time to build up a consistent, global picture which will strengthen informed decision making. Equally we require more time to gather information about new providers. 26. A second reason for caution for this year is that a number of major developments are underway that will affect future regulation, our approach and the resultant costs. These include: Planned legislative changes arising from the Health and Social Care and Public Bodies Bills. The new regulatory model that CQC is currently introducing. The registration of primary medical care providers from April A third reason for caution is that we also need the extensive changes from last year to bed down so that we can review any further implications from them. 28. However, we needed to extend the scheme to include providers of out-of-hours services, as well as make a small number of minor changes to provide immediate benefit to a number of providers who were disadvantaged by the 2011/12 scheme. We have taken account of the feedback from our consultations, and will be implementing the changes we proposed under Option C as set out below. These will take effect on 1 April Option C: Changes we are making to the current fees scheme 29. The five recommended changes for the fees scheme for this year were: Extending one category to include providers of out-of-hours services. A reduction in the first band for adult social care providers without residential accommodation. A change to the third and fourth level bands for dentists and independent ambulances. Charging most PCTs a flat rate fee of 1,500. Charging the Health Protection Agency, NHS Blood and Transplant and NHS Direct using the same bandings and fee rates as that for the Healthcare Other fee category. 30. Forty-nine providers of out-of-hours services have applied to register in April For fees purposes, we will include them within the same category and charges as providers of dental and independent ambulance services. This means that the entry level fee for these new in scope providers will be 800. We estimate that the cost of regulating each provider in this group is around 1,500 using current data. We are therefore setting fees at just over 50% of costs, which is the same ratio that we have used for the first year s fee for other new in scope providers, including NHS trusts, in previous years. This Final regulatory impact assessment for regulatory fees from April

6 prudent approach means that we are unlikely to unintentionally overcharge these providers. We will review actual costs as providers of out-of-hours services come into regulation with the intention of adjusting them, where necessary, as part of our wider long-term review. 31. We will reduce the fee for the lowest banding in the non-residential social care provider category from 1,000 to 720. Last year s fees scheme significantly and unintentionally disadvantaged small domiciliary care providers. A reduction in fees will bring them more closely into line with fees for small care homes, which will alleviate the problem that the high entry fee could destabilise this part of the market, and provide a fairer fee charge. 32. We will also reduce the third and fourth level bandings in the category of dental and independent ambulance services providers. The majority of these providers fall into the first two bands, where we reduced the fee levels following the response to our previous consultation. This left a gap between the second and third band, which made the charges unfair on those small number of providers falling into the third and fourth bands. These will be adjusted by reducing the fee for band three from 6,000 to 4,000 and the fee for band four from 12,000 to 10,000. There are no proposals to change bands five and six as we believe that the cost is set at a reasonable level for those. 33. We will charge most PCTs a flat rate fee of 1,500, regardless of the number of locations. This is commensurate to the existing entry level fee for the category Healthcare Other and reflects the reduced level of work required to regulate PCTs. The majority of PCTs divested their community services to other providers under the Government s Transforming Community Services initiative. It was expected that PCTs would no longer be providers of regulated activities at the end of that programme, and no fees income would be derived as a consequence. However, around 50 of these PCTs have remained registered, as they are continuing to provide some regulated activities, although on a much smaller scale than previously. This means that each would become liable for a charge of at least 40,000 under the current fee scheme. This would produce an additional income of 2 million from the NHS sector and would effectively mean that the sector is overpaying and subsidising other sectors, and that we are charging them too much compared to the cost of regulating their, now smaller, services. Adopting the proposed changes will still result in an income from fees, but of a much lower order, totalling around 75, We will charge the Health Protection Agency, NHS Blood and Transplant and NHS Direct using the same bandings and scale as that for the Healthcare Other category, which has an entry level fee of 1,500. We want to make adjustments for these three organisations because the changes we made last year to the existing scheme, i.e. to calculate charges against turnover, is not a fair or proportionate basis on which to set their fees. Not adopting this proposal would mean that these three organisations will be required to pay a fee which is significantly higher than last year, and is disproportionate to the costs of regulating their services. Making the adjustments will produce a reduction in our income, but it will not be significant and income is estimated at 200,000. Financial cost 35. The expected fee levels are based on currently available information. Income figures for both financial years are current best estimates and could change over time. Overall CQC receives a level of funding from the Department of Health (DH) that will not change once our budget has been agreed as part of the spending round. This means that if more Final regulatory impact assessment for regulatory fees from April

7 fee income is collected than has been estimated for the spending round, then DH will reduce its funding to CQC accordingly; lower recovery is unlikely to result in extra DH funding. 36. The effect of the changes will be to reduce our fee income by around 0.9 million. The estimated growth in the health and social care market adds around 1 million, so overall we expect the income recovered from fees to increase very slightly from the 2011/12 recovery of 92.7 million. 37. The overall forecast income for each sector is shown in the table below and is compared to the forecast income for 2011/12. There is little change from last year, following the adjustments described above and for growth. The impact of the reduction in the fee in the lowest band for adult social care providers without accommodation can be seen clearly. Increases between the years are due to the estimated growth in each of the individual health and social care markets. 2012/ / NHS 19,725 19,400 Social care With accommodation 53,600 52,950 Without accommodation 5,100 6,050 Independent healthcare Hospitals 3,500 3,400 Others 2,830 2,800 Dentists/independent ambulance services 8,000 8,100 New in scope Out of hours 70 Total fee income 92,825 92, CQC is increasing its numbers of compliance inspectors in 2012/13. An additional 7million in grant-in-aid funding from the DH has been agreed to resource this. This cost increase will not be passed on to providers in fees in this year. 39. This additional funding, though resourced through grant-in-aid, forms part of CQC s regulatory costs. So, since fees remain largely unchanged, and regulatory costs will increase, the percentage of fees recovered against regulatory costs (cost recovery) will be reduced. The effect of this on each fee category is difficult to assess, as the staff resource will be employed in the delivery of our new compliance model which will come into effect in April This means that data will only become available as the model beds into practice. So, the simplest assumption for this year is that this increase will relate proportionately to all health and social care categories. Final regulatory impact assessment for regulatory fees from April

8 40. Using these assumptions, cost recovery in each of the sectors for 2012/13, compared to 2011/12 is estimated as follows: Category % of cost recovery 2012/ /12 NHS Adult social care Independent healthcare Hospitals & Others New in scope April 2011 and April This produces an overall cost recovery of 79.8% (84.8% in the previous year) for fees against costs relating to regulatory activity. Administrative benefits and costs 41. The proposed changes are minor and so there are no administrative effects to consider. Type of organisations affected 42. The proposals for change affect a small number of providers who carry on regulated activities and are required to register under the 2008 Act. Assessment of competition 43. The scheme of fees will not impact on competition between providers, as it applies equally to providers within each market segment in England. The changes we are proposing will not have any impact for fees on any other registered provider type or sector. Equity and fairness 44. The proposed scheme of fees has no implications for minority groups or race equality. The fees scheme was reviewed to identify its impact on equality and human rights. The scheme is purely an update on previous years fees schemes, to take account of legislative and other changes to increase transparency and proportionality for providers. On this basis a separate impact analysis is not required. Enforcement and sanctions 45. The proposed system of fees does not contain direct powers or policies of enforcement. Consultation 46. CQC carried out two consecutive fee consultations. The first one ran for 12 weeks from Monday 3 October 2011 and the second for 4 weeks from Monday 23 January All providers and key stakeholders were notified of the consultation documents, and they were published on CQC s website. Final regulatory impact assessment for regulatory fees from April

9 47. An analysis of consultation responses has been undertaken and used to inform decisionmaking on the scheme of fees. Further information is published on our website at alongside this final regulatory impact assessment and legal scheme. Monitoring and review of impact assessment, including timetable 48. CQC will not undertake an additional review of this impact assessment but the impact of fees will directly be taken in to account in the development of future proposals for fees schemes on which we will consult. Summary and recommendations 49. The key options were to remodel the existing fees scheme or to develop a new scheme. CQC's recommendation was to adopt option C, a revised scheme, as we believe that this provides the best option for making limited changes while we consider our framework for a long-term approach to fees charges, based on shared principles for all providers. It also allows flexibility for future approaches to fees, including moving towards achieving cost recovery and incorporating new providers into the scheme. Declaration 50. We have read the impact assessment and are satisfied that the benefits of the recommended approach justify the costs. John Lappin Director of Finance and Corporate Services Philip King Director of Regulatory Development Final regulatory impact assessment for regulatory fees from April