JOINT COMMISSIONING PARTNERSHIP BOARD

THURSDAY 28 JANUARY 2010AT 10.00 A.M.

2010/2011 FUNDING FOR JOINT COMMISSIONING

PARTNERSHIP BOARD

Author: Melanie Parker, Finance Manager

Jess Lievesley,Head of Joint Commissioning

Tel:01438 843232

Lead Officer: Mark Lobban

  1. Purpose of report

1.1The report to the Joint Commissioning Partnership Board (JCPB) in October 2009, Item 6, “Planning for the future Hertfordshire Partnership Foundation Trust Contract”set out the financial challenges facing the health economy both nationally and in Hertfordshire over the next few years. This report provides an update on the expected financial position for JCPB for 2010/2011.

  1. Summary

2.1The information available at the time of writing the report indicates that in 2010/2011 both Primary Care Trusts (PCTs) and Hertfordshire County Council (HCC) are facing difficult financial environments whilst facing increasing demands on their budget. Although there are some small increases to budgets in 2010/2011 all partners are expected to face reducing or standstill budgets in 2011/2012 and beyond.

2.2JCT has been working with Hertfordshire Partnership NHS Foundation Trust (HPFT) to anticipate the financial challenges ahead and will be presenting proposals to the April meeting of JCPB on the level of efficiency savings required and how these can be achieved over the coming four year period.

3.Recommendations

3.1That the JCPB notes the information in the report.

3.2That the JCPB endorses the approach of the Joint Commissioning Team (JCT) working with HPFT and other providers to achieve the efficiency savings required.

4.Background

4.1It is expected that thefinancial position of both Hertfordshire County Council and Primary Care Trustswill require significant efficiency savings to be made in 2010/2011 and beyond. This is a result of both the expected contraction of funding, which is set out below together with increasing demands arising from among other things demographic changes and rising expectations.

Primary Care Trusts

4.2The NHS Operating Framework for 2010/2011sets out Revenue Allocations (Total PCT budgets),and also advises uplifts and efficiency targets to be used by health bodies for the next year.

  • In 2010/11 PCTs revenue allocations will increase by an average of 5.5%. However 2010/2011 will be the last year of significant growth for the foreseeable future and the commissioners must focus its efforts on continuing to secure high quality services, whilst at the same time driving far greater productivity and efficiency from those services, such that they remain strong and sustainable for the future.
  • In 2011/2012 and 2012/2013 it is not expected that PCT allocations will increase at all in real terms (i.e. there will be no increase above inflation).

Commissioner and Provider Budgets

  • For 2010/2011 the net tariff uplift to be applied to commissioner and provider budgets is 0%. This nil uplift includes an efficiency target of 3.5% which offsets completely the impact of inflation on pay and prices.
  • For 2010/2011 there will be 1.5% increase available through Commissioning Quality and Innovation (CQUIN) which will be linked to specific quality improvements in safety and patient experience, together with some locally determined elements. This funding is non-recurrent (i.e. for one year only) and replaces a 0.5% allocation in 2009/2010.
  • For 2011/2012 and 2012/2013 increased efficiency savings will be required with a maximum net tariff uplift of 0%. It is expected that there will be up to 1.5% available non-recurrently in each year through CQUIN.

4.3In addition to the challenge of the national funding environment Hertfordshire Primary Care Trusts are facing a difficult financial position locally. Both PCTS have incurred significant overspends during 2009/2010 and have implemented a recovery plan action plan in order to bring their expenditure back in line with budget. It is intended that through the action plan PCTs will deliver a break-even position for the final six months of the year. A key planning assumption for the 2010/2011budget is that the PCTs will start from a break even position.

4.4The Joint Commissioning Team have been in discussion with PCTs and have been given the following commitments;

  • In recognition that mental health services required significant investment to modernise and improve services, 4% real terms investment was allocated in 2009/2010, and it is expected that a further 1% investment will be allocated in 2010/2011. However as highlighted already in this paper significant pressures on local and national NHS budgets areanticipated and this will mean there will be no further growth in mental health budgets and it is likely that in order to fund any new initiatives or developments significant savings will be required from 2010/2011 onwards.
  • The proposed use of this 1% growth is outlined in the report on IAPT funding (Item 8)
  • That the £2 million underspend on investment monies which has been returned to the PCTs in 2009/2010 will be re-instated on a recurrent basis in 2010/2011.

Additional factors which will impact on JCPB Budgets in 2010/2011

4.5In line with all other primary care trust budgets, JCPB budgets for 2010/2011 will be set atthe outturn for 2009/2010. As JCT are expecting under spends on the Service Level Agreement (SLA) budgets, these budgets will be reduced in 2010/2011, however the risk on these budgets remains with the PCTs, should demand led budgets overspend. This will not affect the recurrent budgets for the 2 main providers.

4.6Depending on the overall financial position of the Hertfordshire PCTs at the end of 2009/2010, it may be necessaryto apply additional efficiency targets to 2010/2011 budgets in order to achieve financial balance across the PCTs as a whole.

Hertfordshire County Council

4.7In keeping with the challenges facing the NHS, the County Council also faces a challenging financial environment.

4.8The County Council has 3 main sources of funding. These are set out below together with key financial information for the 2010/2011 budget.

  • Formula Grant. After taking account of adjustments for changes in function the provisional formula grant figure has been increased by 1.5%. This is the minimum increase possible, and compares to an average increase across all authorities in England of 2.65%.
  • Area Based Grant (ABG). This will be increased to take account of the central government proposal for free personal care for the elderly with highest needs from October 2010. However it is estimated that this proposal is under funded by at least £250m nationally, and it is assumed that the shortfall will have to be met by local government efficiencies.
  • Council tax. There is considerable pressure on the County Council to keep increases in council tax low in order to avoid being capped.

4.9The final figures for grants will not be known until late January/mid February, however they are not expected to change significantly at this stage.

4.10The formula grant and Area Based Grant (ABG) figures have not been announced beyond 2010/2011. However the County Council is assuming that these grants will decrease by 2% a year after 2010/2011.

4.11The County Council’s budget, and the council tax level will be set by the County Council on 23 February 2010 within the resources available taking into account increased costs arising from inflation, pressures for change, efficiency savings, growth and policy changes.

4.12The following cost pressures and efficiencies identified in the Council's 17th December 2009 Policy and Resources Cabinet Panel Report would, if agreed in the approved 2010/2011 budget, impact on JCPB. However, the final position, including any growth and/or policy changes, will not be known until the County Council sets the budget on 23rdFebruary.

  • Inflation uplift has been set at 0% for pay and 1.2% for non-pay.
  • Funding for demographic pressure of £5.8m for learning disability services and £766,000 for mental health services
  • Significant efficiency savings for learning disability servicesfrom

-reducing high cost fees £2m, from working with external consultants "OLM" and their care placement costing model to re-negotiate contracts with private and voluntary sector providers in order to significantly reduce fees for high-cost placements

- increased use of supported living housing £485,000

-expert purchasing of care placements £250,000

Efficiency savings for mental health fromvalue for money review of working age mental health £1,118,000 in 2010/11

4.13Iain MacBeath, Assistant Director Adult Care Services (Performance and Business Support) will provide a verbal update on the County Council budget.

4.14JCT Response to the financial challenges outlined above.

4.15In anticipation of the challenges facing the health and social care economy in Hertfordshire over the coming 4 years, JCT have been working closely with Hertfordshire Partnership NHS Foundation Trust to look at how the expected efficiency targets could be achieved. A range of possible financial scenarios over a four year period have been considered and a range of proposals are being developed that will ensure that Hertfordshire maintains high qualityhealth and social services for all JCPB’s care groups, as well as looking at ways the services commissioned by JCPB can impact on the productivity and efficiency of the wider system.

4.16The initial proposals are now being assessed to ensure their viability and sustainability and to determine the detail of the savings that can be achieved within the required timescales.

4.17JCT will be risk assessing all proposals to ensure any changes in the way services are delivered will not compromise considerations around quality and safety.

All proposals will be considered by the Strategic Commissioning Groups, and recommendations presented to JCPB.

5.Financial Implications

5.1The financial implications will be quantified and reported to JCPB in April, once the parameters have been confirmed.

Background Papers

County Council Standstill Revenue Budget 2010/11 to 2013/14

Policy and Resources Cabinet Panel

17th December 2009

100128 013 Item 7 - 2010-2011 Funding for JCPB 1