Unit Price Model for In-House Services

Unit Price Model for In-House Services

Unit Pricing Model (to be read in conjunction with Unit Pricing Tool.)

1Principles

One of the key challenges for In-House services is having a clear price for services that is derived from the actual cost of delivery. The usual method of costing an establishment and then dividing by activity is not fit for purpose in the developing ‘market’ economy driven by developments in Self Directed Services and shared packages with ILF and Supporting People. This is because an establishment is currently created based on a set level of activity or service model whereas the level of activity will in future be variable.

Creating a Unit Price and then building an establishment based on activity does have considerable risks. It requires the provider to maintain a workforce to match activity as it assumes no funding for over capacity.

The key principle in setting a Unit Price is that the Unit should be one hour of direct service delivery and the Price being all the costs associated with delivering that one hour.

2Methodology.

Essential to the Unit Pricing Model is identifying the actual cost of 1 hour of service. There are numerous variables including weekend pay rates and evening enhancements, management ratios, cover costs etc. No staff member actually works 37hrs a week over the course of a year and requires cover for each hour/day lost due to sickness, training, leave etc. Calculations and guidance on some of the issues to be considered to identify a Unit Price are listed below;

Staff/Management allocation

The Unit Pricing Model adopted a process of identifying all associated costs with delivering 1 hour of support from a frontline worker as this is the only ‘chargeable’ activity. In the example model from Provider Services we identified that 2 types of staff deliver frontline support. These are described as Frontline Worker and Senior Worker. Using an analysis of roles we determined that 82% of delivery was from a Frontline Worker and 18% was provided by a Senior Worker for domiciliary care.

This will be dependent on the service structure required. Notes on using the Unit Price Tool are also included.

To identify the proportion of each manager required current service structures can be used - divide the number of managers at any grade by the number of frontline staff. This will give a proportion of managers to frontline staff.

Note 1. In the model column E is the proportion of 1 (hour) of all staff/managers required to deliver 1 hour of support. The ‘frontline’ delivery should equal 1. Other posts will be a proportion of 1.

Enhancements. (note – not including waking nights)

To determine a % figure for enhancements we have had to make assumptions on the average rota pattern staff work. The figure of 22.75% enhancements are based on an analysis of individual rota patterns and payments from 2007/08. This will vary or may not be applicable depending of the service.

Note 2. In the model column I applies an enhancement percentage for applicable posts.

Cover

To establish the % of cover for a frontline worker it was essential to identify how many hours per week on average over the course of a year that a worker delivers. This was done by using the following figures;

Total hrs contracted per year(a)1929

38 days leave, B/H , 10 days absence, 6 training/development/other

Total hrs lost per year requiring cover(b)400

Total hours worked per year (a-b)1526

Hours worked per week29.3

Hours of cover per 37hr employee per week 7.7

Cover as a percentage of a 37hr post20.8%.

Note 3. In the model column J applies a cover percentage for applicable posts.

Overheads

Identifying an overhead figure to use in the model has required us to estimate based on current service models. The overheads used in the model include all non-direct management salaries. In the Provider Services example only posts up to SUG 7 locality managers were identified as ‘direct costs’.

Overheads also include NVQ costs, travel, office and other expenses costs incurred in delivering the service.

Note 4. Box J 17 contains the overhead figure determined by the service. The figure of 11.26% is based on analysis of Provider Service structures and requires further testing.

Sleep-ins

These are priced in the tool at current actual costs.

3Using the Unit Pricing Tool

The example Provider Services Unit Pricing Tool consists of 4 linked worksheets within a spreadsheet. 2 separate Unit Price calculations were used as the service has costed the delivery of domiciliary care and housing related support differently. A service could have one or more levels of unit price that would be affected by the proportion and salary grade of the workers required.

Note 5. The Unit Price sheet or sheets should be completed first using service specific details and following the notes provided.

Note 6. Sheet 4 is a linked page containing the current 08/09 salaries using the SCP scales. Entering the correct SCP point in the Unit Price sheet column D will transfer the correct salary (inc on costs).

Note 7. Enter the variable figures as guided by notes 1 to 4into the Unit Price sheet.

Having identified a Unit Price, a service or scheme can be costed based on contract, estimated or projected activity. The Unit Pricing Tool contains a New Scheme worksheet. By entering the number of hours of service delivery and entering the same worker details and SCP point as used in the Unit Price worksheet, the worksheet will calculate the budget required and the number of WTE staff at each grade required.

Note 8. Enter the scheme or service hours in cells B4 and B5. The Enhancement and Cover values will have been transferred from the Unit Price Sheet.

Summary

It is important to note that setting a budget based on a Unit Price model requires that the provider is funded based on activity. This model will enable in-house providers to manage Individual Service Funds and provide services to people using Individual Budgets on a more accurately costed basis.

The fundamental challenge will be that to deliver service flexibly in-house providers will need to be able to increase and decrease service delivery depending on demand. This will require further work on the contracting and management of the workforce.

Paul Brooke

Service Manager

18.08.08