1 Subject: Finance and QIPP (Quality, Innovation, Productivity & Prevention) Plan 2016/17 Presented by: John Ingham, Chief Financial Officer Submitted to: NHS West Norfolk CCG Governing Body, 31 March 2016 Purpose of Paper: For discussion and approval Executive 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. Furthermore, CCGs are expected to meet key financial planning requirements set down by NHS England (the “business rules”). This paper outlines the West Norfolk CCG funding allocation of £240.4m for 2016/17 and proposes start year budgets totalling £238.0m net of a QIPP (Quality, Innovation, Productivity, Prevention) plan of £9.8m in order to deliver the planning requirements. This QIPP target is an increased challenge compared to previous years at 4% of annual expenditure. This paper also highlights key risks to delivery of financial balance in 2016/17 and associated mitigations. KEY RISKS: Clinical: None Finance and Performance: This paper presents a balanced budget for 2016/17 but highlights financial risks in Section 9. Impact Assessment (environmental and equalities): None Reputation: Failure to deliver a balanced financial position will adversely affect the reputation of the CCG and could affect its on-going viability. Legal: None Patient focus (if appropriate): None Reference to relevant Governing Body Assurance Framework: 4.1, 4.2, 4.3, 4.4 Recommendation: The Governing Body is asked to: Note the CCG funding allocation for 2016/17 totalling £240.41m; Approve the start year budgets totalling £238.00m proposed in Section 7, noting the QIPP (savings) requirement of £9.84m in order to deliver the required 1% surplus; Approve the QIPP plan outlined in Section 6 to deliver the QIPP requirement; Note the financial risks to delivery of the 1% surplus in 2016/17 and potential mitigations as described in Section 9. Agenda Item: 16.40c
Transcript
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Subject:
Finance and QIPP (Quality, Innovation, Productivity & Prevention) Plan 2016/17
Presented by:
John Ingham, Chief Financial Officer
Submitted to:
NHS West Norfolk CCG Governing Body, 31 March 2016
Purpose of Paper:
For discussion and approval
Executive 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. Furthermore, CCGs are expected to meet key financial planning requirements set down by NHS England (the “business rules”). This paper outlines the West Norfolk CCG funding allocation of £240.4m for 2016/17 and proposes start year budgets totalling £238.0m net of a QIPP (Quality, Innovation, Productivity, Prevention) plan of £9.8m in order to deliver the planning requirements. This QIPP target is an increased challenge compared to previous years at 4% of annual expenditure. This paper also highlights key risks to delivery of financial balance in 2016/17 and associated mitigations.
KEY RISKS:
Clinical: None
Finance and Performance: This paper presents a balanced budget for 2016/17 but highlights financial
risks in Section 9.
Impact Assessment (environmental and equalities): None
Reputation: Failure to deliver a balanced financial position will adversely affect the reputation of the
CCG and could affect its on-going viability.
Legal: None
Patient focus (if appropriate): None
Reference to relevant Governing Body Assurance Framework: 4.1, 4.2, 4.3, 4.4
Recommendation:
The Governing Body is asked to:
Note the CCG funding allocation for 2016/17 totalling £240.41m;
Approve the start year budgets totalling £238.00m proposed in Section 7, noting the QIPP (savings) requirement of £9.84m in order to deliver the required 1% surplus;
Approve the QIPP plan outlined in Section 6 to deliver the QIPP requirement;
Note the financial risks to delivery of the 1% surplus in 2016/17 and potential mitigations as described in Section 9.
Agenda Item: 16.40c
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1. Introduction 1.1 In January 2016 the Governing Body received a paper that outlined the CCG’s financial allocation
for 2016/17 and the high-level financial plan. This paper provides an update and further detail in respect of the 2016/17 financial plan and specifically requests approval of the start year budgets. The paper describes:
the resources available for 2016/17,
the national financial planning requirements,
the application of growth resources,
the current 2016/17 QIPP plan,
summary 2016/17 budgets by expenditure area,
the underlying financial position of the CCG, and
risks to delivery of the financial plan along with potential mitigations.
1.2 The information in this paper is largely consistent with that provided to NHS England in a draft
financial plan submission as at 2nd March 2016. A further, final submission is required by NHS England for 11th April, and any changes reflected in this version will be notified to the Governing Body in May.
2. Resources Available in 2016/17 2.1 The Governing Body paper in January 2016 advised that the CCG’s programme (ie commissioning)
allocation for 2016/17 will increase by £10.4m, which represents an uplift of 4.62%. This compares favourably with the minimum uplift for CCGs of 3.05% and the average uplift of 4.24% across East of England CCGs.
2.2 The CCG’s Running Cost Allowance for 2016/17 has increased by £0.023m which equates to 0.6%.
Running Costs Allowances have been maintained at a “flat cash” level nationally, with marginal changes for individual CCGs dependent on relative population growth.
2.3 The resulting total CCG allocation for 2016/17 is summarised in Table 1 below
Table 1 – 2016/17 Resource Limit
2.4 Since the January Governing Body meeting there has been further clarification that the 2016/17
recurrent growth funding includes specific allocations that had previously been awarded non-recurrently, as follows:
£665k funding for the Enhanced Tariff Option (ETO) within 2015/16 national prices,
£350k transformational funding for Child & Adolescent Mental Health Services (CAMHS).
In addition, it should be noted that the CCG’s 2016/17 growth funding is linked to population changes, and therefore the growth in Programme allocation includes the recurrent impact of patients transferring from Watton to Swaffham practices in 2014, for which the CCG received a non-recurrent funding transfer in 2015/16 of £788k from South Norfolk CCG. The value of growth funding excluding these specific factors is £8,096k, which equates to a real uplift of 3.61% on 2015/16 recurrent funding.
3. 2016/17 National Planning Requirements 3.1 Each year NHS England publishes its planning requirements for CCGs, known as the “business
rules”. For 2016/17 these include the following:
Delivery of a cumulative surplus of 1% of allocation (as in previous years);
Establishment of a Contingency Reserve of at least 0.5% of allocation (as in previous years);
Setting aside a 1% non-recurrent risk reserve, to be uncommitted at the start of the financial year. This reserve is to be regarded as a mitigation for financial risk throughout local health systems, and guidance states that approval for spending of the 1% non-recurrent monies during the year will be subject to approval by HM Treasury. This is a fundamental change from previous years when use of the 1% reserve has been at the local discretion of CCGs;
Delivery of 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, and that the real uplift in allocation for West Norfolk CCG is 3.61% as explained above.
3.2 Also, NHS England and Monitor are jointly 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. In recent years national prices have reduced, as provider efficiency requirements of 4% per year have exceeded the allowances for cost inflation. However in 2016/17 this position is reversed, with provider cost inflation of 3.1% being only part offset by a 2% efficiency requirement. This results in a headline price (tariff) uplift of 1.1% for all NHS providers, with an additional uplift of 0.7% for acute Trusts as a result of further increases in the cost of the Clinical Negligence Scheme for Trusts (CNST).
3.3 A further national requirement for 2016/17 is that all CCGs need to contribute to a national risk-pool
for legacy Continuing Healthcare (CHC) claims. This is the third and final year of this risk-pool, and contributions have been notified to CCGs; for West Norfolk the figure is £262k.
4. Local Planning Assumptions 4.1 In addition to the national planning requirements the CCG’s financial plan reflects a number of local
planning assumptions, the key areas for 2016/17 being as follows:
Demographic growth 1.3%
Non-demographic growth - acute services 1.1%
Non-demographic growth - continuing healthcare 3.7% (ie total growth 5.0%)
Non-demographic growth - GP prescribing 3.7% (ie total growth 5.0%)
Non-demographic growth - high cost drugs 8.7% (ie total growth 10.0%).
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5. Application of Growth Funding
5.1 As noted in section 2 above the CCG has received £10.375m growth in resources in 2016/17. 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 2 below.
Table 2 – Application of growth funding 2016/17
5.2 Two key points to note from Table 2 are that:
Whilst the CCG is forecasting delivery of a surplus of 1% in 2015/16 this is supported by non-recurrent means (such as contractual penalties and challenges) which masks the recurrent underlying exit position for 2015/16 which is a shortfall of £2,719k. The underlying position for 2016/17 is discussed further in section 8.
Despite the CCG receiving an uplift in funding of over £10m, the various requirements for 2016/17 lead to a savings (QIPP) target of £9.836m in order to deliver the required 1% surplus at the end of 2016/17. This is discussed further in section 6.
Description £000 Notes
2016/17 Additional Resources:
Growth funding 10,375
2015/16 surplus b/f 2,317
Less requirement for 2016/17 surplus c/f (2,405)
Total available resources 10,287
Application of Resources:
Recurrent shortfall from 2015/16 2,719
15/16 position supported by one-off allocations and
non-recurrent benefits (eg contract penalties &
challenges)
Price (tariff) inflation net of efficiency 2,806 National uplifts of 1.1% / 1.8% (acute)
Demographic growth 2,749 Local assumption of 1.3%
NHS England "Business Rules" 3,934 Includes 1% non-rec reserve, 0.5% Contingency
Reserve
Other recurrent growth / cost pressures 6,797
Includes non-demographic growth (especially CHC,
Prescribing), areas where national funding no longer
available (eg GPIT), and other known cost pressures
1,117
Specific items such as contribution to national CHC
risk-pool, Pathology transition costs, and local QIPP
Reserve.
Total applications 20,123
Balance = QIPP target (9,836)
Other non-recurrent growth / cost
pressures
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6. Bridging the Gap - QIPP (Quality, Innovation, Productivity, Prevention) Savings 6.1 As noted above in Section 5 the CCG proposed budgets for 2016/17, based on a range of
reasonable planning assumptions, lead to a shortfall of £9.84m (4.0% of planned expenditure). A number of initiatives have been identified to bridge this gap, which contribute to a current QIPP plan totalling £10.67m.
6.2 The current QIPP plan for 2016/17 is summarised below in Table 3, with further details shown in
Appendices B and C. Key points to note from Table 3 are that:
70% of the value of QIPP schemes is contained within the Top 10 schemes;
80% of the schemes are transactional and 20% transformational; and
The current programme totals £0.84m more than the QIPP requirement, which equates to “headroom” of 9%.
Table 3: Summary of 2016/17 QIPP programme
6.3 It is important for the CCG to create additional “headroom” above the QIPP target to mitigate the
risks associated with delays in implementation of schemes or non-delivery. This is in the context of actual QIPP delivery in previous years of 60%-70% of plan, so in order to deliver £10m of savings the CCG should be targeting around £14m of schemes. To help the CCG achieve further “headroom” and to increase the level of delivery the CCG is focusing on a number of key areas:
Resource optimisation – It is vital that as an organisation, we maximise the effectiveness of the resource available to us so that we are able to make sure we have the right people with the right skill set to deliver our goals. We have embarked upon an in-house training round where we will be developing the wider team. This includes topics such as:
o Project Planning, o Risk and Issue Management, o Financial Analysis o Stakeholder Management.
These sessions are designed to strengthen the team to enable the development of skilled multi-disciplinary project teams so that more projects are delivered on time, on budget and in full.
QIPP scheme structure – With any organisation of our size there are only a finite number of schemes that can be actively managed and delivered successfully. With this in mind the
Description £m %
Top 10 QIPP schemes (see App B for details) 7.50 70%
Other schemes (see App C for details) 3.17 30%
Total QIPP plan 10.67 100%
QIPP requirement 9.84
Headroom / (gap) 0.84
Split of QIPP plan by Transformational / Transactional:
Description £m %
Transactional 8.52 80%
Transformational 2.15 20%
Total QIPP plan 10.67 100%
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schemes are being structured into programmes of work which align projects with key dependencies. This allows the project teams to develop the schemes “in the round” rather than in isolation. This programme approach will allow us to increase the number of areas which we can develop and change without dramatically increasing the resource available.
Resource review – Once we have structured the QIPP schemes into programmes of work and optimised our resource we will be able to identify any gaps we have in the delivery of the QIPP schemes. This will allow us to make sure that any gaps that we have can be met in the most efficient and economical way.
Development of an active QIPP development pipeline – It is vital that QIPP development is a rolling process that is embedded as part of the ‘day’ job’. Rather than QIPP being a separate entity or there being an annual QIPP cycle, the programme teams will be working on their specific areas with QIPP being a component part of their thinking. The product being that they are able to develop opportunities on a regular basis. Taking this approach it is expected that further schemes will be initiated throughout 2016/17 that will build the QIPP programme for 2016/17 and 2017/18 and create further in-year ‘headroom’.
Long List analysis – In addition to schemes developing from the teams’ daily activity, we have developed a ‘long list’ of further ideas. These are currently being reviewed and from this a number of schemes will be identified to be worked up within the programmes of work detailed above.
6.4 Following analysis of historic levels of QIPP delivery the CCG has also reviewed the project process
and governance. The process has been streamlined so that it is more tailored to the size and capability of the organisation while making sure that there is no loss of control or governance. The system is summarised below:
Note re abbreviations: CLEX = Clinical Executive (meets monthly), SMT = Senior Management Team (meets weekly), SRO = Senior Responsible Officer, BI = Business Intelligence The Task and Finish groups are multi-disciplinary teams which will be working on focused programmes of work. The clinical leads play a vital role in the groups, helping to develop the schemes with strong clinical guidance and championing the schemes through the developmental stages.
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6.5 It should be noted that the QIPP plan outlined in 6.2 will continue to evolve over coming weeks as schemes are developed and signed off internally and further headroom generated, and an updated plan will be brought to the May Governing Body meeting.
6.6 It is also important to note that the CCG’s financial plan includes a small reserve of £0.5m for
enabling QIPP initiatives; this will be used for additional project management as necessary, for sessional pharmacist time to support the Prescribing Quality Scheme, and for any other one-off enabling costs.
7. 2016/17 Summary Budgets 7.1 The start year budgets resulting from the application of growth funding outlined in section 5 and the
QIPP schemes described in section 6 are summarised in table 4 below, with further detail shown at Appendix A.
7.2 Appendix A provides a breakdown of the budgets by category of expenditure and application of growth funding, showing the starting position of the 2015/16 forecast and the planned 2016/17 final position.
7.3 The Governing Body is asked to approve the budgets in Table 4, and to note that these remain subject to amendment as work is on-going to finalise 2016/17 contracts. Any resulting changes to the start year budgets will be submitted to the May Governing Body for further approval. Table 4 - Summary Budgets by Expenditure Area
£000 £000 £000
Expenditure Area
Acute 138,783 (6,243) 132,540
Mental Health 17,233 (229) 17,004
Continuing Healthcare 13,969 (1,374) 12,595
Community 27,915 (2,014) 25,901
GP Prescribing 33,893 (808) 33,085
Other Primary Care 7,095 - 7,095
Other Programme Costs 1,702 832 2,534
1% Non-Recurrent Reserve 2,344 - 2,344
Running Costs 3,701 - 3,701
Contingency Reserve 1,203 - 1,203
TOTAL BUDGETS 247,838 (9,836) 238,002
Resource Limit
Recurrent Programme Allocation 234,389 - 234,389
Running Cost Allowance 3,701 - 3,701
Non-Recurrent Allocations - - -
Brought Forward Surplus 2,317 - 2,317
TOTAL RESOURCE LIMIT 240,407 - 240,407
SURPLUS / (DEFICIT) (7,431) 9,836 2,405
Description Total before
QIPP
QIPP
Savings
Total
Start Year
Budgets
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8. Underlying Financial Position 2016/17 8.1 As stated in Table 2 and further demonstrated in Appendix A, it is important to note that whilst the
CCG is expecting to deliver a cumulative surplus of £2.317m in 2015/16, the underlying recurrent position is a deficit of £2.719m. This reflects the fact that the CCG’s 2015/16 in-year Financial Recovery Plan has increasingly relied on non-recurrent measures such as the benefit from additional one-off allocations received in recent months, acute contract penalties and challenges, and non-recurrent reserves.
8.2 This underlying deficit contributes to the high level of QIPP savings required in 2016/17, as shown above in section 5. Provided these savings are delivered recurrently, the CCG’s position as at the end of 2016/17 will be much healthier with a recurrent surplus of £3.5m ie 1.5% of expenditure, as shown in Table 5:
Table 5 – Summary of 2016/17 underlying position
The main elements of planned non-recurrent spending are:
1% risk reserve (as described in section 3.1) £2.34m;
QIPP enabling reserve of £0.50m;
CHC national risk-pool contribution of £0.26m (as described in section 3.3);
The final year of transition costs for the local Pathology contract £0.36m.
9. Risks and Mitigations 9.1 In addition to the elements factored into the 2016/17 financial plan there remain a number of risks
that could jeopardise delivery of the required 1% surplus. These are outlined in table 6 below, along with potential mitigations. If all of the risks and mitigations materialise as per table 6, then the CCG would deliver a deficit in 2016/17. It is therefore critical that this position continues to be reviewed over the coming weeks as QIPP schemes are progressed and provider contracts finalised, and an update will be reported to the May Governing Body. Table 6 – Risks to delivery of 2016/17 financial plan
Description
£000 £000 £000
Planned spend (after QIPP) 234,541 3,461 238,002
Funding 238,090 2,317 240,407
Surplus / (Deficit) 3,549 (1,144) 2,405
Surplus / (Deficit) as % of funding 1.5% 1.0%
Recurrent
position
Non-rec
position
2016/17
Total
Risks Potential
risk value
Notes
£m
Acute SLAs activity above plan 0.67 Full risk value reflects a further 1% growth
Continuing Healthcare activity above plan 0.32 Full risk value reflects a further 5% growth
QIPP: delivery risks 2.46 Full risk value = total identified QIPP
GP Prescribing activity growth above plan 0.33 Full risk value reflects a further 2% growth
Other risks 1.50 16/17 contract settlements + remaining risk to delivery of
2015/16 surplus
Total risks 5.28
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Table 6 – Potential mitigations
10. Conclusion 10.1 2016/17 will be a very challenging year for the CCG as it seeks to rectify an underlying recurrent
deficit and deliver the service and financial requirements expected of the CCG by both the local population and by NHS England. This paper outlines a financial plan that meets these requirements but which necessitates delivery of a QIPP target of £9.8m that is greater than that delivered in previous years.
10.2 The Governing Body is asked to acknowledge the contents of this paper and to approve the summary budgets outlined in section 7.
Mitigations Potential
mitigation
value
Notes
£000
Contingency reserve 0.60 Assume 50% needed for other risks arising in year
CCG cost pressures reserve 0.90 Set aside for unforeseen pressures
Other non-recurrent measures 0.30 Additional allocations in-year (as received in 2015/16)
