NHS Finance Why Do We Need to Know

NHS Finance

Why Do We Need to Know About Money in the NHS?

Applying financial knowledge in clinical practice Forecasting Variance Cost improvement programmes SMR Tariff Specialised services Departmental Organisation Translating finance language Pathway design Business cases Value based commissioning

Content 1. Where money in the NHS comes from and where it goes 2. Commissioning 3. Paying for NHS Services 4. Business case writing

Where does money in the NHS come from and where does it go?

How much is spent on health compared with other Government Departments? Defence Education Health Transport

Public Expenditure Department Expenditure Budget 2015 -16 140. 00 120. 00 Health, 116. 60 £ billions 100. 00 80. 00 60. 00 40. 00 20. 00 Defence, 58. 2 Education, 35 Transport, 8. 6

Here Some Key Organisations in the NHS Draw a diagram showing how money flows between them ent m a i l r Pa m t r a Dep Hospi of t n e h ealt H c Hea Local Authorities NHS England sts u r T l ta ups o r G g n i n o i s cal Commis Clini Publi lth En gland Reg Mental Health ula tors : CQ C& Mon i tor

Here Some Key Organisations in the NHS Draw a diagram showing how money flows between them Parliament Department of Health Regulators: CQC & Monitor NHS England Clinical Commissioning Groups Primary Care Local Authorities Hospital Trusts Mental Health

Provider Funding

Trust Income Breakdown 2014/15 Forecast Outturn £m Local CCGs 428. 0 NHSE (Specialised) 218. 5 Other NHS Patient Care Contracts Non-NHS Patient Care (Private Patients, OSVs, etc) 53. 7 6. 1 Teaching/R&D Income 80. 6 Other Operating Income 37. 9 Grand Total 824. 8

Breakdown of NHS Payments to General Practice Global Sum Local Enhanced Services 20. 95% MPIG National Enhanced Services 4. 12% 1. 16% 3. 22% 4. 46% 0. 40% 4. 44% PCO Admin 61. 24% Premises Prescribing QOF

Commissioning What does commissioning mean?

Oxford dictionary definition: ‘Order or authorize the production of (something) Origin: via Old French from Latin commissio(n-), from committere ‘entrust’ Pope Julius II Michelangelo Sistine Chapel

Questions • What have you commissioned in your non-work life? • What are GP’s and Consultants commissioned to do at work? • What is your organisation (eg hospital or GP practice) commissioned to do?

What if the person you commissioned doesn’t deliver what you commissioned them to do?

Penalties • Usually occur in the form of fines • Could be removal of entire contracts • Do penalties always work?

As a commissioner, how could you get better value from the people/ organisations you commission (at home or in the NHS)?

Rewards CQUINS (Commissioning for quality & innovation)

Quiz Who commissions each of these organisations? • • Clinical commissioning groups (CCG’s) Hospitals Mental Health Trusts Specialized services (eg Pulmonary Hypertension or spinal surgery) GP practices Public health Community services NHS England

Commissioning - summary • Commissioning in the NHS means ‘buying’ services- there may be several 100 services provided by 1 hospital • Commissioners use contracts with hospitals setting out the specifications of the services • There may rewards and penalties to ensure the service quality and quantity meet the specifications • There are many commissioners and providers in the NHS

Paying for NHS services

Exercise 1 - Costs of a service 80 year old admitted with Pneumonia Cost 1 Saw GP 4 days earlier – consultation/ Abx ? 2 Seen by GP at home - getting worse, sent to ED by ambulance ? 3 Seen in ED - CXR, bloods, urine, antibiotics, MRSA & DVT prophylaxis ? 4 Admitted to hospital ward – Oxygen, bloods, antibiotics, CT chest ? 5 Discharge planning – Home assessment (failed) ? 6 Transferred to community hospital –Ambulance transport home ? 7 Return home –visit by community nurse x 3 ? 8 Hospital out-patient follow up appointment 2 weeks after discharge ?

Exercise 2 –Price of a service 80 year old admitted with Pneumonia Price 1 Saw GP 4 days earlier – consultation/ Abx ? 2 Seen by GP at home - getting worse, sent to ED by ambulance ? 3 Seen in ED - CXR, bloods, urine, antibiotics, MRSA & DVT prophylaxis ? 4 Admitted to hospital ward – Oxygen, bloods, antibiotics, CT chest ? 5 Discharge planning – Home assessment (failed) ? 6 Transferred to community hospital –Ambulance transport home ? 7 Return home –visit by community nurse x 3 ? 8 Hospital out-patient follow up appointment 2 weeks after discharge ?

Paying for hospital services Payment by results (PBR): 1. A patient is admitted with a specific diagnosis eg pneumonia or elective hip surgery 2. The diagnosis is then ‘coded’ (by hospital coders) , so instead of writing the diagnosis out in full for millions of patients, it can be represented with a few simple letters and numbers. Eg Dyspnoea is R 06. 0 3. The (a)diagnosis code is then considered alongside (b)any procedures and (c)comorbidities to produce something called a health resource group (HRG) 4. 4. The HRG assumes a certain amount of time and cost has gone into looking after that patient and the hospital receives a nationally set ‘tariff’ or payment for that HRG

Diagnosis Tariff Procedures HRG grouper Co-morbidities

Based on what you heard about on the last slide –what can you do to help make the coding more accurate?

What else does coded information get used for?

How do different providers get paid? 80 year old admitted with Pneumonia Price 1 Saw GP 4 days earlier – consultation/ Abx ? 2 Seen by GP at home - getting worse, sent to ED by ambulance ? 3 Seen in ED - CXR, bloods, urine, antibiotics, MRSA & DVT prophylaxis ? 4 Admitted to hospital ward – Oxygen, bloods, antibiotics, CT chest ? 5 Discharge planning – Home assessment (failed) ? 6 Transferred to community hospital –Ambulance transport home ? 7 Return home –visit by community nurse x 3 ? 8 Hospital out-patient follow up appointment 2 weeks after discharge ?

Payment Systems Footfall HRG Block contract Footfall

Budgets 1. Do you have a household budget? 2. How do you organize your household budget? 3. Why do NHS organisations have to have budgets? 4. What happens if you (at home) or the NHS organisation overspends? 5. What things could make you go ‘off budget’- at home and in your NHS organisation? 6. What is a cost improvement plan (CIP) or Quality, innovation, productivity and prevention plan (QIPP)

Value Outcome 1 Value 2 Patient experience 3 Safety e. g. comfort, e. g. diagnostic error, e. g. population health, treatment by staff, post-op survival rate, extent of waiting time, ease of complications, functional recovery access infections Clinical outcome Resources 4 Revenue costs e. g. income, time, salaries, system maintenance, facilities Source: based on Michael Porter (HBR, NEJM), HFMA “Value in Health Care”, Delivery Group interviews 5 Capital costs e. g. Investment in infrastructure / equipment

Paying for the NHS -summary • There are costs and prices associated with all health services • ‘Payment by results’ requires accurate coding and tariffs to make payments for hospital services • GP’s and Community health services are paid for using capitated fee’s or block contracts • Budgets are used to make sure there is enough money to pay for services (including staff wages!) each year • Savings have to be made each year to make up for rising costs of wages, goods and services (CIPS & QIPPS) • ‘Value’ takes into account quality together with costs

Business Cases

Business Cases Can you come up with one good idea that would make your clinical area run better (however strange you think it might sound!)?

Producing a business case Form a group of 3. One person is going to be ‘selling‘ the idea, the second person is going to be ‘receiving/ judging the idea’ the third person is going to be making observations on how the other two go about their task and I want you to judge it out of ten (without letting anybody else know until the end of this session). Take two minutes at the beginning for each of you to decide how you are going to go about doing your role well ie using public money for the best possible value You will have 5 minutes for this task

Business cases • We all have great ideas on making our services better • Each of these ideas comes with a price tag • NHS organisations have to consider these ideas to make sure they add value and are affordable • Each year NHS organisation will have hundreds of ideas to consider and will have to decide which ones to take forward

What do you think should be in a business case?

Key components • Is it Needed? • Is it Value for Money? • Is it Viable? • Is it Affordable? • Is it Achievable?

NHS 5 case model

Repeating the business case ‘pitch’ • Form a group of 3. • One person is going to be ‘selling‘ the idea, the second person is going to be ‘receiving/ judging the idea’ the third person is going to be making observations on how the other two go about their task and I want you to judge it out of ten (without letting anybody else know until the end of this session). • Take two minutes at the beginning for each of you to decide how you are going to go about doing your role well ie using public money for the best possible value • You will have 5 minutes for this task

Business case writing summary • You shouldn’t do it on your own –needs to be done with the general manager, business analysts and people with the relevant experience • Stick to the principles of business plan writing • There may be local ‘templates’ for you to use that will give you guidance • Don’t get frustrated if you don’t succeed the first time –there may be other opportunities eg next year, via charitable funds, attaching it to a different business case that is related. • Look at the sample business cases in the resources section of the VLE

Summary of the Session • Healthcare receives the highest proportion of Government Departmental Spending • The New NHS Structure has devolved the majority of Commissioning to local Clinical Commissioning Group, comprised mainly of GPs. • There are costs and prices associated with all health services • ‘Payment by results’ requires accurate coding and tariffs to make payments for hospital services • GP’s and Community health services are paid for using capitated fee’s or block contracts • Business cases needs to be done with help of people with the relevant experience • Stick to the principles of business plan writing