Fundamental Review of Allocations Policy This report is an update to CCG Governing Bodies on the scope, process and possible outcomes of the review which will impact CCG income in 2014/15 and 2015/16, and the budgets available for the direct commissioning responsibilities of the Area Team.

Background and Timeline Review commissioned by NHS England (NHSE) in December 2012 Overseen by the Allocations Steering Group with members drawn from the national support centre area teams CCGs Representatives of the Advisory Committee on Resource Allocation (ACRA) ACRA have made recommendations on a revised formula and new target allocations for CCGs which was published by the DH in January The Allocations Steering Group will be making recommendations to the Board of NHSE in November on the application of the formula, including pace of change, to distribute the total fixed financial mandate for NHSE. To assist them in this they have held a series of workshops during September. The Board of NHSE will make the decision and announce CCG and other Allocations for the years 2014/15 and 2015/16 during December 2013.

Why do we need to change? The mandate requirements for NHSE are subtly different to PCTs. Required to Provide for equity of access, ensuring equal access for equal need Conduct a transparent allocation process Doing nothing is seen as unfair due to inequalities in inherited baselines and significant distance from the new target allocations NHSE and CCGs have different responsibilities to PCTs NHSE are implementing consistent commissioning for its area of responsibility, meaning baselines are inherently flawed as they are linked to local priorities. The correlation between organisational financial performance, including provider failure, and CCG distance from new target allocation is clear. However ….. Allocation change is always controversial as data, and therefore any formula, is imperfect. Significant swings can destabilise health economies.

The Three Key Questions 1.How to allocate funds between areas of spend – CCGs, NHSE, Public Health, Social Care transfers, etc. Long term aim is an approach linked to return on investment based on to QALY gains. Not achievable for 2014/15 to 2015/16. Equal uplift – which doesn’t deliver the mandate requirements Or, Differential uplift by area - which leads to a targeted approach 2.How to allocate funds within each area of spend – e.g. across CCGs 3.What should be the pace of change, i.e. how quickly do we move from current to future state? QALY – Quality Adjusted Life Years. A comparative measure of cost effectiveness for different health interventions used by eg National Institute for Health and Care Excellence - NICE

1. Allocating between areas of spend In their requirement to address inequalities NHSE will need to consider Which elements of which commissioning streams might need more funding to address unmet/inappropriately met need encapsulated in the baselines The quantum of any adjustment The review working group is recommending that the main parts of a patient pathway where unmet need arising from inequalities may require additional targeted funding are in Primary Care} Collectively these represent c31% Community Care} of total NHSE spend Prescribing} and 24% of CCG spend Public Health} Social Care} ACRA confirm that there is no evidence that this would lead to NET adverse impact on acute care.

2. Allocating within areas of spend NHSE Board will need to consider Whether additional adjustments should be made to the new formulae The methodology appropriate for each relevant stream Need a practical means of implementation which does not destabilise health systems Needs to address inequality – baseline funding embodies local priorities and is not demonstrably equitable across wider geography. But … As yet the NHSE Board have made no decision on whether the CCG formula and target is appropriate.

Allocating within CCGs Objective of the CCG Formula is to enable equal (opportunity of) access for equal need Key changes from PCT formula Scope – no primary care, specialised services or public health Population Basis – 2011 census data and use of registered population. Disability Free Life Expectancy (DFLE). This was an adjustment in the old formula which had significant impact on the weighting, but which ACRA view as not core to CCG funding, and for which the evidence is not seen as robust.

Allocating within Primary Care Planning to use the current Carr-Hill formula for Primary medical care, with separate formulae for dentistry and pharmacy Carr-Hill formula determines the 57% of GP funding distributed through the “global sum” and takes into account age, sex and health status factors which correlate to deprivation Current NHSE strategy is to increase the proportion of funding routed through the “global sum” starting with the phasing out of MPIG. Over time this will better align funding to need. MPIG – Minimum Practice Income Guarantee, introduced as an adjustment factor when nGMS contract was introduced in 2004, being eroded over time.

Allocating within other funding streams Specialised Commissioning. Commissioned nationally according to need, based on standard service specifications. Work underway to enable retrospective visibility of geographic split. Public Health. General approach for 2014/15 and 2015/16 is to set programme budgets. Social Care Still awaiting clarity on the methodology for the Integration Transformation Fund.

3. The Pace of Change NHSE Board will need to consider Possible pace for investment/disinvestments Maintaining safe services Need for stability for longer term planning Allocation working group exploring a two stage approach Pragmatic approach for 14/15 and 15/16. Likely to consider Differential allocation to growth – eg flat funding or smaller % for some CCGs Areas at extremes moving faster Areas with biggest surpluses moving faster Longer term work to develop evidence based approach Outcome will not be known until NHSE Board has considered the recommendations of the Allocations Steering Group Normal timeline for announcement of allocations is December