Development of a Registration Fees scheme across provider markets 26 March 2010

Background CQC has the power to set fees across all the provider markets which will be registered in 2011 and beyond (c.45,000 providers) The proposal for NHS providers for 2010/11 is complete The consultation on the interim fee structure for adult social care and independent healthcare providers for 2010/11 is commencing This presentation is to discuss the strategic fee scheme options to allocate and recover costs post Ernst & Young have been appointed to develop: - overarching fees scheme for 2011 and beyond - including market analysis of impact of the scheme - cost model

Where we are today Strategic assessment ► Exploration of other regulators approaches to fees ► Joint Ernst & Young/CQC workshops on fee scheme options Cost assessment ► Assessment of costs associated with registration, compliance and enforcement ► Map costs and activities Market analysis ► Segment the market and carry out trend analysis to understand potential changes in the provider base Options analysis and scenario simulation Stakeholder engagement Model amendments and preferred option selection ► Populate data and make amendments to the model functionality once tested with real data ► Explore the sensitivities of the different options and certainty of cost recovery ► Meet a cross section of ‘voices for’ and ‘voices in’ the market to discuss broadly discuss fee scheme options ► Make amendments from stakeholder feedback ► Rate and score options → agreement of preferred option Build model and final report ► Clean options and extend functionality for the selected option where required ► Write final report Jan April Today

Analogous research Seven organisations were reviewed: The Audit Commission Ofsted The NHS Litigation Authority The Environment Agency Financial Services Authority The Civil Aviation Authority ABPI Detailed profiles of their fee scheme structures are in Appendix A

Market segments Hospitals (Ind/NHS) Community provider (Ind/Vol/ NHS PCT) NHS GP practices Dental Provider (Ind/NHS/ Mixed) Hospitals (Ind/NHS) Independent private practice by NHS consultants Walk in centres Secure provision (Ind/NHS) Care Home w/o nursing (Ind/NHS(LA)/ Vol) Non residential care (in community) Urgent Patient Transport (Ind/NHS/Vol) Planned Patient Transport (Vol/Ind/NHS) Care Home (Ind/NHS(LA)/ Vol) Hospitals (Ind/NHS) Secure provision (Ind.NHS) Mental Health Ambulance Services Primary Medical Services Dental Other Acute Community Health Adult Social Care Learning Disabilities NHS Blood and Transplant Health Protection Agency NHS Direct Doctors currently in private practice Out of hours services Prison services Immigration and detention services This diagram is still under construction and will be finalised once all data has been collected. The adult social care elements for mental health and learning disabilities have been accounted for in adult social care. Therefore only the healthcare elements are shown under mental health and learning disabilities in this diagram. Segmentation of the overall CQC market by service provision was undertaken to understand the current and future state of this market.

Decision criteria Qualitative Criteria Perceived LegitimacyLevel of acceptance of fee scheme and understanding of its structure in the market SimplicityCQC ability to implement and maintain the Fee Scheme Degree of incentivisationExtent to which scheme promotes desirable behaviour Quantitative Criteria Degree of change% change in fee levels of providers from current interim scheme Recovery of CQC costsCertainty of cost recovery depending on a number of scheme characteristics related to external factors. Accuracy of cost allocation Estimate of how close recovered costs match costs across and within market sectors StabilityThe extent to which the fee scheme leads to a change in the provider base

Building blocks

The first two options are based on achieving straight line recovery Option 1 - The simple approach (% of turnover) Option 1a - The simple approach taking into consideration market segment sensitivities and locations Fee Structure One annual fee per provider, ie, not broken down by registration, compliance, enforcement One structure for all markets Cost DriversTurnover Incentive scheme None Other fee schemes This is similar to the approach adopted by the Association of British Pharmaceutical Industry (ABPI) except the ABPI have a fee for registration and charge an annual fee based on two tiers of % of turnover. Fee Structure One annual fee per provider, i.e. not broken down by registration, compliance, enforcement Fees are split by segments (e.g. Dental, GPs, Acute) Cost DriverCost drivers for all sectors are the same: turnover and location. Incentive scheme None Other fee schemes This is similar to the OFSTED approach in terms of charging per location and the Financial Services Authority Approach in terms of banding providers by type and setting fees based on % of turnover.

The second two options are based on maximising the accuracy of cost allocations Option 2 - Fees broken down per CQC activity, using a risk based approach. Option 2a - Fees broken down per CQC activity using a risk based approach. In addition to option 1 enforcement charged as ‘pay as you use’ Fee Structure Fees are broken down by:  a flat fee for registration by segment  a combined fee for compliance and enforcement by segment based on risk and turnover. Cost Drivers Cost drivers for all segments are the same: turnover and risk rating Incentive scheme No incentive. Comparabil ity to other fee schemes This is similar to the NHS Litigation Authority Approach of setting fees based on the risk profiles of providers. Fee Structure Fees are broken down by:  a flat fee for registration by segment  an average fee for compliance by segment  a ‘pay as you use’ enforcement fee Cost Drivers Cost drivers for all segments are the same: turnover and risk rating Incentive scheme No incentive. Compara bility to other fee schemes Similar to the NHS Litigation Authority Approach but also including the Environment Agency and Civil Aviation Authority Approach of setting fees based on activities.

The last option is a based on incentivising good performance Option 3 – Fees broken down per CQC activity using a risk based approach Enforcement charged as ‘pay as you use’ Direct financial reward for top performers Fee StructureFees are broken down by:  A flat fee for registration by segment  An average fee for compliance by segment  A ‘pay as you use’ enforcement fee Cost DriversCost drivers for all segments are the same: turnover and risk rating Incentive scheme  Fee reduction on compliance only for top performers, calculated as a % of the fee a particular providers is supposed to pay (e.g. 1% for good performers, 2% for excellent). Comparability to other fee schemes Similar to the NHS Litigation Authority Approach using risk profiles and in setting discounts based on achieving CNST standards but also including the Environment Agency and Civil Aviation Authority Approach of setting fees based on activities.

Implementation Issues Turnover data Availability Extracting non-registerable activity Year on year movements Risk data Availability System for new providers – measuring risk associated with dentists, GPs and private ambulance providers Risk of over recovery – new registrations in year paying fees CQC recovering through incumbents – risk over recover.

Stakeholder approach Provider Advisory Group and specific provider association meetings (voice of the market) Telephone interviews and meetings with individual organisations in each segment (voice in the market) To test options in broad terms, explore views about strengths/weaknesses, compare differences between sub-segments and voices in and for the market.