PCT — commissioning and financial flows

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This area could prove to be the most significant change to NHS commissioning since GP fundholding, with far-reaching and profound implications.

The NHS does appears to be moving from a service provider to a service specifier, with a national price and quality standard, delivered by anyone who can meet the quality standards at that price. Note that all NHS trusts go live with the new system in April 2005.

Why the change?
Historically, health authorities (and subsequently primary care groups and primary care trusts) have commissioned health services from providers. The basis for the contracts varied from cost/volume, to block contracts where the NHS trusts provided services that were required until the money ran out. If they didn’t hit their targets there was little that could be done as wholesale service changes would not be supported and any yearly change would only release the marginal costs of the unperformed treatments.

Individual services — particularly high cost ones — were costed and tight contracts were developed around these, to manage costs and also the financial risk to the trust and health authority. The prime focus was price, with the health authority trying to get as many patients through the system at the cheapest cost. Price often ended up having little to do with the real cost of service delivery and occasionally massive discrepancies between trusts occurred, some only miles apart.

As a result, the commissioning process was adversarial, money-focused and rigid. It was certainly not geared towards delivering service change in an environment as technologically fast moving as the health service. The structure was geographically focused and too difficult to change or really get to grips with except on a piece-by-piece basis.

Risk management needed
And yet the government’s ambition around a primary –care-led NHS may be put at serious risk unless ministers make fundamental changes to the payment –by results (PbR) scheme, according to some NHS managers. With PbR already having kicked in the new foundation trusts, some PCTs are getting worried that the fixed-tariff system will encourage acute trusts to admit more patients. One of the threats is that there is no incentive for the service provider to manage demand and no incentive for commissioners to tackle chronic disease — so perverse incentives could well operate with two of the major policy aspirations (PbR and chronic disease management) being in conflict with each other.

Health Secretary John Reid has urged PCTs to ‘fight back’ and resist pressures from acute trusts to increase acute admissions under PbR saying that one of the balanced pulls built into the system is the responsibility of PCTs to resist any unnecessary increase in hospital work. And he urged PCTs to be clear in telling acute trusts ‘No, we don’t want to do that. This can be dealt with better, more efficiently at primary care level’.

However some 70 of 100 chief executives surveyed by the NHS Confederation at their annual 2004 conference still believed that the system would incentivise hospital admissions rather than promoting improved care for people with long-term conditions.