One in 10 better care fund plans are predicting a first year return on investment of more than 20 per cent, analysis has revealed, prompting new suggestions that the financial planning of the fund is ‘wildly unrealistic’.
LGC’s sister title Health Service Journal has looked in detail at data contained in the “final” plans produced by health and wellbeing boards and submitted as part of the national assurance process for the fund. The planned savings and activity projections in these documents formed the basis for claims made by ministers in October that the fund would save the health and care system £532m in 2015-16.
Nationally the average expectation is that the fund will yield savings worth 10 per cent of the total £5.3bn pooled budget in 2015-16.
Our analysis of 98 plans identified five areas projecting savings in 2015-16 worth more than 30 per cent of the total local pooled better care fund pot (see table, below).
Another five areas said they were expecting a return on investment of 20-30 per cent.
Our analysis has also revealed that only four out of 98 plans HSJ obtained have factored the marginal tariff for non-elective admissions – meaning they are often paid for at a lower rate – into savings projections (see box, below). This casts further doubt on the plans’ reliability.
The national assurance process assessed all plans’ finances and imposed conditions requiring improvements to be made on some. Among those with conditions was North Lincolnshire, which HSJ has learned will be reviewing its projected return on investment as it works to improve its plan over the coming weeks.
However, not all areas with extremely optimistic assumptions about savings have been forced to revisit their plans. Worcestershire, which forecast a 35% return on investment, was one of just five areas nationally whose plan was approved with no conditions imposed and no requirement that they be “supported” by NHS England.
Nuffield Trust chief executive Nigel Edwards said a 30 per cent return on investment “might be doable” if the fund was focused on cutting admissions to residential care, as any fixed costs associated with nursing homes were “external” to the NHS.
However, the fund planning process placed the strongest emphasis on savings generated by reduced accident and emergency admissions. Only £50m is projected to be saved nationally from cutting care home admissions, while savings worth five times that depend on the fund reducing non elective activity – which Mr Edwards said the evidence for was “not very encouraging”.
“There is a reason to be concerned about whether the [better care fund] is designed in a way that is likely to maximise its success,” he said. “It might be wise to have a contingency plan.”
Jeremy Cooper, a director at consultancy iMPOWER, which is working with around a dozen health and wellbeing boards to implement the policy, said the projected in-year savings were “wildly unrealistic”.
“There is no validity to the financial planning,” he said. “The main problem is the time lag. Community and preventative care may be 10 per cent cheaper overall, but not in the first year.
“I’m not seeing any connection in the areas we are working with between the financial accounting and the implementation. There’s a connection in terms of how much of the [better care fund] pot they’re getting, but absolutely none in terms of the projected savings.”
NHS England was approached for comment but declined to respond.
Gaps in better care fund savings predictions
HSJ’s analysis of the final better care fund plans has also revealed that only four out of 98 obtained have factored the marginal tariff for non-elective admissions into their savings projections.
In October health secretary Jeremy Hunt announced that the fund would save £253m in 2015 by cutting the rate of non elective admissions by 3.07 per cent.
That savings projection was aggregated from the fund plans submitted in September, and shows an average saving per admission avoided of £1,552. NHS England suggested a default figure of £1,490, based on the average reported cost of a non-elective inpatient episode.
However, under the marginal rate commissioners pay their provider 30 per cent of tariff for activity above a set baseline, often the 2008-09 admission rate.
This would diminish the savings available to commissioners through cutting A&E activity.
However, HSJ has identified just four plans that build the marginal rate into their savings calculations. These are: Doncaster (£566 per admission); North Yorkshire (£588.53); Suffolk (£744); and Stockport (£765).
All make explicit reference to the marginal tariff in their plans or in subsequent statements to HSJ.
Meanwhile Oxfordshire, the only area not to submit a better care fund plan, cited the marginal rate as one reason why activity reductions would not yield financial savings.
Although there is flexibility in how the marginal rate is implemented locally, it remains in widespread use.
Monitor has proposed increasing the marginal rate and changing the baseline, but health and wellbeing boards would not have been aware of that at the time of the submission.