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Redistributing CCG funding 'could mean real terms cuts'

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NHS England has acknowledged there is little scope for any redistribution of funding levels between clinical commissioning groups without real-terms cuts for some areas.

Health reporting HSJ and LGC logo

Documents published by the central commissioning body on Thursday suggest “radical strategies” may be necessary to move CCGs from their current allocations to their “target” resource levels, LGC’s sister title Health Service Journal reports.

The warning came as NHS England released figures revealing how much areas stood to win or lose under a proposed new formula for CCG allocations. The organisation sparked controversy last year when it declined to implement this formula in 2013-14, opting instead to give commissioning groups flat rate increases while it undertook a “fundamental review” of resource allocations. 

The terms of reference for that review were among the papers circulated last night. Under the heading “pace of change”, the document warns it will be “extremely challenging” to redistribute CCG allocations quickly at a time of constrained funding growth.

It continues: “Whether we adopt more radical strategies, which may involve settlements below real terms growth for some organisations, or take a more conservative approach, which will involve an extended period of undifferentiated growth, detailed modelling of risks and opportunities will be required.

“In this context we will look specifically at the risks of uniform growth, assessing which areas would be placed at greatest risk from such an approach and analysing the key drivers of that risk (such as population growth) to look for simple ways to mitigate that risk should a more radical approach to implementation of a target model not be feasible or desirable.

“We will specifically consider potential approaches to multi-year allocations in either scenario, including the related opportunities and risks.”

David Buck, senior fellow in public health and inequalities at the King’s Fund, told HSJ: “No secretary of state ever had the balls to consider reducing real allocations to any CCG or primary care trust, because it’s politically difficult.

“But if NHS England wanted to, that decision is now an operational one rather than a political one. The whole thing gives a really interesting sense of how they’re choosing to interpret their duties, and a signal that they’re starting to be quite open about the scope of allocations.”

Alongside the terms of reference, NHS England released a table showing the potential impact of a formula proposed last year by the government’s independent advisory group on allocations. NHS England declined to adopt the formula at the time because it said it “would predominantly have resulted in higher [funding] growth for those areas that already have the best health outcomes”.

However, it had not until now published details of how target allocations would change under the formula, despite a high level of interest. It said it was doing so now to “support… wider engagement” on the issue.

The table shows that, under the formula proposed by the Advisory Committee on Resource Allocation, the north of England and London would lose funds relative to the rest of the country.

The current overall budgets for CCGs in those regions are calculated to be higher than the “targets” they would be set under the formula.

No decision has been made about whether or how the formula will be used in the future. If it were adopted, the speed at which actual allocations changed would depend upon the “pace of change” policy adopted by NHS England.

This would involve areas currently judged to be “above target” receiving smaller annual increases compared to those judged to be furthest below target, to move them over time toward their target allocations.

The regions that would stand to gain overall from ACRA’s proposed formula are the South of England, and the Midlands and East. However, there would also be redistributions within regions. For instance, under the formula the North of England is judged to be over-funded by £722m, or 3.8 per cent. Within that region, however, Cheshire, Warrington and Wirral is judged to be under-funded by £44m, or 2.8 per cent.

In East Anglia, all CCGs were judged to be under-funded at present, with the sole exception of deprived Great Yarmouth and Waveney.

The formula suggests funding should be squeezed in Brighton and Hove, while nearby Eastbourne and Hailsham was seen as under-funded. It also identified Windsor, Ascot and Maidenhead as more seriously under-funded than Slough, and Fareham and Gosport as being in more need of extra cash than Portsmouth.

Guidance sent to commissioners yesterday restated NHS England’s explanation of why it decided not to use the formula this year. It says: “NHS England were concerned that while the formula accurately predicts need as currently met, it did not capture unmet need, and that the formula on its own would have resulted in higher allocations to areas with better health outcomes.”

The review will also look at the split between NHS England’s own budgets – mainly for specialised commissioning and primary care – and those of CCGs.

A letter sent out alongside the funding formula data by NHS England says: “As part of the [allocation] review process, we need to consider how resources should be allocated between different commissioning streams – that is to say how we balance the total resources available to clinical commissioning groups and the direct commissioning streams, such as primary care and specialised services.

“We then need to think about how each of these resource ‘pots’ is distributed geographically, between individual clinical commissioning groups or area teams. A further challenge is then to understand how these different strands interact.”


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