What does the Health and Care Bill mean for NHS finances?

The Health and Care Bill heralds the biggest reforms to the NHS in more than a decade and it is already generating significant column inches – but the potential impact on NHS finances has received little attention to date. Understanding this means looking at what is not in the Bill, as well as what is.

Learning from the past to shape the future

Providers understand how allocating and distributing funding at integrated care system (ICS) level can contribute towards the 'triple aim' of better health and wellbeing for everyone, better quality of health services for all individuals, and sustainable use of NHS resources. The 'system first approach' to financial management driven by COVID-19 appears to have been a largely positive experience.

However, as we look to the future, we must reflect on what has worked well in the past to maximise the chances of the new financial regime being a success. As things stand, NHS Providers is concerned that the Bill may not strike the right balance between embracing the opportunities presented by more collaborative working, and protecting integrated care boards (ICBs), trusts, foundation trusts and ultimately patients when things do not go as planned.

Changes to financial flows and objectives

Under the current financial regime, important checks and balances are enshrined in law. The Bill proposes a series of changes to financial flows (contract and payment mechanisms) that appear to symbolise a cumulative loss of independent oversight, including:

  • the replacement of the national tariff with a new NHS payment scheme, representing a move away from mandatory national prices for many services to commissioners having more flexibility over the prices they pay providers;
  • the formal merger of NHS England and NHS Improvement, meaning there will be no process of negotiation between two 'parties' embedded in the development of the NHS payment scheme (unlike the development of the tariff); and
  • the removal of an independent review mechanism to deal with objections to the NHS payment scheme, currently delivered by the Competition Markets Authority (CMA) as part of the statutory objection process for the tariff.

The Bill also proposes that each ICB, and its 'partner trusts and foundation trusts', will be collectively required to deliver financial balance and seek to achieve financial objectives set by NHS England. A separate power will allow NHS England to set additional and mandatory financial objectives specifically for trusts. This builds on the existing duties placed on clinical commissioning groups (CCGs) and trusts under the Health and Social Care Act 2012 and NHS Act 2006 respectively.

We support the intention of all of these proposals, which is to facilitate greater integration in healthcare and, in doing so, help each ICS deliver on its core purpose to improve outcomes, tackle inequalities, enhance productivity, and drive broader social and economic development. We expect the new financial regime to run smoothly in the vast majority of cases. However, in the extreme event that an ICB, trust or foundation trust feels it has been given an impossible task – for example, if its funding envelope is insufficient to meet patients' needs, potentially putting outcomes, quality of care and patient safety at risk – it is important that clear routes to recourse and challenge exist.

Capital spending limits for foundation trusts

Another specific issue for foundation trusts is the proposal to give NHS England a new power to limit their capital spending. While it can be argued that, in the move to greater system working, there is a logic to NHS England having such a power, its use must be carefully controlled – not least because appropriate freedom over capital spending is central to providers fulfilling their responsibility to deliver safe care. At present, it is extremely concerning that the Bill does not mirror NHS England and NHS Improvement's September 2019 legislative proposal, which clearly stated that the power would only be used in the most exceptional circumstances. The Bill also cuts across the health and social care committee's unequivocal position that the power to set capital spending limits for foundation trusts 'should be used only as a last resort'.

What next?

The purpose of this legislation is to provide an enabling framework for the frontline, but it must also effectively safeguard against the extreme. As such, over the summer NHS Providers will be looking to work with the Department of Health and Social Care (DHSC) and NHS England and NHS Improvement to explore what a reasonable system of checks and balances might look like when it comes to financial flows and objectives. We want to ensure that if and when tensions arise, they can be resolved quickly, fairly and transparently.

The way forward on capital spending limits is clear: the Bill must contain the same protections for foundation trusts as detailed in NHS England and NHS Improvement's September 2019 legislative proposal and as negotiated with NHS Providers on behalf of our foundation trust members.

Finally, we urge the government to carefully consider the conditions needed to enable ICBs, trusts and foundation trusts to collectively deliver financial balance. This will require an open and honest conversation ahead of the comprehensive spending review about the revenue and capital funding needed to live with COVID-19, transform the NHS, and build greater resilience into the wider health and care system. Without this, we fear, the full benefits of system working will not be realised.

This blog was first published by Public Finance.