The Newcastle Upon Tyne Hospitals Nhs Foundation Trust s1

Agenda item 4(i)

THE NEWCASTLE UPON TYNE HOSPITALS NHS FOUNDATION TRUST

COUNCIL OF GOVERNORS

EXECUTIVE REPORT - CURRENT ISSUES

1. Executive Team

Particular attention is drawn to:

i) Addressing resilience in relation to the envisaged scale and intensity of Winter caseload presentation, with a significant surge already manifest over and above expectations in recent days.

ii) The evolving ‘Accountable Care Organisations’ in Northumberland (a much heralded national Vanguard lead) and also in North Tyneside.

iii) Future configuration of Freeman Clinics Limited.

iv) The uncertainty surrounding future configuration of the commissioning/ funding of Specialised Services (regional/national) in 2016/17.

v) Pro-active order book management, with intervention where called for across the Service Directorates.

vi) Actions taken to sustain financial stability in accordance with the regimes and necessary discipline attributable to our NHS Foundation Trust.

vii) Taking forward the ever challenging task of ensuring the best possible ‘Care Quality’ and all this entails.

viii) The award of a contract by North Tyneside Clinical Commissioning Group (CCG) to deploy Northumbria Healthcare NHS Foundation Trust as an agency to provide a ‘Referral Management Service’ to scrutinise and determine the appropriateness or otherwise of General Practitioner referrals intended for secondary/specialist assessment.

ix) Opening of the Newcastle Hospitals at Cramlington Clinic (Manor Walks) on 7th October 2015.

x) Refresh of the modus operandi surrounding Planned Preventative Maintenance of the healthcare delivery infrastructure.

xi) The highly problematical challenge surrounding effective completion and handover of Phases 8 and 9 of the Transforming Newcastle Hospitals PFI Investment Programme.

xii) Scoping of future, short and medium term, enhanced infrastructure requirements.

1 xiii) Launch of Newcastle Academic Health Partners (Newcastle University, The Newcastle upon Tyne Hospitals NHS Foundation Trust and Northumberland Tyne & Wear NHS Foundation Trust).

xiv) Renaissance of ‘Better Together’.

xv) Coping with the resource implications surrounding exponential reach-in of quality assurance inspectorates, accreditation agencies and other related bodies.

xvi) Navigating the evolving scenarios of policy directives and multi-factorial strategic/operational reach-in (regional and national).

xvii) Caseload presentation arising out of the Northumbria Healthcare reconfiguration, post opening of the new Specialist Emergency Care Hospital, East Cramlington.

xviii) The ever worsening crisis in North Cumbria and future interface with Newcastle upon Tyne as the regional supra-specialist provider.

xix) Care Quality Commission Whole Service Portfolio inspection scheduled for 19th to 22nd January 2016.

xx) A raft of interrelated, problematical issues surrounding national Tariff (2016/17) and the risk of adverse consequential impact on leading specialist providers as exemplified by Shelford Group dialogue with Department of Health and NHS England.

xxi) The recruitment challenge surrounding in particular Nursing staff vacancies but also other key disciplines.

2. Key Impact Documents/Statements from Government/Regulators/Advisory Bodies/ Others

(i) National Peer Review Report: Major Trauma 2015 (NHS England)

The National Peer Review Programme includes expert clinical representation throughout the delivery of its programme and provides important information about the quality of major trauma services across the country, whilst supporting the development of leadership, self-regulation and governance.

This report summarises the findings of the third round of peer review to major trauma services during 2014/2015. The findings of this round of peer review visit reports were completed between January 2015 and March 2015. All services undertook a self-assessment of their own service and were then subject to an external peer review visit by the National Peer Review team.

The national overview focuses on compliance with specific measures but also identifies the key messages that have emerged from the reviews and highlights some of the challenges facing the major trauma networks, providers of major

2 trauma services, and commissioners, as they strive to ensure the delivery of effective and high quality care.

(ii) International support for Vanguard sites (King’s Fund and NHS England)

Dr Donald Berwick, a renowned international authority on health care quality and improvement management, has been appointed by The King’s Fund together with NHS England and national partners to help support Vanguard sites in developing the new models of care set out in the NHS Five Year Forward View.

Dr Berwick, who is currently President Emeritus and Senior Fellow at the US-based Institute for Healthcare Improvement, shall participate in a series of national events at The King’s Fund, intended to help the Vanguard teams in developing effective leadership for system transformation and engaging the workforce in service redesign.

(iii) The State of Health Care and Social Care in England 2014/15 (Care Quality Commission)

The Care Quality Commission has set out an assessment arising from the new approach and ratings system.

In essence the report is divided into two sections:

 Part 1 covers The State of Care in England, focusing on: the challenges facing health and adult social care; how health and adult social care is performing; encouraging improvement; ensuring safe, high-quality in a period of change; and building strong leadership, resilience and innovation.  Part 2 covers the sectors the CQC regulates: hospitals (both NHS Trusts and independent hospitals); adult social care services; mental health services; and primary medical services (GP practices, GP out-of-hours services, dental care and other primary care services).

Of particular note:

 Out of 169 organisations inspected, 2% were rated as ‘Outstanding’; 35% as ‘Good’; 54% as ‘Requires Improvement’; and 8% as ‘Inadequate’.  There was a 27% growth in spending on temporary staff between 2012/13 and 2013/14, and this trend continued in 2014/15.  40% of respondents during inspections said that there were sometimes, rarely or never “enough nurses on duty to care for them”.

(iv) Improving Value for Patients from Specialised Care (NHS England)

This document heralds the commissioning intentions in 2016/17 for Prescribed Specialised Services.

NHS England have heralded they are planning to improve the way NHS England commissions, reviews and transforms Specialised Services by both responding to the Five Year Forward View and to build upon the progress already made to deliver

3 consistent care standards across the country within inevitably constrained funding growth.

Of particular note:

 The scope of services in 2016/17 will reflect changes agreed by Ministers, and the new mandatory Information Rules tool shall provide a consistent base for all contracts.  The intention to strengthen the way commissioning is undertaken, by rapidly building on the ten Commissioning Oversight Groups established across England. The intention is to tier the Specialised Service portfolio to enable further collaborative commissioning engagement of CCGs around key geographies and place-based planning, whilst ensuring consistent national standards apply.  There will be reviewing and reshaping of Specialised Services provision through a published Strategic Services Review Programme, to ensure they commission cost effective treatments from the most capable providers. The review programme is intended to provide opportunities for new models of care development and complement work with the national Vanguards.  A clinically driven change agenda is to be centred on working with partners to implement the findings of the national taskforces. ‘Commissioning for Value’ and ‘Right Care’ data developed with Public Health England will be targeted at reducing unnecessary variation, and evidence based assurance of optimal care delivery shall be underpinned by the continued roll out of clinical utilisation review technology.  A single operating model will be applied to all contracts in 2016/17. NHS England will normally only hold one NHS Standard Contract with any provider and use mandated formats for activity and local price plans. Prior approval should be sought for any Specialised Services activity not commissioned via a signed contract. It is understood that NHS England shall only make payment where treatment complies with relevant published policies. NHS England will not make payments over and above mandatory Tariffs.  NHS England shall be continuing with the Contracting for Excluded Drugs and Devices measures introduced in recent years to help ensure that providers and commissioners can jointly deliver best value, including national changes to the Tariff-excluded high cost devices supply chain.  In light of the current service efficiency and sustainability challenges for Specialised Services, a collaborative process for resolving significant local service issues will be mandatory before any service expansion/development plans or service termination notices will be considered by the Commissioner.  There is a commitment to continue work with providers to support the ‘Reforming the Payment System’ process. It is intended that this shall involve opportunities for year of care and pathway currencies, as well as implementing the expected adoption of HRG4+ and the associated revisions to specialist top-ups.

These intentions are intended to provide notice to healthcare providers and partners about changes and planned developments in commissioning and delivery of prescribed Specialised Services. The aim is to enable providers to make early

4 preparations and focus engagement with commissioners and clinical service leads for the 2016/17 planning process.

NHS England explain that Specialised Care can deliver on new opportunities to improve survival and outcomes for patients through advances such as personalised and regenerative medicine. Moreover, considerable progress has been made over the last 12 months in terms of achieving more consistent standards of care across the country and ensuring services remain sustainable within limited financial resources. However, variation in outcomes across England remains a challenge and the focus on improving value needs to be strengthened if our patients are to benefit from the most cost effective treatments available.

Alongside the continued delivery of changes set out in 2015/16, the intentions are spoken of as providing a roadmap to realise the opportunities set out in the Five Year Forward View.

(v) Payment of Tenancy Charges (Department of Health)

Contact has been made with Foundation Trust Accountable Officers as to the large value of outstanding NHS Property Services (NHSPS) and Community Health Partnerships (CHP) invoices, including a significant amount unpaid from 2014/15 and 2013/14.

In some cases, information and system challenges following the handover from former primary care organisations contributed to slower processing and a higher than expected level of queries and disputes in relation to the tenancy charges for these years. In this context it is to be noted:

 Funding disputes with commissioners cannot be grounds for withholding or delaying payment of tenancy charges to NHSPS or CHP.  Whole invoices should not be held back from payment due to a query or dispute about only part of the charge: the undisputed parts of any invoices must be paid within the normal payment timeframes.  The undisputed parts of any outstanding invoices from 2014/15 and earlier should be settled immediately.

NHSPS and CHP have begun raising invoices for 2015/16 and these should be settled within the payment terms contracted or otherwise following the sector’s best practice of 15 days from invoice date.

(vi) Secretary of State for Health speech at the Conservative Party Conference

The Secretary of State for Health, Jeremy Hunt, delivered a speech to the Conservative Party Conference on 6th October 2015 and of particular note singled out Salford Royal; Frimley Park; and Northumbria Healthcare as hospitals which “have eliminated waste from unsafe care, made efficiencies, and raised standards at the same time”.

5 Key messages from the speech were:

 Special measures - the system is working, with care being transformed and 9 of the 24 major hospitals in special measures now out.  Quoting Nye Bevan’s ambition to “universalise the best”, the Secretary of State highlighted the progress made since being in Government in 2010, including record numbers of doctors and nurses; cancer survival rates at a record high; maximum waiting times introduced for mental health services; and public satisfaction at near record levels.  Seven-day services – the Government was not asking junior doctors to work longer hours, nor seeking to cut their pay, and those that are accusing them of this were “utterly irresponsible”. The Government wants to see doctors working properly staffed shifts, with safe working hours, and seven- day access to diagnostic services.  Honesty culture – stating that there are around 200 avoidable deaths in hospitals each week, and part of the reason is that the culture in hospitals across the world is often wrong, namely doctors and nurses are afraid of the consequences of whistleblowing. The Secretary of State called for “an honesty culture not a blame culture”.  Safer care costs less – the Secretary of State reiterated his argument that “it is not a choice between standards or money”, and that hospitals such as Salford Royal, Frimley Park and Northumbria were eliminating waste from unsafe care, making efficiencies and raising standards at the same time.  GPs – targets, tick-boxing and rising appointment lists stood in the way of personal care. The Prime Minister had already announced plans for a new voluntary contract to support GPs to deliver seven-day care through working with other local surgeries and clinical staff, advising that £750 million has been invested to improve primary care premises and technology.  Targets, transparency and MyNHS – targets can be effective in bringing about change, such as waiting times, speeding up A&Es, improving cancer care etc; however, “collectively they have undermined the professionalism and sense of vocation that should be at the heart of medicine” and peer review, transparency and openness are a better way to drive up standards. The launch of ‘MyNHS’ was addressed at enabling patients to see how good their local hospitals, GP surgeries, clinicians etc are performing. From May 2016 there is to be an overall quality measure for (i) mental health and (ii) cancer care, area by area as well as avoidable death rates.

The full transcript is available for Governors.

(vii) Complaints about Acute Trusts 2014-15 (Parliamentary and Health Service Ombudsman)

This report provides a comparative analysis of 2013/14 and 2014/15 NHS complaints data. In 2014/15 the Ombudsman upheld 44% of the investigations into complaints about Acute Trusts.

The Ombudsman has commented as follows:

“As part of our drive to provide transparency to people about the complaints that we handle, we want boards to see regular data about complaints so they can identify themes and recurring problems and take action. This is why I am pleased

6 to be publishing the second in our series of regular publications outlining the insight we have drawn from our complaints data, broken down by trust.

We believe all complaints offer an insight into how Trusts are performing. However, there are many factors that influence the number of complaints that different health organisations receive. This includes (but is not limited to) the size of the organisation, the specialisms it deals with, patients’ demographics and ease of access to a complaints service. If complaints data is to be useful and encourage learning, it is important that this context is taken into account.

This is why we are asking Chief Executives and Trust Board members to use this data to examine how their organisation is performing relative to others, and to ask some searching questions.

The information contained within this report is not designed to rank Trusts on the basis of their complaints information or assess the performance of individual Trusts when it comes to handling complaints. There are lots of reasons why levels of complaints may vary from Trust to Trust, and these reasons are explored throughout this document.

However, our data does pose some interesting questions, and we hope it will enable Trusts to better explore their approach to handling complaints. For instance, why are some Trusts seven times more likely to have a clinical episode turn into an investigated complaint than others?

We hope that Trusts will use the data and insight drawn directly from our casework as an opportunity to learn about and improve the care they provide, and in handling their complaints”.

The Chairman shall advise further in this regard.

(viii) Nursing Agency Rules and Spending (Monitor and Trust Development Authority)

A set of rules that are to be adhered to with effect from 1st October 2015 has been circulated. These rules apply to all NHS Trusts as well as NHS Foundation Trusts receiving interim support from the Department of Health and NHS Foundation Trusts in breach of their licence for financial reasons. All other NHS Foundation Trusts are strongly encouraged to comply and Monitor will take into account inefficient or uneconomic spending practices when considering the need for regulatory action concerning any potential breaches of governance licence conditions. The ceiling for nursing agency spending does not currently apply to Ambulance Trusts.

For each Trust, an annual limit for agency nursing expenditure as a percentage of total staff spend has been set. For the purpose of this ceiling rule, nursing is defined as registered general and specialist nursing staff, midwives and health visitors.

7 The ceilings for Newcastle are:

Q3/4 2015/16 2016/17 2017/18

3% 3% 3%

Following implementation, Monitor and the Trust Development Authority are to closely scrutinise agency spending and may subsequently adjust ceilings and trajectories based on the progress of the sector or individual Trusts, or as new data becomes available.

Also from 19th October 2015, all procurement of nursing agency staff has to be via approved frameworks unless otherwise authorised.

All in all it is advised that “Together these rules aim to increase Trusts’ bargaining power when contracting with agencies and to encourage a move among nurses back to permanent and bank working. Their success should enable Trusts to manage their workforce in a more sustainable way, reduce reliance on temporary staffing, raise quality and improve the working environment for staff.”

The Nursing & Patient Services Director and the Finance Director shall give an update at the meeting.

(ix) The Devolution Bill

The Devolution Bill is due to proceed through the House of Commons in the Autumn. Subject to legislation, NHS England needs to agree appropriate principle- based criteria to make decisions about submitted devolution proposals.

Principles – Devolution areas will:

 Remain part of the NHS and continue to meet statutory requirements and national standards.  Involve commissioners, providers, patients, carers and wider partners, including the voluntary and community sector, to make decisions that obey the principle of subsidiarity and have clear accountability for services and public expenditure.  Implement clear plans for long term clinical and financial sustainability.  Have a strong governance model which is simple to operate and minimises bureaucracy.

It is understood NHS England’s preferred option is that it would take 18 months from an expression of interest in devolution to implementation, this being based on their experiences of Greater Manchester.

Decision criteria for assessing proposals are considered to embrace:

 Clarity of vision about the benefits and need for devolution, and a clear plan for delivery.  A ‘health geography’ that supports devolved decision-making with a matching corporate infrastructure.

8  Evidence of quality and continuity of care, particularly linked to the safe transfer of responsibilities.  Consideration of the impact on other populations, including users of local services from outwith relevant geography.  Financial risk management, including mitigation actions and clear mitigation plan and exit route in the case of failure.  Support of local health organisations and local government with a track record of collaboration.

The Chairman shall lead discussion on current scenarios here in the North East.

(x) What have Non-Executive Directors advised in relation to wishes for support in their role? (Monitor)

A survey of Non-Executive Directors (NEDS) earlier this year has served to confirm that over 60% believe their motivations in becoming a NED are being fulfilled. However, Monitor believes that there is more they can do to help.

More than 100 NEDs have offered to support training sessions by sharing experience with colleagues and hence Monitor is to arrange a series of informal, half day seminars that shall focus upon but not exclusively:

 Improving culture.  Strategy.  Financial turnaround.

It is understood Chatham House rules shall prevail at these events.

(xi) NHS Reference Cost Assurance Programme – 2014/15 Audit (Monitor)

The findings from a Capita report, commissioned by Monitor, as to whether or not the reference cost submissions were accurate for the 75 audited Trusts, has been released.

The Costing Guidance requires Trusts to i) adhere to Monitor’s six principles of costing; ii) comply with Department of Health Reference Cost Guidance; and iii) comply with the Healthcare Financial Management Association costing standards, on a ‘comply or explain’ basis.

The key findings include:

 49% of Trusts audited had materially inaccurate reference cost submissions, up from 34% the previous year.  65% of Trusts with materially inaccurate reference costs were found to use poor costing information to all three care settings (admitted patient care, non- admitted patient care, and other).  Only 15% of the providers audited had accurate costing in each of the setting assessed.  4% of Trusts were red-rated for all three of the costing risk areas.

Monitor concludes that since costing guidance has not changed significantly in recent years, the lack of compliance serves to suggest that most acute Trusts use 9 budgetary rather than costing information for day-to-day management and do not see the benefit of devoting resources to producing accurate costing information.

In response to the report’s finding, Monitor is implementing a series of next steps, including:

 Asking all Trusts to review their costing processes to ensure they are compliant with Monitor’s costing guidance.  Working with Trusts to facilitate benchmarking and other activity to validate the accuracy of costing information.  Writing to the Chairs of the Trust Audit Committees to ask them to ensure that action plans to address the recommendations of individual provider audit reports are not only implemented but sustained.

(xii) National Institute for Health Research – Annual Performance League Table

The league table, now in its fifth year, details the scale of clinical research studies undertaken by each NHS provider organisation and also number of participants recruited into those studies.

Newcastle tops the table for the fourth consecutive year, with 486 studies, being followed by Leeds (468 studies) and Guy’s & St Thomas’ (459 studies).

The league table categorises NHS Trusts into organisations with similar characteristics thereby enabling meaningful comparisons.

The achievement has been commended by George Freeman MP, Life Sciences Minister.

(xiii) NHS Improvement

This new body is being formed to “drive and support both urgent improvements at the frontline and the long term sustainability of the healthcare system – alongside that, it will be the health sector regulator” Monitor 8th October 2015.

It is to be noted that with effect from 1st November 2015 the full time Chief Executive Officer of NHS Improvement is Jim Mackey, Chief Executive of Northumbria Healthcare NHS Foundation Trust.

(xiv) Offering Patients Choice on where they receive care (NHS England and Monitor)

The findings of a joint survey by these two bodies serves to suggest that too few NHS patients are being offered a choice about where they receive care and hence it is felt more work needs to be done to promote patient choice across the NHS.

(xv) Managing Conflicts of Interest in NHS Clinical Commissioning Groups (National Audit Office)

The National Audit Office has found that some 1,300 NHS Clinical Commissioning Group Board members were susceptible to conflicts of interest, as they were also

10 doctors in active Primary Care practice.

It is of interest that the investigation also found that commissioners who are not medical practitioners have potential conflicts of interest when they have financial or other interests in organisations that provide local health services.

(xvi) Multi-dimensional Performance Assessment using Dominance Criteria (Economics of Social and Healthcare Research Unit)

This report outlines the difficulties in judging hospital performance as the following:

 There is no single measure of performance as hospitals have different objectives that they are expected to achieve, e.g. access, safety and affordability.  People might value the above objectives differently, which makes it difficult to construct an overall measure of performance that everybody would be happy with.

(xvii) Improving Length of Stay – what can hospitals do? (The Nuffield Trust)

The Nuffield Trust, in conjunction with Monitor, has published a report which aims to find the best ways to improve quality of care across the health system in light of recent pressures on urgent and emergency care.

In summary, the report identifies significant opportunities to reduce length of hospital stay through improvements in internal processes and the development of alternative services and draws attention to the following principles of good practice:

 Focus on flow.  Getting the basics right, e.g. creating standardised pathways for common patient types that are based on evidence and clinical consensus complemented by structured Ward rounds.  Maintaining a rapid pace for decision-making and patient progress.  Ensuring active support for discharge seven days a week.

(xviii) CQC Ratings replace Foundation Trust status as ‘definition of success’ (Secretary of State for Health)

The mark of quality for an NHS provider is no longer the Foundation Licence but the award of a ‘good’ or ‘outstanding’ rating by the Care Quality Commission.

The Secretary of State has made it clear that he was making the attainment of one of the CQC’s highest ratings the “single definition of success”. The possibility has also been floated that there could be statutory change to make the freedoms given to Foundation Trusts available to any Trust that is rated ‘good’ or ‘outstanding’.

(xix) ‘Too many Trusts in the NHS’ (Secretary of State for Health)

The Secretary of State has heralded that there are “too many Trusts in the NHS” and a need to “up the pace of work on hospital chains and other provider reforms”. These comments come amid renewed interest in the so called ‘chains’ in both

11 Government as well as NHS England whom it is understood are selecting sites for its ‘Acute Care Collaboration Vanguard’.

In 2014, the Dalton Review (Salford Royal NHS Foundation Trust inspired) advocated a range of organisational forms for NHS Providers including hospital chains; Moorfields style single service chains; and management franchises.

It is to be noted that Salford Royal NHS Foundation Trust and the Wrightington, Wigan and Leigh NHS Foundation Trust have submitted a bid to NHS England’s national Vanguard scheme to ‘kickstart’ the ‘chain initiative’.

(xx) North Cumbria Success Regime Programme Board (NHS England)

A Programme Board has been established to oversee the initiative taken by NHS England to bring about high quality, safe services which are clinically and financially stable.

Newcastle Hospitals are seen to be a stakeholder in this quest.

(xxi) Building on strong foundations – Shaping the future of health and care quality regulation (Care Quality Commission)

The document sets out the Care Quality Commissioner’s thinking for its forthcoming five year strategy and invites views on the strategic choices for the next phase in the regulatory approach, which include:

 Moving to a more risk based approach to registration: including improving its approach to handling the greater diversity of providers and new models of care.  Improving monitoring and insight from data: which would involve combining numerical data with feedback from people who use services.  A greater focus on co-regulation: which may mean supporting providers to assess and share evidence on their own quality of care. CQC would then validate this assessment against its own monitoring data and would use this information to appropriately target its activity.  More responsive and tailored inspections: this could include reducing the number of comprehensive inspections, inspecting services already found to be of good/outstanding quality less frequently/intensively than other services, using random sampling alongside assessment of risk when selecting providers to inspect, aligning inspection activity with other partners.  Looking at the quality of care for populations and places: this could involve assessing how well providers are working in partnership across their organisations; continuing with the thematic reports on the quality of care for specific populations in local areas (such as dementia and older people); or mean a more radical long term shift which would assess quality of care across a place and reduce some aspects of comprehensive provider assessment.  Assessing a providers use of resources: this will involve assessing how NHS providers use resources efficiently and effectively to provide good quality care.

12 (xxii) Nuffield Trust Improving UK health care 2015-2020

The Nuffield Trust’s five-year Strategy sets out a new direction i.e. in being “more grounded in the practical implications of policy-making, working closely with NHS staff and policy-makers to identify solutions to the challenges facing the NHS”.

The work programme shall focus on five areas:

 NHS and social care reform.  Quality of care.  The NHS workforce.  New models of health care delivery.  Older people and complex care.

Feedback is welcomed by the Nuffield Trust.

(xxiii) Quick Guides to get ready for Winter (NHS England and partners)

Six Quick Guides have been published to “bring clarity on how best to work with the care sector” by highlighting practical tips and case studies to support health and care systems.

Some headline challenges are:

Want to find out how the care sector can support local systems in the run up to winter? Want to break down barriers between health and care organisations? Want to find out how Leicester has achieved a 60% reduction in care home admission costs? Want to finally break down the myths around sharing patient information and assessments? Want to use other people’s ideas and resources?

 Better use of care at home.  Clinical input to care homes.  Identifying local care home placements.  Improving hospital discharge into the care sector.  Sharing patient information.  Technology in care homes.

(xxiv) Learning Disability Care – Building the Right Support

Major new plans encompassing a three year implementation have been announced by NHS England, the Local Government Association and the Association of Directors of Adult Social Services to improve support for people with a learning disability and/or autism, with a reduction of up to 50 per cent in inpatient beds and greater investment in community based care. Also published are a new Service Delivery Model and Final Care and Treatment Review guidance to reduce unnecessary admissions and lengthy stays in hospital.

(xxv) Fair and Transparent Pricing for NHS Services (Department of Health)

The Department of Health has published the Government response to this consultation “Fair and Transparent Pricing for NHS Services – A consultation on proposals for revising the objection mechanism to the pricing method". 13 This consultation, which ran from 13th August 2015 to 11th September 2015, addressed proposals on the objection thresholds which apply when a proposed national tariff is published for consultation as part of the statutory process.

The objection mechanism for the national tariff was established by the Health and Social Care Act 2012 and certain provisions are set out in the NHS (Licensing and Pricing) Regulations 2013. These set three objection thresholds equally at 51%, for:

 Clinical Commissioning Groups.  Relevant providers; and  ‘Share of supply’ where the percentage of providers is weighted by the share of services in England that they provide.

The consultation noted how the proposed 2015/16 national tariff had not been implemented after objections had exceeded the 'share of supply' threshold, and the consequences of this. The consultation proposed the objection mechanism for the NHS national tariff should be revised to provide greater certainty on prices in advance of a new financial year. Views were sought on whether the objection mechanism should be revised, removing the 'share of supply' objection threshold, and increasing equally the objection thresholds for commissioners and providers to either 66% or 75%.

Having considered the views expressed during consultation, the Department of Health intends to lay draft amending regulations before Parliament in the coming weeks.

For ease of reference and to set the issue in context:

 “Rationale for pricing:

The Health and Social Care Act 2012 (the 2012 Act) introduced a new independent, transparent and fair pricing system that requires Monitor and NHS England to collaborate to set prices and further develop new payment models across different services. The intention was to create a more stable, predictable environment, allowing providers and commissioners to invest in technology and innovative service models to improve patient care. Transferring pricing from the Department of Health, and making it an independent function was intended to provide that stability. However, this has been difficult to achieve given the challenging economic circumstances and the funding pressures faced by all public services, including the NHS despite funds being protected.

 Pricing and the Health and Social Care Act 2012

Sections 115-127 of Chapter 4, Part 3 of the 2012 Act give Monitor and NHS England responsibility for designing and implementing the reimbursement framework for NHS funded healthcare services. This came into effect from 1st April 2014 as the National Tariff Document and specifies:

 A set of healthcare services provided for the purposes of the NHS, which are to have national prices (referred to as currencies);

14  The method used for determining the national prices for those specific services;  The national price for each of those specified services (whether as an individual service, or as a bundle of services or as a group of services);  Specifies the methods used for approving an agreement between a provider and commissioner to modify a nationally determined price and for determining a provider's application to Monitor to modify a nationally determined price (local modifications); and,  A provision for rules under which providers and commissioners may agree to vary the currency or the national price of services (local variations).

NHS England has a duty to specify healthcare services which it thinks a national price should be used. Monitor has a duty to set that price and is required to consult and publish the national tariff.

To develop a national tariff, Monitor and NHS England engage with commissioners and providers of NHS services and other interested parties on their initial tariff proposals. This engagement previously included the publication of a number of detailed documents setting out different aspects of the proposed tariff, which together formed the Tariff Engagement Document (TED). The TED tests the underlying modelling and likely impact of the tariff proposals. Engagement will take a different form this year with more emphasis on working directly with stakeholders, rather than publication of standalone suite of documents.

Following this engagement, Monitor is required by section 118 of the Act to undertake a 28-day statutory consultation on the national tariff. Monitor must send a notice to all Clinical Commissioning Groups, relevant providers of NHS services and other such persons as it considers appropriate, informing them of the draft national tariff.

Sections 118 to 120 of the Act specify an objection procedure which allows commissioners and providers to formally object to the chosen methodology proposed for calculating national prices (rather than the price itself). In relation to the objection procedure, the Secretary of State must prescribe two thresholds for the percentage by overall proportion, of objecting commissioners and providers. The Secretary of State may also prescribe a third threshold for the overall share of supply, which reflects the percentage, by proportion of providers weighted according to share of supply in England of such services as may be prescribed. These thresholds are referred to in this consultation document response as objection thresholds and all three were prescribed at 51% in the NHS (Licensing and Pricing) Regulations 2013.

 2015/16 National Tariff

Monitor formally consulted on proposals for 2015/16 national tariff. Their analysis showed the following objections to the proposed method:

 73.7% of relevant providers by share of supply;  36.6% of relevant providers by number; and,

15  8.1% of commissioners by number.

The share of supply threshold was triggered largely due to objections on the efficiency factor of 3.8%. Monitor and NHS England also believe that another significant trigger for formal objections related to a variation to the payment of national prices for specialised services, rather than the underlying method for the price (to which formal objections are made).

As the share of supply exceeded 51%, the national tariff was not published and the 2014/15 tariff remained in force. NHS England have calculated cost pressures to commissioners and providers continuing to pay at 2014/15 tariff levels rather than those that would have been introduced through the 2015/16 tariff proposals at an estimated £1 billion. NHS England have indicated that if a similar system were to continue in 2016/17, there would be a negative impact on planned investment in areas such as mental health and community services which would have serious implications for the health service as a whole.

In February 2015, Monitor and NHS England offered providers the option of (i) agreeing local variations to the 2014/15 (the Enhanced Tariff Offer or ETO) or (ii) remain on 2014/15 tariff prices (Default Tariff Rollover or DTR). Newcastle opted for (ii).

The Department of Health, Monitor and NHS England all agree that the objection mechanism process needs to be reviewed to provide for a process that is fair and stable for the sector as a whole as well as ensure such plans are affordable. Financial stability is needed to allow commissioners and providers to make investment decisions to reflect affordability for patient care as well as enable them to achieve financial balance whilst addressing any forecast deficits as soon as possible. A new national tariff will also have an impact on existing contracts where these continue into a financial year in which new national prices apply. It is essential for commissioners and providers to have sufficient time to consider the implications of updating prices and where appropriate to negotiate different provisions before the start of the new financial year. It is crucial that the tariff development process operates more efficiently and effectively than has been the case for 2015/16, while being mindful of the views of stakeholders. This is why we have taken the decision to rebalance the objection methodology.

We consulted on a number of proposed changes to the objection mechanism and thresholds. The Department of Health considers these options represent a range of proportionate responses that will retain the ability of commissioners and providers to object to the chosen methodology, but also balance it in favour of the whole sector. It is imperative that Monitor and NHS England continue to consult and engage with all stakeholders to improve the tariff setting process and bring all stakeholders along with the tough decisions that need to be taken”.

Key messages arising from the consultation include:

 On the objection mechanism:

16  52% disagreed with the proposed objection mechanism; instead, there were calls for a wider review of the whole tariff process from development, through engagement to agreement, such as multi-year tariffs, or segmenting the objection process. It is to be noted that the Department of Health has committed to revise the objection process however no further details are being offered at this stage.

 On the objection thresholds:

 34% of respondents agreed that the proposal stating the share of supply threshold gives “too much leverage to large providers of NHS services subject to national pricing, who account for over 70% of the work, yet only represent 30% of relevant providers”.  65% of respondents disagreed with removing the share of supply objection threshold, which included 90% of providers.  Alternatives offered include a revision to a more stratified share of supply may allow for a more balanced approach, or that share of supply should be set much higher than 51% or alternatively linked with total objections by provider number. In this respect the Department of Health responded: “We believe that a fairer balance will be maintained in the system as a whole if larger providers have the opportunity to object to proposals as part of the overall provider response, rather than as a separate voice. Larger providers will still continue to play a crucial role as part of the tariff development process. We note the concern to maintain financial stability within the system. As such, we will explore together with NHS England and Monitor the option of introducing multi-year tariffs, which will assist commissioners and providers with financial planning. However, while we recognise strong opposition to removing this threshold, the taxpayer cannot afford a repeat of 2015/16 tariff process and the financial disruption this has caused. We have therefore decided, as part of a package of measures, to remove the share of supply objection threshold”.  15% of respondents, which consisted mainly of commissioners, agreed with increasing the objection threshold, with many preferring 66% over 75%; however, 82% of respondents, mostly providers, disagreed with the proposal. In this respect the Department of Health responded: “The Department of Health now considers that the objection percentage for providers and commissioners should be higher, but remain equal in the interest of fairness. Also the Department of Health has decided to increase the objection thresholds of both providers and commissioners from 51% to 66%”.

 On impacts and equalities:

 Upon being asked if aware of any equality issues or of any particular group for whom the proposed changes could have either a detrimental or differential impact, 73% of respondents answered ‘no’.  24% of respondents expressed concerns about future eventualities, not least where the providers of some services found them to be financially unsustainable but without sufficient numbers of providers objecting to meet a threshold.  Respondents identified impacts on large providers, most often in 17 connection with share of supply although some also argued this in connection with higher thresholds.  Specialised services that were mentioned by respondents included cleft- lip & palate, cranio-facial, HIV, and transplantation (renal, liver, etc). In this regard the Department of Health responded: “The current objection mechanism reflects an expectation that threshold levels may only be reached in circumstances when objections represent widely held concerns. It is evident that, for example, the treatment of specialised services generally can generate such concern amongst providers, which could relate to the interests of many groups of patients”. “The current provisions of the objection mechanism permit a number of large providers to veto tariff proposals. The proposed changes would require objections from a larger number of providers in order to reach an objection threshold (rather than the 37% of providers who objected to 2015/16 tariff proposals). The implication is that the overall patient population served by providers who object would thus tend to be more equally representative of the population at large. This is compatible with the PSED and the duty as to reducing inequalities”.  When asked if they consider there to be any significant impact on the sector as a result of the proposed changes to the objection process, the majority of providers stated ‘yes’ while commissioners opted for ‘no’. In this regard, the Department of Health responded: “We anticipate that the impact of the sector is likely to negligible, with no direct costs or benefits with regards to changes in the objection thresholds. No direct costs were identified by independent providers who responded to the consultation”. The consequential and multifactorial impact on the Trust and particularly as a nationally acknowledged specialist provider of service is being addressed by the Board of Directors.

The Chairman shall advise further at the meeting as to outlook and strategy in the context of what these and other national policy changes mean for the Newcastle upon Tyne Hospitals.

Sir Leonard Fenwick Chief Executive 13th November 2015