HC 172 Annual report and accounts 2016/17
Advise / Resolve / Learn
NHS Resolution Annual report and accounts 2016/17
Presented to Parliament pursuant to Paragraph 6 of Schedule 15 of the National Health Service Act 2006.
Ordered by the House of Commons to be printed 13 July 2017. This is a reproduction of the annual report and accounts laid before Parliament under the name of the NHS Litigation Authority - pages 5 to 165 remain unchanged
HC 172 Contents
© NHS Resolution 2017 (the operating name of the NHS Litigation Authority) The text in this document (this excludes, where present, the Royal Arms and all departmental or agency logos) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not in a misleading context. The material must be acknowledged as NHS Resolution copyright and the document title specified. Where third party material has been identified, permission from the respective copyright holder much be sought. Any enquiries related to this publication should be sent to us at 151 Buckingham Palace Road, London, SW1W 9SZ This publication is available at www.gov.uk/government/publications Print ISBN 9781474143813 Web ISBN 9781474143820 ID 18041725 07/17 Printed on paper containing 75% recycled fibre content minimum Printed in the UK by the Williams Lea Group on behalf of the Controller of Her Majesty’s Stationery Office
Advise / Resolve / Learn Contents Contents
Performance report 6 Chair’s welcome 8 Chief Executive’s report 10 Performance summary 12 What we do 12 Understanding our indemnity schemes 13 The year in numbers 14 The environment we work in 27 Key issues and risks 28 A going concern 30 Performance analysis 31 Our strategic aims 31 Performance measures 32 Delivering a fair distribution of cost 36 Our strategies for resolution 37 Mediation 37 Contesting claims appropriately 37 Tackling exaggeration and fraud 37 Challenging excessive legal costs 39 Resolution without legal proceedings 43 Defending cases to trial 44 Developing legal precedent 46 Managing historic liabilities 50 A focus on maternity 50 Sharing learning for improvement 53 Service updates 58 Feedback on our performance 67 Finance report 70
Accountability report 78 Corporate governance report 80 Directors’ report 80 Statement of Accounting Officer’s responsibilities 81 Governance statement 82 Remuneration and staff report 103 Parliamentary accountability and audit report 119 The certificate and report of the Comptroller and Auditor General to the Houses of Parliament 120
Financial statements 122 Statement of comprehensive net expenditure for the year ended 31 March 2017 124 Statement of financial position as at 31 March 2017 125 Statement of cash flows for the year ended 31 March 2017 126 Statement of changes in taxpayers’ equity for the year ended 31 March 2017 127 Notes to the accounts 128 Glossary 164
5 Performance report
Performance report Performance report
7 NHS Resolution Annual report and accounts 2016/17 Performance report
Overview Chair’s welcome
Ian Dilks / Chair
We are becoming we considered that there was financial and performance NHS Resolution. more we could contribute. report. The good news is A number of steps have already that for the third year in a I referred last year to the been taken in recent years, row clinical negligence claim ongoing discussions with the for example establishing our numbers reported to us have Department of Health (DH) Safety and Learning team and fallen, by over 10% in three about the future role of the the promotion of mediation years. Despite this however, NHS Litigation Authority and as an alternative to litigation, the cost of claim payments how we could play a bigger so NHS Resolution represents continues to rise. In part, this role to assist in the reduction evolution not revolution. is a function of the nature of of harm and cost of claims Our new strategy and name our risk pools which mean to the NHS. both support the changes that that payments today reflect The strategy for the were already under way and claims notified in previous development of what is now give us a clear mandate to years, but it also reflects the NHS Resolution is the outcome. do more. It also gives us the increasing cost of claims and I would like to congratulate opportunity to make more use the associated legal costs, with the management team on of new skills acquired when the claimant legal costs rising by the development of the new National Clinical Assessment 19% last year to almost £500 strategy and we are grateful Service (NCAS) joined us a million, once again a greater to both our sponsor team in few years ago. Further details increase than in damages DH and our scheme members are contained in our strategy paid to patients (up 14%). in their responses to the document available from our It is salutary to reflect that our new website, www.resolution. consultation we carried out total provisions have increased nhs.uk/our-strategy, and in the last year which have been by over 250% from £26 billion pages that follow. invaluable in shaping the in 2014 to £65 billion in 2017. Much of this is attributable to future for NHS Resolution. One key aspect of our plans financial factors beyond the We are also grateful to our for the future is much closer control of the NHS and driven Health Ministers for their working, both formally by the current low interest active support. and informally, with other rate environment - the change organisations within the overall So why change? We have in discount rate used to value health system. Many of the commented before that our liabilities which occurred measures that can be taken to the clinical negligence cost last year and the change in influence the cost of claims are burden placed on the NHS the Personal Injury Discount not ones that NHS Resolution is becoming unsustainable. Rate (PIDR)1 which occurred in can take but we can advise The NHS Litigation Authority March 2017. Neither of these and support others. was, as external reviews adjustments are a measure of have confirmed, well led and The need for change is harm but as I said last year, the operationally efficient but illustrated again in our final provision (£65 billion this
8 NHS Resolution Annual report and accounts 2016/17 Performance report
year) reflects the true cost to costs so will be dependent Director Mike Pinkerton the NHS in today’s prices of the on additional funding to who recently stood down payments that we will have to be provided by DH which in as the Chief Executive of make in the future. turn will be met out of the Doncaster and Bassetlaw additional £1.2 billion per NHS Foundation Trust and The National Audit Office annum the Chancellor of brings valuable insights into (NAO) is currently conducting a the Exchequer has said the senior leadership of our review of how the Government will be made available to scheme members. We were manages the cost of clinical public bodies, including also delighted last November negligence in trusts and we NHS Resolution, to meet to appoint as an Associate now expect the final report, these claims. Non-executive Director, Dr the publication of which Mike Durkin, the then National was delayed by the general In addition to developing our Director for Patient Safety election, later this year. NHS new strategy the management at NHS Improvement, which Resolution is obviously a team has continued to develop brought valuable knowledge of significant part of the overall and improve our internal and links to other organisations system and we look forward to capabilities, important to active in improving patient receiving the NAO findings and our priority of being fit safety. At the same time we to seeing whether they point for purpose. I would like lost the services of Ms Ros to other steps that can be to mention two external Levenson whose term of office taken in which we can assist. achievements that reflect came to an end in October last this. Firstly we were awarded The change in the PIDR added year and I would like to express ISO 27001 certification of £4.7 billion, approximately my appreciation for her role in our information security 7.5%, to our claims provisions supporting the development management systems at March 2017 but will have a of NHS Resolution during her and secondly, successfully proportionally bigger impact term of office. obtained Investors in People on the claim payments we will accreditation. Both are notable We are all enthused by the make in 2017/18. Our previous achievements at a time of challenges that lie ahead in estimate of payments was continuing change for implementing and further c£2 billion which is the cost the organisation. developing our new strategy. already notified to our scheme The Board is committed members but the PIDR change Our senior management team, to supporting the senior will materially increase the which was relatively new this management team in enabling amount of payments we will time last year, has continued to NHS Resolution to play a make, particularly if there is develop and there have been greater role, working with change in the behaviour no significant changes. There others in the system, of claimants. We will not this have however been changes in improving outcomes year be making any additional on the Board. In January we for patients and reducing the charges to our scheme were delighted to welcome burden of harm on the NHS. members to meet these as a new Non-executive
1 More detail about the PIDR can be found on pages 27 and 28.
9 NHS Resolution Annual report and accounts 2016/17 Performance report
Chief Executive’s report
Helen Vernon / Chief Executive
Our review of 2016/17 resources for patient care, with Incidents arising in maternity highlights the extent of a new name, NHS Resolution. continue to dominate our expenditure due to the very the financial challenge Much of the year has been high value of claims arising that negligence presents focused on planning for the from brain injuries at birth. to the NHS. Behind the future and putting in place These incidents can have a numbers are the personal the necessary structure for devastating impact on those stories of those who have change. A consultation on the involved and we must do suffered injury, of distressed pricing of the main indemnity everything we can to learn healthcare staff and of their scheme, the Clinical Negligence from what happened. As a families - all affected by an Scheme for Trusts (CNST) first move to an approach incident which could have sought to reach a consensus on the principles by which the to incentivise improvement been prevented and no-one through our maternity price wanted to happen. costs of clinical negligence are distributed and we were we issued shadow indicators We have been able to share pleased to have both a strong to our membership in some of these stories in response and a high degree of March 2017 illustrating how our events and publications agreement. The consultation an approach modelled on over the course of the also sought views on some key ‘forward indicators’ might year; bringing patients and questions for the future of the operate. Coupled with a new healthcare staff together to scheme, such as the desirability scheme for notification of learn from what went wrong of early reporting for high brain damage at birth, this and to share what has worked value incidents, the challenge takes us closer to these rare in safety improvement. of building a ‘forward view’ incidents than has historically into pricing and the appetite been the case and provides Our five-year strategy, for additional services. a greater opportunity to use ‘Delivering fair resolution and our resource and expertise to learning from harm’ represents Our response to the support all of those involved, a shift in approach, to tackle consultation set out the right from the start. the multiple drivers of claims programme of work ahead costs, using the indemnity and a number of steps were Like all parts of the NHS, we schemes both as a platform taken in-year to progress this. need to make sure that every for learning and a financial In response to feedback we penny we spend is value for lever for improvement. Our made some improvements money for the taxpayer. strategy unites our operating to our pricing approach and This means making some arms under a common purpose importantly, brought forward difficult decisions on delivering to provide expertise to the the date on which prices were compensation only where it is NHS on resolving concerns issued to our members in order due and ensuring that the fairly, share learning for to align with the financial NHS is not overcharged for improvement and preserve planning cycle of the NHS. legal costs.
10 NHS Resolution Annual report and accounts 2016/17 Performance report
We have a duty both to events and created products Achieving certification against compensate fairly and to for members to start to take ISO27001 was the culmination preserve funds for NHS us towards a more tailored of over two years’ work to care. Our report illustrates approach. Our NCAS services enhance our standards on the ongoing challenge of are now delivered to meet information security, reflecting disproportionate claimant the particular needs of those how seriously we take the legal costs and our response calling upon us and the protection of the data shared to this in contesting both development of a ‘link adviser’ with us. Towards the end of individual bills and points model has helped us to build a the year, we were accredited of principle. The lawyers we greater understanding of the against Investors in People appoint go through a rigorous challenges faced. which we see as an important procurement process and work first step to develop leadership to fixed fees. With that process We see education as having skills at all levels of NHS underway this year, we took an increasing role in our Resolution and ensure that our the opportunity to introduce services. NCAS continues to staff have all that they need to a pricing structure focused deliver high quality training lead the changes that the next on early investigation so that in the area of managing few years will bring. we can avoid formal court professional performance. Our strategy for the next five proceedings wherever possible. This year the Family Health years is an ambitious one, as it Following a successful pilot, Services Appeal Unit (FSHAU) has to be if we and others are we also procured for a delivered a well-received to make a real impact on the mediation panel with the programme aimed at rising costs of harm to the NHS. new mediation service well improving decision making in We are looking forward to underway by the latter order to avoid unnecessary the opportunity to do more to part of the year. Getting applications. We are gradually protect resources for NHS care, the lawyers on both sides starting to extend this working with our partners to engaged in mediation has upstream approach to other ensure that learning is shared been challenging but the parts of the business to share for the benefit of patients panel has already been active what we know in order to and NHS staff. in building interest with some prevent the escalation of
encouraging early signs. concerns and disputes.
It has become clear from the As mentioned in Ian’s welcome, responses to our consultation we were delighted this year to and our conversations with achieve two quality standards, trusts and other NHS partners both of which reflect the that it is important to move strong work ethic and away from a ‘one size fits professionalism of our staff all’ approach to our services. who have responded brilliantly This year we ran a number of to the challenges of the year.
With effect from 3 April 2017, the NHS Litigation Authority relaunched under the new operating name of NHS Resolution. For consistency throughout this document we refer to NHS Resolution wherever possible. The NHS Litigation Authority remains a legal entity and we have reverted to this name when mentioning the organisation in a legal context. At the time of the launch of NHS Resolution, we also published our five year strategy on www.resolution.nhs.uk This annual report outlines the work undertaken in 2016/17 to prepare us to deliver the five year strategy which describes how we will build upon our strengths to transform the way in which we use valuable NHS resources to benefit patients, resolve concerns and help to improve safety.
11 NHS Resolution Annual report and accounts 2016/17 Performance report
Performance summary
The purpose of the performance summary is to provide an overview of the work of NHS Resolution, the new operating name of the NHS Litigation Authority. This includes our purpose, the key risks to the achievement of our objectives and a summary of some of the key activities we have undertaken over the past year to meet the three strategic aims outlined in our business plan for 2016/17. For more detail about how we have delivered against our aims, please review the ‘performance analysis’ section.
What we do
Our purpose is to provide expertise to the These teams are supported by the NHS on resolving concerns fairly, share learning following departments: for improvement and preserve resources for 1. The Safety and Learning team supports patient care. members to better understand their claims We provide the following core services risk profiles to target their safety activity to our customers: while sharing learning across the system. 1. The Claims teams deliver expertise in 2. The Membership and Stakeholder handling both clinical and non-clinical Engagement team works at a corporate claims to members of our indemnity schemes. level to improve our customer-focused approach to delivery. 2. The National Clinical Assessment Service (NCAS) provides advice, support and 3. The IT and Facilities team enables the interventions in relation to concerns about organisation to deliver its services the individual performance of doctors, effectively through the provision of a dentists and pharmacists. secure infrastructure. 3. The Family Health Service Appeals Unit 4. The Finance and Corporate Planning (FHSAU) offers an impartial tribunal service directorate provides finance, human for the fair handling of primary care resources/organisational development, contracting disputes. corporate governance and business development expertise.
12 NHS Resolution Annual report and accounts 2016/17 Performance report
Understanding our indemnity schemes
The main bulk of NHS Resolution’s workload We also manage two non-clinical schemes is handling negligence claims on behalf of under the heading of the Risk Pooling the members of our indemnity schemes: NHS Schemes for Trusts (RPST): organisations and independent sector providers • Property Expenses Scheme (PES) which of NHS care in England. The four clinical covers ‘first party’ losses such as property negligence schemes we manage are: damage and theft, for incidents on or after • Clinical Negligence Scheme for Trusts (CNST), 1 April 1999 which covers clinical negligence claims for incidents occurring after 1 April 1995 • Liabilities to Third Parties Scheme (LTPS) which covers non-clinical claims such as public • Existing Liabilities Scheme (ELS) is centrally and employers’ liability funded by DH and covers clinical negligence claims against NHS organisations for incidents In addition we manage one other occurring before 1 April 1995 non-clinical scheme: • DH non-clinical – which covers non-clinical • Ex-RHA Scheme (Ex-RHAS) is a relatively small negligence liabilities that have transferred to scheme, centrally funded by DH, covering DH following the abolition of any relevant clinical negligence claims against former health bodies Regional Health Authorities abolished in 1996 In this document where we refer to clinical • DH clinical covers clinical negligence liabilities negligence we are referring to an amalgamation that have transferred to DH following the of data relating to all four of our clinical abolition of any relevant health bodies negligence schemes.
13 NHS Resolution Annual report and accounts 2016/17
The year in numbers
Table 1: A financial overview
2015/16 2016/17 Change
Funding for clinical schemes Income from members £1,419.5m £1,655.4m £235.9m 17% Funding from DH (budget) £142m £130.0m (£12m) 22%
Total funding £1,561.5m £1,785.4m £223.9m 14% Payments in respect of clinical schemes Damages payments to claimants £950.4m £1,083.0m £132.6m 14% Claimant legal costs £418.0m £498.5m £80.5m 19% Defence legal costs £120.1m £125.7m £5.6m 5%
Total payments £1,488.5m £1,707.2m £218.7m 15% Funding for non-clinical schemes Income from members £59.8m £58.8m £1m 2% Funding from DH (budget) £11.5m £9.0m (£2.2m) 22%
Total funding £71.3m £67.8m £3.5m 5% Payments in respect of non-clinical schemes
Damages payments to claimants £26.7m £30.7m £4.0m 15% Claimant legal costs £25.0m £19.7m (£5.3m) 21% Defence legal costs £7.7m £7.1m (£0.6m) 8%
Total payments £59.4m £57.5m (£1.9m) 3% NHS Resolution administration of schemes Clinical £9.4m £10.4m £1m 11% Non-clinical £3.2m £3.5m £0.3m 9% NHS Resolution other activities Income £1.5m £1.4m (£0.1m) 7% Expenditure £6.4m £6.4m £0m 0% Sign up to Safety £18.7m £0.2m - Staff numbers 223 236 13 6% Cost of new claims provisions New claims provisions £29,332m £10,499m (£18,950m) 68%
Total provisions at year end £56,440m £64,998m £8,557m 15%
14 Performance report
Figure 1: The value of payments (damages, claimant and defence costs) across all indemnity schemes for 2016/17 – to demonstrate the relative size of the schemes
CNST ELS Ex-RHA DH Clinical LTPS DH Non-clinical Total value of payments PES £1,764.7m
15 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 2: How 17,338 claims were settled2 in 2016/17
No proceedings Damages No damages 30.1% 37.7% 5,226 6,533 Total: 67.8%
Proceedings Damages No damages 25.4% 6.1% 4,400 1,058 Total: 31.5%
Trial 0.3% 0.4% Total: 49 72 0.7%
55.8% 44.2% 100% 9,675 7,663 17,338
The majority of claims we claims end up in court with The overwhelming majority receive (67.8%) are resolved fewer than 1% going to a were resolved by negotiation without formal court full trial (where most end in in correspondence, in meetings proceedings and in these judgment in favour of the between the parties, or using early stages, more claims are NHS). Claims resolved without some form of alternative resolved without payment the need for formal court dispute resolution, including of damages, than with. proceedings are managed formal mediation. Just under one third of by our in-house teams.
2 This figure refers to settled claims, not closed claims and therefore includes claims that have been agreed with ongoing periodical payment orders. Settled claims will also include claims where damages have been agreed or successfully defended, and costs have not yet been agreed. This data is a different cohort to closed claims reported elsewhere in this document as they may fall in different years.
16 NHS Resolution Annual report and accounts 2016/17 Performance report
In 2016/17, NHS Resolution both with and without the to 993 in the previous year. closed 17,202 clinical and non- payment of damages. We In addition, we received 250 clinical claims brought against handled 925 referrals about appeals in accordance with the NHS in England compared the performance of doctors, the Pharmacy Regulations to 16,459 in 2015/16 - these dentists and pharmacists compared to 297 in the figures include claims closed within the NHS compared last financial year.
Figure 3: The total number of clinical and non-clinical claims closed with and without the payment of damages from 2010/11 to 2016/17
20,000
17,202 16,459 16,459 15,384 15,000 14,171 14,232 12,584
10,000 Number of claims
5,000
0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Closure year
Claims volumes reached a peak numbers of clinical claims Sentencing and Punishment of in 2013/14 and have steadily being made prior to a change Offenders Act 2012.3 reduced since then. This is in funding arrangements attributed to a surge in the following the Legal Aid
The number of claims closed in 2016/17 was 17,202, an increase of 743 on the previous year. This figure includes claims closed without a payment of damages.
3 Legal reforms that came into force on 1 April 2013. The reforms change, amongst other matters, the amount that claimant solicitors can recover from the defendant under conditional fee agreements and for after the event insurance.
17 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 4: The number of new clinical and non-clinical claims reported in each financial year from 2010/11 to 2016/17
14,000
11,945 12,000 11,497 10,965 10,686 10,129 10,000 9,143 8,655
8,000
6,000 4,802 4,806 4,346 4,618 4,632 4,172 4,082
Number of new claims 4,000
2,000 Clinical Non-clinical
0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Notification year
New clinical negligence claims In part, this is due to the fact in 2016/17 fell in number by that payments represent claims Over the past three 2.5% to 10,686 compared with notified in previous years. financial years the 10,965 received in 2015/16. numbers of new clinical The total payments relating Despite this small decrease in and non-clinical claims to our clinical schemes the number, damages paid increased by £218.7 million reported in-year has to patients rose significantly (15%), from £1,488.5 million reduced since a peak from £950.4 million to £1,083.0 to £1,707.2 million. in 2013/14. million, an increase of 14%.
18 Performance report
Figure 5: Clinical negligence payments including interim payments 2015/16 and 2016/17
1,800 Total = £1,707.2m 125.7 (7%) 1,600 Total = £1,488.5m 1,400 120.1 (8%)
1,200 498.5 (29%) 1,000 418.0 (28%)
800 Defence legal costs Claimant legal costs 600 Damages paid to claimants 400
Clinical negligence payments (£m) 200 950.4 (64%) 1,083.0 (64%) 0 2015/16 2016/17
Across the board, legal costs and compensation payments associated with clinical negligence claims have increased.
Figure 6: Payments on clinical claims by financial year from 2012/13 to 2016/17 for our CNST, ELS and Ex-RHA, and DH clinical schemes
1,800.0 1,575.9 1,600.0 1,378.2 1,400.0 Clinical Negligence 1,200.0 1,117.7 1,051.2 1,044.4 Scheme for Trusts 1,000.0 DH clinical scheme 800.0 Existing Liabilities & Ex-Regional Health
Payments (£m) 600.0 Authorities scheme
400.0
200.0 141.2 106.2 97.5 82.5 100.2 35.1 27.7 27.7 31.0 0 2012/13 2013/14 2014/15 2015/16 2016/17 Financial year
We continue to receive and For clinical claims we closed For non-clinical claims defend a high number of 5,252 in 2016/17 compared to we closed 2,618 in 2016/17 claims which are closed without 4,935 in 2015/16 without the compared with 2,796 in a payment of damages. payment of damages. 2015/16.
19 NHS Resolution Annual report and accounts 2016/17
Figure 7: The number of cases resolved without the payment of damages in each financial year from 2004/05 to 2016/17 across all schemes
6,000 5,252 4,959 4,983 5,000 4,643 4,524
4,000 3,541 3,680 3,330 3,175 3,054 2,922 3,000 2,523 2,657 2,796 2,596 2,618
Number of claims 2,000 2,198 1,951 2,008 1,860 1,884 1,726 1,836 1,000 1,286 1,409 1,332
Clinical Non clinical 0
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Closure year
The projected expenditure for are usually paid as a lump sum members will continue to CNST in 2017/18 is £1.95 billion up-front together with annual increase for years, probably representing a 17.5% increase payments for the rest of that decades to come. compared to 2016/17, a year in person’s life. This means both We have a duty to compensate which we had already seen a that the claimant is financially patients fairly where they are secure and that money, which 17% increase in contributions harmed by negligent care, but would otherwise be paid out in from members to the scheme the current costs to the NHS advance, is retained for patient on the prior year. This latest are unsustainable, particularly care until it is actually needed. increase does not take into given the other financial However, the costs of meeting account the effect of the challenges facing the system. these annual payments are change to the PIDR. This However, increases in costs increasing, as around 200 new affects the value placed on are also unavoidable without cases a year are compensated future losses when paid out in significant law reform. a lump sum, so we expect the in this way. At this point in cost of current settlements to time, more cases are being Over 2016/17 we developed a committed to such a payment five year strategy to play increase significantly. regime than are leaving (when our part in addressing the Claims for seriously injured patients sadly reach the end escalating cost of claims. As a patients, such as those who of their life). Consequently result we are taking forward suffer brain damage at birth, the costs and charges to our work to improve the resolution
20 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 8: The number of CNST (including DH legacy) clinical negligence cases received by damages range in each financial year from 2012/13 to 2016/17
3,000 2,732 2,678 2012/13 2,571
2,500 2,446 2013/14 2,293 2014/15 2,056 2,039 2,018 1,997 2015/16 2,000 1,909 1,850 1,817
1,746 2016/17 1,660 1,573 1,517 1,475 1,500 1,424 1,347 1,344 1,255 1,180 1,149 1,148 1,102 1,081 1,004 981 938 926 911 Number of claims 1,000 740 678 634 619 500 374 273 255 244 233 186 103 103 104 96 0
Nil £1 -
£10,001 - £25,001 - £50,001 - £10,000 £25,000 £50,000 £100,001 - £250,001 - £100,000 £250,000 £1,000,001 - £2,000,001+ £1,000,000 £2,000,000 Estimated damages
Claims numbers have dropped at the lower value end but with a steep increase in year in the number of claims lodged in the £50,001 to £100,000 tranche as well as an increase of a lesser magnitude in some of the higher value ranges.
of claims, striking the balance One area of focus is maternity these tragic cases and the of avoiding unnecessary court claims. In addition to the families involved we developed costs whilst continuing to devastating effect on families, our early notification scheme defend claims where there was they represent one of the which launched on 1 April no negligence and challenging significant drivers of cost. 2017. The scheme’s objective inappropriate legal costs Despite obstetric claims is to improve the handling of where we encounter them. representing only 10% of these incidents and identify Our strategy also sets out the clinical claims by number in and share learning much earlier action we will take to use what 2016/17, they accounted for in the process. we know about the causes of 50% of the total value of new incidents to prevent the same claims reported. In order to thing happening again. help organisations handling
21 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 9: The number of clinical negligence claims received in 2016/17 by specialty across all clinical negligence schemes4
13% Orthopaedic surgery Casualty/A&E Obstetrics
34% General surgery 12% Gynaecology General medicine Total number of Urology clinical claims 10,686 Radiology Psychiatry/Mental health 10% Ophthalmology Other (aggregated specialties) 3% 8% 3% 3% 3% 5% 5%
As in previous years, the greatest number of claims received across all our clinical negligence schemes relate to the orthopaedic surgery specialty.
4 In this figure the percentages add up to 99% due to rounding.
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Figure 10: Value of clinical negligence claims received in 2016/17 by specialty across all clinical negligence schemes5
Obstetrics 16% Paediatrics Casualty/A&E 2% Orthopaedic surgery 2% Neurosurgery 2% General surgery 2% Total value of General medicine 3% clinical claims received 50% £4,370.3m Radiology 3% Gynaecology Ambulance 5% Other (aggregated specialties)
8%
8%
As in previous years, the greatest value of claims received across all our clinical negligence schemes relate to the obstetrics specialty.
5 In this figure the percentages add up to 101% due to rounding.
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Figure 11: Non-clinical negligence payments including interim payments 2015/16 and 2016/17
Total = £59.4m Total = £57.5m 70.0 7.7 (13%) 7.1 (12%) 60.0
50.0
40.0 19.7 (34%) 25.0 (42%) Defence legal costs 30.0 Claimant legal costs
20.0 Damages paid to claimants
10.0
Non-clinical negligence payments (£m) 26.7 (45%) 30.7 (54%) 0.0 2015/16 2016/17
In 2016/17 claimant and defence costs have reduced in comparison to the previous year, while damages paid have increased.
The number of new non- million to £30.7 million, claimant legal costs and 8% for clinical claims, typically however the total payments defence costs. This is attributed employers’ and public liability relating to our non-clinical to the continuing impact of claims, fell from 4,172 received schemes decreased by £1.9 fixed recoverable costs in this in 2015/16 to 4,082 in 2016/17, million (3%), from £59.4 million area and efficiencies in the a decrease of 2%. Damages to £57.5 million due to a steep claims process. increased by 15% from £26.7 fall in legal costs: 21% for
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Figure 12: Payments on non-clinical claims by financial year from 2012/13 to 2016/17 for LTPS, PES and DH non-clinical schemes
50.0 46.9 44.6 43.6 40.2 41.2 40.0
Liabilities to Third 30.0 Parties Scheme DH Non-clinical scheme 20.0 Property Expenses Payments (£m) Scheme 11.1 9.4 10.0 7.5 8.6 3.7 3.9 2.8 3.6 5.3 0.0 2012/13 2013/14 2014/15 2015/16 2016/17 Financial year
Payments on non-clinical claims has stabilised. Increased payments under PES was attributed to a small number of high value incidents.
The highest value and number of non-clinical claims fall under the category of orthopaedic injuries, resulting from slips, trips and falls.
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Figure 13: Number of non-clinical claims (LTPS & DH Liabilities only) received in 16/17 by injury6
1% 1% 1% 1% 2% 2% Orthopaedic injuries 2% Psychiatric damage 5% Head injuries 6% Facial injuries Injuries to internal organs Total number of Burns non-clinical claims 10% 71% Damage 4,016 Other Injuries affecting the senses Sickness/Disease Other (aggregated injuries)
Figure 14: Value of non-clinical claims (LTPS & DH Liabilities only) received in 16/17 by injury7 Orthopaedic injuries Psychiatric damage 1% 1% Other 1% 1% Head injuries 2% Injuries to internal organs 4% Facial injuries 4% Fatality 5% Damage Burns 6% Total value of Injuries affecting the senses non-clinical claims received £64m 59% Other (aggregated injuries)
16% The numbers of both clinical and non- clinical claims received across all our indemnity schemes in 2016/17 have fallen. However, the costs of claims and the corresponding provisions calculated to meet these rising costs into the future continue to rise.
6 ‘Other’ is a recognised an injury code and is different from ‘Other (aggregated injuries)’ which is the total of other coded injuries that are not in the top ten injury types – In this figure the percentages add up to 102% due to rounding. 7 ‘Other’ is a recognised an injury code and is different from ‘Other (aggregated injuries)’ which is the total of other coded injuries that are not in the top ten injury types.
26 NHS Resolution Annual report and accounts 2016/17 Performance report
The environment we work in
NHS Resolution operates within both the Health Service and the Civil Justice systems, and needs to be able to respond to this changing landscape. The rising costs of clinical negligence claims are our primary focus. The drivers of these costs are multiple and include factors such as discount rates and the legal framework which governs the basis on which compensation and legal costs can be recovered, neither of which are in our direct control.
2016/17 saw the launch of three government consultations, the outcomes of which are unknown at the time of publication, but will influence our work and the environment we work in.
Rapid Resolution Fixed recoverable Personal Injury and Redress costs Discount Rate
In October 2016 the Secretary In January 2017, the On 27 February 2017, the of State for Health announced government published its Lord Chancellor, acting in a comprehensive package of plans to introduce fixed accordance with her powers measures designed to improve costs in clinical negligence under the Damages Act the safety of maternity care cases with damages of up to 1996, reduced the PIDR in the NHS. This included £25,000. Subsequently, Lord from 2.5% to minus 0.75%. consultation on a Rapid Justice Jackson commenced This change, which is expected Resolution and Redress a separate review of fixed to significantly increase the scheme (RRR) for severe birth recoverable costs across size of awards of damages for injuries. The proposed scheme all civil litigation claims future loss paid as a lump sum, envisages an early investigation (including clinical negligence came into force on 20 March and that eligible families will claims). It is envisaged that 2017. On 30 March 2017 the receive a package of support. if successfully implemented, Ministry of Justice published The threshold for receipt of fixed recoverable costs could a consultation to review the compensation is also being achieve proportionality, reduce framework under which considered. This consultation uncertainty for litigants, the rate is set including the launched on 2 March 2017 and reduce frictional cost, and principles which should guide closed on 26 May 2017. free-up court resource. this, how often the rate should The consultation launched be reviewed and who should on 30 January 2017, and closed set it. This consultation closed on 2 May 2017. on 11 May 2017.
27 NHS Resolution Annual report and accounts 2016/17 Performance report
Key issues and risks
Financial sustainability The change to the PIDR has Further information on the added to cost of settling effects and uncertainty on Financial pressures across the claims in the future. The rate our financial estimates are health system continue to determines the present value included in the Finance Report be a key issue, including the of lump sum settlements for from page 70, and Note 7 to cost of clinical negligence. claimants where there is an the accounts, in particular The liabilities arising from element of future loss, such as the section on sensitivity tests incidents up to 31 March 2017 care costs or loss of earnings. considering the impact of the for all types of claims have This will have a significant PIDR change on page 154. increased significantly, with impact on the cost of damages Delivering fair resolution and the provision reported in our awarded to claimants, and learning from harm: our five accounts increasing from £56.4 this may also affect claimant year strategy, published on billion in 2015/16 to £65.1 preferences for lump sum 22 March 2017 is our response billion in 2017/18. In addition awards rather than periodical to this increasingly to the changes in discount payment orders (regular challenging environment. rate factors, these increases payments for the life of the are due to continued inflation claimant, usually for care costs). for damages awards and legal Data and information costs, and the growing number The Chancellor of the of cases where we provide for Exchequer announced There are a number of the cost of care for life. additional funding across risks in this area. Like most government of around £1.2 Over the same period, the other organisations, we are billion a year for this change continually under threat from amount spent on settling and in the Spring Budget 2017. We administering claims for all potential security breaches, will therefore not be collecting both internal and external. We types of claims has increased further funds from members from £1.6 billion to £1.8 have worked extremely hard to of our indemnity schemes, achieve ISO27001 Information billion. Contribution levels for but will be dependent upon members of the CNST scheme Security Management securing direct funding Standard certification to have increased by a further from DH to meet the 17.5% in 2017/18, excluding the ensure that our information material impact on our cash management systems operate effect of the change to requirements from the change the PIDR. to a high standard, and we in the PIDR. We are monitoring continuously review our costs to inform budgetary and security arrangements to cash requirements for 2017/18 protect the integrity of our IT and we have also responded infrastructure. As a result, we to the Ministry of Justice were able to avoid any adverse consultation on the future consequences from the cyber- arrangements for setting attack on the NHS in May 2017, the PIDR. but remain vigilant to this ever- changing threat.
28 NHS Resolution Annual report and accounts 2016/17 Performance report
We monitor data quality Legal environment Capacity and skills throughout the year, seeking assurance from system checks The consultations previously During the year, the terms and controls, management referenced mean a period of of office of two of the three review, and independent audit, some uncertainty in terms of non-executive directors as data quality is essential for future claims volumes and came to an end, as well as the delivery of our business costs. We will work with DH one post remaining unfilled. and the production of key and wider government to This presented the risk that financial information. implement any changes to our we would have insufficient operations required to support capacity and skills at Board There is also an increased the delivery of any changes level to provide appropriate appetite for data sharing and made by government as a leadership to, and oversight the use of data to support result of these consultations. of, the organisation. Action early identification of risk and was taken to ensure that the to incentivise improvements in Board could operate effectively safety in healthcare. We have New models of through a combination of governance arrangements in care delivery recruitment and extension of place to ensure that we comply The development of new terms of office. In addition, fully with the requirements of models of care delivery, a further Executive Director the Data Protection Act when including the vanguards, was added to the Board to using and sharing patient data. created potential gaps in broaden the coverage of NHS We are also working with other indemnity cover arrangements. Resolution’s activities. Further health system organisations We worked with DH and its details of changes to Board to understand how we can lawyers in order to establish membership can be found in bring together intelligence how the legal framework the Governance statement on and develop incentives despite governing our schemes could page 82 onwards. the challenges the data sets be adapted in order to extend present. For example, during Vacancies in operational and cover to these emerging the year, we started a pilot corporate teams have also models of care. In December study with the providers of been recruited to, in particular 2016, we introduced a new local incident reporting systems the Claims, HR and IT teams, scheme aimed at organisations to consider how incident, to improve the delivery of our such as community interest complaint and claims data services and prepare for the companies to cover negligence could be brought together changes needed to deliver liabilities arising out of jointly to increase the understanding our five year strategy. Further commissioned health and social of risk at a local level. information about Board and care activities. staff developments is provided in the Remuneration and staff report, and Governance statement – as is further information about our risk environment and controls.
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A going concern
The NHS Resolution Board The Government recognises On this basis NHS Resolution is has reviewed the financial that there will be a significant not required to hold assets to position of the organisation impact on public finances, and cover liabilities arising from and discussed future funding therefore has added around the indemnity schemes. arrangements with DH, given £1.2 billion a year to the Therefore the Board has that NHS Resolution reports budget reserve to meet the concluded that it is appropriate significant net liabilities. expected costs to the public to apply the going concern The indemnity schemes that sector, in particular to basis of accounting. NHS Resolution operates are NHS Resolution. funded on a ‘pay-as-you-go The change is likely to lead basis’ - members collectively to a material increase in the contribute sufficient funds to amount of payments we will meet the liabilities required need to make, particularly to be met on a yearly basis if there is a change in the rather than holding reserves behaviour of claimants. DH for future settlements. There is has confirmed that it will a reasonable expectation that be providing support to Government, via DH and the NHS Resolution to meet the NHS, will continue to fund additional costs in settling future liabilities. claims, and as a result, no On 27 February 2017 the further claims on members of Lord Chancellor announced a our schemes will be required change to the PIDR from 2.5% in 2017/18. to minus 0.75%, effective from 20 March 2017.
30 NHS Resolution Annual report and accounts 2016/17 Performance report
Performance analysis
Our strategic aims
During 2016/17 our strategic aims were Strategic aim 3: offering best value to our reviewed, resulting in the publication of customers, patients and the public refreshed priorities for the 5 years to 2022. • Putting the needs and expectations of our The strategic aims for the customers, patients and the public at the core 2016/17 year were: of our work. Providing an efficient and best-value service. Strategic aim 1: supporting the reduction of harm • Working with our customers, patients, the public and stakeholders to develop our • Sharing learning, ensuring that the right services, actively responding to external incentives are in the right place. feedback, and ensuring all our services represent value and best practice. • Providing expert, robust and effective management and resolution of concerns Our Performance report sets out how we have about performance. delivered against our strategic aims, in year. • Supporting the NHS to learn from things We: that go wrong, to help reduce harm, improve patient safety and prevent claims - outline the financial challenges and the from happening in the future. trends and key features we have observed as a result of analysing our data; - explain the steps we have taken to share Strategic aim 2: providing analysis the costs of claims fairly and to incentivise and sharing expert knowledge improvement; • Providing expert, specialist and current - describe how we have used our expertise knowledge about the resolution of claims, in order to preserve funds for patient care concerns and disputes. Sharing knowledge on by targeting our strategies on resolution, legal developments, precedents and trends in including influencing the law; order to influence emerging law. - describe how we have worked with providers • Using our specialist knowledge and skills of NHS care to learn from claims in order to to deliver effective outcomes for the NHS. drive improvement; Ensuring that the patient interest is at the centre of what we do and in how we use - confirm the steps we have taken to obtain our expertise. and respond to external feedback; and
• Analysing our data and where possible, - summarise the activity we have undertaken joining this with other data sets to deliver within our various operating divisions to insight into trends and patterns. add value for our customers.
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Performance measures
Our performance measures The performance of our legal NHS Resolution’s Board provide an objective panel firms is also monitored and Workforce Strategy Group assessment of our operational closely under a balanced range monitored a variety performance and how we are of KPIs which are specified of workforce indicators, delivering against our strategic in our contracts with them including establishment aims. NHS Resolution has key in order to ensure a high levels, employee turnover, performance indicators (KPIs) quality service at a competitive recruitment, sickness absence, covering all areas of operations price. Throughout 2016/17, levels of pay, and equality and which are reviewed periodically we continued to review the diversity statistics, to ensure to ensure that they support distribution of work and that the associated HR issues us to continually learn and performance in relative, flowing from our business develop our services. as well as absolute, terms were properly managed. At a high level, our KPIs and intervened as required. provide assurance and A new scheme of panel performance information audit was tested in order to to our Board and the complement our programme DH. Internally, they drive of internal quality audit. We continuous improvement increased our internal audit for our operational teams. capacity and strengthened the capabilities of our managers Our KPIs are agreed by in undertaking performance our Board and the DH and management. published annually via our business plan with the exception of some of our claims KPIs where publication could prejudice the effective management of claims.
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Table 2: Key performance indicators Claims resolution
Providing Offering best Supporting Key performance analysis and value to our the reduction KPI met indicators sharing expert customers, patients of harm knowledge and the public
Response time to a letter of claim
Closure rate
Claims closed with no damages payment
Time to resolution
Repudiated claims converting to a damages payment
NHS Resolution to undertake 2 x annual customer satisfaction surveys
% target for member participation in order to ensure an engaged membership / customer base
Evidence of increasing scores Not on 50% of the areas covered by the survey, year on year comparable
Financial spend controlled within 5% of target
33 NHS Resolution Annual report and accounts 2016/17 Performance report
Safety and Learning
Providing Offering best Supporting Key performance analysis and value to our the reduction KPI met indicators sharing expert customers, patients of harm knowledge and the public
Feedback from at least 60% of trusts visited on recognition of leaflets – oral or written
95% response rate to members following a request for contact
80% of scorecards collected by members within 3 months of sending out
Family Health Services Appeal Unit (FHSAU)
Providing Offering best Supporting Key performance analysis and value to our the reduction KPI met indicators sharing expert customers, patients of harm knowledge and the public
90% of FHSAU "first step" letters sent out within 7 days of receiving the appeal or dispute
100% of FHSAU appeals or disputes where notice of an oral hearing is more than 14 days
80% of FHSAU appeals where Decision Maker agreed with recommendation of Case Manager
15 weeks to resolve FHSAU appeals and disputes - Internal input only
25 weeks to resolve FHSAU appeals where external input is required)- External input
33 weeks to resolve FHSAU disputes where external input is required e.g. oral hearing
90% positive outcome of quality audits for FHSAU appeals and dispute files
90% positive outcome of quality audits for FHSAU appeals and dispute files
34 Performance report
National Clinical Assessment Service (NCAS)
Providing Offering best Supporting Key performance analysis and value to our the reduction KPI met indicators sharing expert customers, patients of harm knowledge and the public 90% of requests for advice from NCAS responded to within 2 working days (or within an alternative timeframe requested by the RB) 90% of all exclusions/suspensions critically reviewed: Stage 1: after initial 4 weeks Stage 2: at 3 months Stage 3: at 6 months 92% of referrals for assessments and other interventions considered within 7 working days of receipt of all referral information
92% of assessments and other interventions delivered within target timeframe
90% of assessment and other intervention reports produced/ issued within target timeframe
90% of HPANs issued/released (where justified) within target working days
90% of HPANs revoked (where justified) within 7 working days.
90% of NCAS stakeholders met within quarterly targets
90% of NCAS education events rated by participants at least 4 out of 5 for effectiveness/impact
98% of clinical advice reports produced/issued to the GDC within 10 working days
Business areas performed sensitive cases. As such, the had an impact on delivery well against KPIs in 2016/17, number undertaken (42 of the assessment. achieving most KPIs, and were completed) represents Stretching targets were exceeding targets in a a small proportion of the adopted this year for the claims number of areas. total number of cases where teams with a tightening of KPIs NCAS encountered challenges NCAS is involved (925 new at the start of the financial in the area of assessments and cases). Often this year, delivery year. These were achieved interventions which represents against the timescale proved in most cases however the the most intensive involvement difficult due to a small number response time to Letters of of NCAS and are reserved for of cases where external factors, Claim was missed by 2% in the most complex and such as availability of clinicians, the clinical claims area.
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Delivering a fair distribution of cost
At the beginning of the The consultation identified In 2016/17 we made the financial year 2016/17 we a wide degree of consensus following changes to consulted members of our across our membership on the CNST in order to make main indemnity scheme, the principles to which the the pricing more responsive the CNST, about our pricing indemnity scheme operates to improvements in each methodology. The consultation with broad support for the organisation’s claims demonstrated support for concept of ‘risk pooling’ experience: promoting learning from which protects the NHS from 1. Greater weight was given to incidents and using the scheme the financial shocks of rare, the experience element of to provide financial incentives high costs events and the contribution as opposed to improve safety. As a result, provides stability without to the measure of exposure. we launched a programme the additional costs of of reform to support efforts commercial alternatives. 2. Greater focus has been to improve safety in the NHS. placed on more recent Members responding to our These plans are captured in our experience. Incidents consultation expressed a desire report on the consultation. which are over 10 years for us to alter our approach old were removed from The consultation provided to the pricing of CNST to rely the experience calculation, valuable feedback to help form less on claims experience and increasing the degree our business plan for 2017/18 increasingly on ‘indicators’ of of risk pooling for and our five year strategy recent improvement. Given the historic liabilities. Delivering fair resolution and significant impact of maternity learning from harm. As a claims on clinical negligence result of the consultation we liabilities and the time lag accelerated the process for involved in the most complex setting our prices to support claims, we prioritised work trust financial planning. on indicators for informing the maternity contribution for 2017/18.
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Our strategies for resolution
Our primary focus is to reduce the rate of growth in claims costs and the incidence of harm to address the burden of clinical negligence on the NHS. Patients should be entitled to pursue claims for fair compensation when things go wrong. However, court proceedings are not the only route to resolving concerns about healthcare. There are alternative ways to achieve fair resolution that do not involve a costly legal process.
Mediation Contesting claims Tackling exaggeration appropriately and fraud On 5 December 2016, we launched a new claims We are committed to ensuring We respond firmly to any mediation service following that the claims we receive are case where we suspect competitive public tender. handled fairly. Where a claim exaggeration and fraud. Contracts were awarded has merit, it will be resolved as Following are two cases that to the Centre for Effective quickly as possible however we illustrate the effectiveness Dispute Resolution (CEDR), must also contest claims where of our robust anti-fraud and Trust Mediation and Costs they are without merit in order claims validation process. Alternative Dispute Resolution to preserve valuable resources (CADR) for an initial period for NHS care. In 2016/17, 5,252 of two years. The service is clinical negligence claims were designed to support patients, resolved without a damages families and NHS staff to work payment, an increase on the together towards resolving previous year. incidents, complaints, legal claims and costs disputes, avoiding unnecessary expense and the potential emotional stress of going to court. Mediation provides injured patients and their families with an opportunity for face-to-face explanations and apologies when things go wrong. We will continue to closely monitor the service to ensure positive benefits from greater uptake.
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SM v NHS Commissioning Board Medical experts who examined the claimant were sceptical, finding her symptoms In the first case a 48-year-old claimant incompatible with the medical evidence. As a underwent arthroscopic surgery to her knee result we decided to undertake surveillance. following a road traffic collision. Surgeons On one day the claimant was seen attending discovered two meniscal tears which were a medical examination being pushed in a duly repaired. Four months later the claimant wheelchair by a friend, but a week later was underwent a repeat procedure to relieve observed on several days walking unaided joint pain which she said failed, and she and without difficulty. She was seen with later issued proceedings alleging that the a full range of movement and observed first operation was negligent. She said the driving a car without difficulty. When surgery had left her with a permanent limp presented with the surveillance evidence the and chronic pain, and meant that she was claimant offered to accept £8,000, but in the unable to work, needed a crutch at all times, face of a refusal quickly withdrew her claim could not walk or stand for long periods, in its entirety. and had been forced to move to single- storey accommodation as a result of being unable to climb stairs. She claimed £150,000.
LE v George Elliott Hospital of undertaking most day-to-day activities NHS Trust without restriction. The claimant refused to accept the surveillance evidence and The second case relates to a 42-year-old actively tried to suppress it. The matter claimant who underwent surgery for stress proceeded to trial. In court the trial judge incontinence that was said to have been awarded the claimant £115,000, less than negligent and left her with debilitating 5% of her pleaded claim, describing the pain, urinary incontinence and mobility case as “a determined attempt to extract problems. Liability was admitted at an early several million pounds from the NHS … by stage and we made what we believed were way of a claim that was inflated beyond all reasonable settlement proposals. However, reason. The claimant’s evidence was in part negotiations failed and the claimant issued dishonest and in part grossly exaggerated. I proceedings seeking damages in excess of find it especially troubling that the claimant £2.5 million. sought to suppress the surveillance evidence Medical experts who examined the claimant … and absent(sic) the surveillance evidence a were suspicious, finding inconsistencies terrible injustice would have been done to and symptoms disproportionate to the the NHS”. The saving to the public purse in injury. We again undertook surveillance and this case was over £2 million. discovered that the claimant was capable
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Challenging excessive cohort. Although the average costs of challenging excessive legal costs overall claimant costs for claims claimant legal bills whereas resolved at less than £100,001 claimant legal costs will In addition to challenging continues to increase the include additional elements inappropriate claims we also percentage relative to damages such as VAT and ‘after the carefully examine the costs has fallen slightly. event’ insurance costs. In both sought by claimant solicitors. instances, the cost of expert Defence costs have remained A key issue is to ensure that advice and additional fees these costs are proportionate. low in comparison although such as those paid to barristers Claimant legal costs have, increased at the lower and court costs are captured over time become increasingly end relative to damages in in the data. disproportionate to damages, 2016/17. It should be noted particularly for lower value that defence costs include the claims. 2016/17 was the first year in which we have seen a Disproportionate claimant legal costs are observed for drop back in this pattern for lower value clinical negligence claims. The extent of claims resolved for less than disproportionality in claimant legal costs reduced slightly in £10,001 as pre-LASPO funded 2016/17 for claims resolved with damages of £1 to £10,000. claims start to diminish in this
Figure 15: Defence and claimant costs for clinical negligence as a percentage of damages from 2013/14 to 2016/17
350% % Claimant Costs of Damages 2013/14 % Claimant Costs of Damages 2014/15 300% % Claimant Costs of Damages 2015/16
250% % Claimant Costs of Damages 2016/17
% Defence Costs of Damages 2013/14 200% % Defence Costs of Damages 2014/15 % Defence Costs of Damages 2015/16 150% % Defence Costs of Damages 2016/17
100%
Percentage legal costs of damages Percentage 50%
0 £1 - £10,001 - £25,001 - £50,001 - £100,001 - £250,001 - £500,001 - £1,000,000+ £10,000 £25,000 £50,000 £100,000 £250,000 £500,000 £1,000,000
Damages by tranche
39 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 16: Average of claimant costs paid on claims where damages are between £1 to £100,000 by financial year from 2004/05 to 2016/17 for the Clinical Negligence Scheme for Trusts and DH legacy cases
35,000 32,383 31,669
30,000 28,436 26,379
25,000 23,281 22,566 20,914 20,000 18,55118,433 15,845 15,000 13,535 13,690 11,281
10,000 Average claimant legal costs (£) Average 5,000
0
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Closure year
His reforms which included The new Average claimant significant rule changes were Proportionality Test costs paid on claims implemented on 1 April where damages 2013. The Jackson Reforms The new more robust test states the winning party are between £1 to include the introduction of will only be able to recover £100,000 by financial costs budgeting and a new proportionate costs from the year has continued to proportionality test. The aim losing party (i.e. the NHS). rise year-on-year since of costs budgeting is that Under the new rule, even judges should be able to set 2004/05 for the Clinical if it was ‘necessary’ to incur the parties’ costs budgets at Negligence Scheme costs during the litigation, for Trusts and DH an early point in the claim, they should be disallowed if legacy cases. before costs have been they are ‘disproportionate’ incurred to ensure that the (proportionality trumps parties conduct their work at a necessity). The judge is reasonable and proportionate required to undertake a cost. We continued work 2 stage costs assessment; at In 2009 Lord Justice Jackson, in 2016/17 to bring clarity the first stage only allowing undertook a detailed review around how costs budgeting is reasonable costs, and then of civil litigation costs with implemented and challenged at the second stage further the aim of achieving access to disproportionate costs when reducing the assessed justice at proportionate cost. we were faced with them. reasonable costs if they are
40 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 17: Average claimant legal costs as a percentage of the total claim value (for damages between £1 to £100,000) by financial year from 2004/05 to 2016/17 for the Clinical Negligence Scheme for Trusts and DH legacy cases
60% 54.83% 51.88% 53.45% 50.34% 50% 47.95% 44.67% 44.37% 43.17% 40.88% 38.14% 40% 36.78% 35.19% 32.30%
30%
20%
10% Claimant costs as a percentage of total Claimant costs as a percentage
0%
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Closure year
disproportionate. There is We recently tested this theory widespread judicial uncertainty For the first time since by undertaking two studies over which items in legal 2004/05 the average of random case samples. The costs bills should be taken claimant legal costs as studies showed that in 99% of into account when applying a percentage of the litigated cases, the claimant’s the second stage of the test. total claim value has lawyer had failed to notify Currently there are a number fallen slightly (where the value of damages being of competing judgments from damages are between claimed until after they issued different judges, regarding £1 to £100,000). formal court proceedings. how the new proportionality Furthermore, in the first study test should be applied. In involving 61 mainly low to October 2017, the Court of Case length and over medium value litigated claims, Appeal is set to give some pleading of damages £13.3 million had been sought guidance in the case of BNM Often claimant legal firms against £4.8 million paid. In v MGN Ltd, which may clarify argue the reason why legal the second sample involving some aspects of how the costs are so high is because 10 very high value claims, £109 new test should be applied in compensators do not settle million was sought against clinical negligence cases. damages quickly enough, £76.6 million paid. The studies which means that they need demonstrate the importance of to commence expensive formal exercising due diligence when court proceedings. dealing with damages claims.
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A failure of a claimant solicitor to file an appropriate costs budget restricts recoverable costs
SJ v Bradford Teaching Hospitals This was a multi-million pound clinical NHS Foundation Trust negligence claim, pleaded in damages in excess of £3 million, which eventually This is a Court of Appeal case and involved settled for £900,000. The claimant’s legal a decision by the claimant’s solicitors not costs were claimed at over £325,000, a to file a costs budget as required by the civil procedure rules. A costs budget is figure that did not take into account VAT essentially an estimate of costs intended to and certain additional liabilities. The failure help the court manage the litigation and to by the claimant’s solicitor to file a costs ensure that cases are conducted justly and budget 18 months previously meant that at a proportionate cost. It was a decision the Court of Appeal restricted recoverable which was to have significant financial costs to court fees of just £1,425 despite the consequences for the firm involved. claimant’s lawyer seeking over £500,000.
Disproportionate costs
AR v Moorfields Eye Hospital Although the claim settled by negotiation NHS Foundation Trust for the relatively modest sum of £3,250, the claimant’s bill of costs totalled £73,320.49. This case shows the application of In court we argued that the costs were proportionality in action. This was a clinical negligence claim involving an wholly disproportionate to the value of the accepted delay in diagnosis. Breach of claim. The judge agreed and disallowed duty was admitted, but there were 64% of the claim, awarding the claimant’s arguments around causation. solicitors less than £26,500.
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Resolution without legal proceedings
Figure 18: Litigation rate 100%
90%
80%
33% 70% 35% 34% 33% 34% 37% 36% 36% 37% 41% 67% 67% 43% 42% 65% 66% 66% 60% 63% 64% 64% 63% 59% 57% 58% 50%
40%
30%
20%
10%
0% 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Settlement year
Proportion of claims settled without court proceedings Proportion of claims settled after court proceedings start
occasionally criticised publically Injuries may not have settled In 2016/17, in line with by claimant lawyers for settling within the three year limitation historic experience, some cases after proceedings period or may be awaiting we saw a larger were commenced, however medical evidence before proportion of claims for the reasons described either can value the claim. settling without court it is not always possible to We have a duty to ensure proceedings than with. resolve cases pre-litigation. In that claims are not grossly these instances the claimant’s inflated or exaggerated. In one Many clinical negligence claims solicitors may not have claim where damages were are lodged a long time after provided sufficient information eventually settled for £175,000, the treatment in question and to us to allow a decision to be the claimant’s solicitors had claimants’ lawyers commence taken on liability or quantum, originally submitted a claim proceedings to protect their or may not have notified the for £4.5 million. This single clients’ limitation position. NHS of the intended claim until claim alone illustrates that Also, settlements in cases the three year limitation for we need to be vigilant when involving patients under a legal issuing proceedings has almost assessing the accuracy and disability have to be approved expired, which means the reasonableness of damages by a court, so proceedings claimant’s solicitor is required claims brought by claimant must be commenced. We are to issue protective proceedings. solicitor firms.
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Defending cases to trial
We continue to defend those 5% from 60%. The majority of our non-clinical schemes cases where we consider there clinical negligence trials were 25 trials featured liability issues has been no negligence or in respect of liability, with with 11 of the trials related where the amount claimed quantum only featuring in 16 to quantum. 23 cases were is thought to be excessive. out of 78 cases. 51 cases were determined in our favour. In 2016/17 we took 114 cases successfully defended. Testing Two examples of claims taken across all schemes to trial with claims at trial often has wider to trial under our clinical a 65% success rate. This is a implications for other, similar and non-clinical scheme fall of 10 cases (8%) from the cases and so where a case respectively, follow: previous year but with an is won, this can deter other increase in the success rate of claims without merit. Across
The importance of supporting witnesses and strong witness evidence
JW v NHS Commissioning Board also a possibility. The consultant could not recall the procedure for this particular This case involved a claimant who claimed claimant, but gave clear and compelling damages against an NHS trust following evidence about her normal practice and an alleged negligent failure to fit a had good contemporaneous notes. The trial contraceptive implant in her arm. judge accepted the consultant’s evidence She subsequently became pregnant and that she would have followed her usual gave birth to a healthy child, but claimed procedure, and if so, there was no reason damages for the ‘wrongful birth’ and a to doubt that the device would have been subsequent psychiatric injury. It was agreed implanted. This being the case, on balance that the implant was not in place, so the the implant must have extruded at a later issue was whether the consultant failed date. The claim was dismissed. This decision to fit the implant or whether the implant demonstrates that even where the passage extruded from the arm at a later date. of time means that a witness cannot The claim was disputed and went to trial. accurately recall the events leading to a Medical experts agreed that non-insertion claim, clear and strong evidence backed by was the most common explanation for a compelling documentary evidence can still missing implant, but that extrusion was be persuasive.
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No liability without real and apparent danger
CL v East Cheshire NHS Trust Under cross examination two witnesses for the claimant accepted that their In this employers’ liability case a community statements describing the area of the nurse, in the course of visiting a patient fall as being “pitch black” were wrong, at home, tripped or lost her footing on and in fact the lighting was “poor”. The a portion of gravel driveway leading trial judge went further and found that to the patient’s house. She sustained a the area was in fact perfectly adequately serious wrist fracture. It was dark and the lit by two street lamps and light from temperature was said to be below freezing, a kitchen window. The claimant herself although there was no suggestion of accepted in giving her evidence that the the presence of ice. The claimant issued gravel area was not a source of danger. proceedings against both her employing The trial judge also criticised the claimant’s NHS trust and the homeowner, alleging advisors for not visiting the location and that the driveway was “unlit, uneven taking measurements. In summing up the and hazardous”, and was a “trap”. Both judge decided that the gravel area of the defendants denied liability and the matter driveway was not a trap and contained no proceeded to trial. The trust accepted that hidden or latent defect, nor did it present no risk assessment had been carried out, a real and apparent danger. The absence of so the key issues were whether the a risk assessment was not material, since no driveway presented a real and apparent material risk would have been discovered. danger and whether a risk assessment The judge found that neither defendant was material to causation of the injury. was blameworthy and dismissed the claim.
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Developing legal precedent We continue to be involved in a number of significant decisions in the higher courts where cases are contested in the interests of defending or challenging legal precedent, supporting clinical practice and preserving funds for patient care. Three examples follow:
46 NHS Resolution Annual report and accounts 2016/17 Performance report
A&E receptionists do not owe patients a duty of care to give them accurate information about waiting times
D v. Croydon Health Services he would be seen by a nurse within NHS Trust (Court of Appeal, 30 minutes, he would have stayed in 23 March 2017) hospital and therefore avoided his permanent injury. The first instance judgment featured in our annual report for 2015/16. This was Lord Justice Jackson gave the main disputed by the claimant and the case judgment. He said that this case was has now been adjudicated upon by the significant because roughly 100,000 people Court of Appeal. visit A&E departments across England every week. He was satisfied that there was no Following an assault to his head the duty upon receptionists to keep patients claimant attended the A&E department of informed about waiting times. It would Mayday Hospital, accompanied by a friend. not be fair, just or reasonable in his view to He was booked in by a receptionist at 20.26 impose liability in such circumstances. Were and was told that it would be up to four this type of claim to be permitted, litigation or five hours before he would be seen. about who said what and to whom in A&E He was not informed that a triage nurse could become prevalent. Trusts might then would examine him within 30 minutes and instruct receptionists to say nothing to determine how soon he needed to see a patients other than ask for their details, doctor. As he was in pain he decided to which would be unhelpful. The claimant go home after just 19 minutes and take had been told to wait, but chose not to do paracetamol. Unfortunately his condition so. People had to accept responsibility for rapidly worsened. He returned to hospital their actions in his opinion. by ambulance and it was discovered that he had an extradural haematoma, but too late This was a very important ruling as no A&E to prevent serious brain injury. The experts receptionist has ever been held liable in a for the parties agreed that if the claimant situation such as this and were that position had remained in A&E he would have been to be reversed, the NHS would be burdened treated sufficiently quickly to have avoided with significant additional liabilities. Whilst the brain damage. it is a very sad outcome for the claimant that he now has serious permanent injury, The essence of this claim was that the A&E decisions as to treatment are made by receptionist owed the claimant a duty of clinicians and non-medically qualified care to give him accurate information about receptionists play no part in them. waiting times. The trial judge had accepted Mr D’s assertion that had he been told that
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The courts will not award compensation to those who have accepted partial responsibility for their own criminal acts and then seek to obtain damages as a consequence of what they have done.
EH v. Dorset HealthCare University mental functioning should be regarded NHS FT (High Court, 19 December as ‘substantially impaired’. That was 2016 – Mr. Justice Jay) distinguishable from ‘wholly impaired’ and meant that EH had accepted partial In August 2010 the claimant, who was responsibility for her actions. suffering from paranoid schizophrenia, tragically stabbed her mother to death. Previous rulings of the Court of Appeal It was accepted by the Trust that this would and House of Lords had determined that in not have happened in the absence of their relatively similar circumstances, individuals failure to respond in an appropriate way were unable to pursue claims for injuries to EH’s mental collapse. and losses they themselves had sustained as a consequence of perpetrating criminal EH sought compensation under the acts. Contrary to what had been argued on following headings: a depressive disorder following the death of her mother, loss behalf of EH, the Supreme Court had not of liberty as a result of her compulsory subsequently expressed reservations about detention, loss of amenity, inability to those rulings. Consequently, the application inherit a share of her mother’s estate to strike out would succeed. (as a consequence of the Forfeiture Act), This ruling is important for the NHS and the cost of psychotherapy and a because it demonstrates that the courts will support worker. We sought to have the still not award compensation to those who claim struck out because of public policy have accepted partial responsibility for their and illegality. own criminal acts and then seek to obtain The judge placed great emphasis on the damages as a consequence of what they fact that at her criminal trial, EH pleaded have done. However, the claimant’s legal guilty to manslaughter on the ground of team are seeking to appeal to a higher diminished responsibility. A psychiatrist court so the case is not necessarily yet had advised the criminal court that EH’s at an end.
48 NHS Resolution Annual report and accounts 2016/17 Performance report
Not all claims for failure to diagnose meningitis succeed in particular where steps are taken in accordance with a reasonable body of medical opinion at the time of the incident.
XYZ v. Maidstone & Tunbridge Wells by the bacteria into the cerebro-spinal fluid. NHS Trust (High Court, 28 October Once that has occurred, the meningitis will 2016 – Mr. Justice Foskett) remain asymptomatic for between eight and twelve hours before the patient then It was alleged that the Trust ought to have demonstrates headache, fever, photophobia, taken steps to halt the claimant’s development neck stiffness etc. of pneumococcal meningitis whilst he was in hospital at the age of almost two. XYZ had a In this case the experts had agreed that the blood-brain barrier had probably been previous history of febrile fits and his mother breached by the time of XYZ’s admission feared he might be heading for another one to hospital on 22 May. No symptoms of so she called an ambulance, which took him meningitis would, however, have been to hospital where he arrived at 22.02 on apparent on admission. The registrar 22 May 2001. had undertaken a very thorough initial Following an initial assessment he was seen examination and clearly had in mind the by a paediatric registrar between 22.20 possibility of meningitis. However, the child and 22.40. She undertook a detailed was exhibiting no relevant signs and there was examination, noted no neck rash or stiffness nothing to suggest a sinister condition. and reached a diagnosis of ‘probable viral In such a situation the registrar could not be illness’. She determined that the child should criticised for failing to commence intravenous be closely observed. Various observations antibiotic treatment. took place over successive hours but no major The steps taken were entirely in accordance problems were reported. It was not until 10.00 with a reasonable body of medical opinion the following morning that XYZ was observed at the time and accordingly the claim to be twitching and he was then treated would be dismissed. as an emergency. Sadly, he had developed meningitis and is permanently brain-damaged. This case is an important reminder that not all claims for failure to diagnose meningitis It was alleged that clinicians, and especially succeed. It is a terrible condition, leaving the paediatric registrar, should have adopted life-long disability. However, there is a period a more active strategy from the start: during which it is symptomless and clinicians including ordering a blood test, seeking should not be regarded as negligent for a more senior review and administering failure to administer antibiotics if there is intravenous antibiotics. no demonstrable need, not least because The judge held that it was important to of increasing bacterial resistance, a massive understand the development of this condition. problem worldwide. It is also significant Pneumococcal bacteria carried in the throat of to note that this case reached court over 15 years after the events in question, a young child can enter the bloodstream. They and the doctor involved had to wait such remain there for a period but, unless checked a lengthy period before being totally by antibiotics, will multiply. After 12 to 24 absolved of blame. hours the meningeal membranes, protecting the brain, can no longer withstand penetration
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Managing historic liabilities We continue to manage hearing loss. Many claims These include both clinical the run-off of claims arising arise from events occurring negligence liabilities and from historic non-clinical in the 1970s and 1980s, and employers’ and public liability liabilities for dissolved NHS in some cases earlier. We also claims. Payments in respect of organisations. These are mainly manage claims arising from the DH-funded legacy schemes in occupational disease claims, liabilities of former strategic 2016/17 amounted to £136.5 typically asbestos-related health authorities and million which is a £15.2 million disease and noise induced primary care trusts. increase since 2015/16.
A focus on maternity
The number and value of This is comparable to last year, The value of these cases claims received in 2016/17 where the obstetrics specialty reflects the complex nature into our clinical negligence accounted for 10% of the total of the injuries and the indemnity schemes shows that number of claims and 42% subsequent care required and whilst the obstetrics speciality of the value of claims. These under today’s legal framework, accounted for only 10% of types of claims include cases after the change to the PIDR, the 10,686 claims received where a child tragically suffers could exceed £20 million (Figure 9), they represent 50% brain damage at birth and as a for one child. of the £4,370 million value of result they will frequently have claims received (Figure 10). complex life-long care needs.
50 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 19: A comparison of the number and total value of claims for maternity cerebral palsy/brain damage claims over time across all clinical negligence schemes
300 2,000 1,921 255 1,800 247 250 229 232 1,600 218 223 219 1,483 199 195 204 1,400 200 188 181 179 1,200 1,261 1,143 1,200 150 1,000 1,012 945 800 845 805 claim (£m) Total Number of claims 100 600 611 572 598 400 50 363 200 Number of claims Total claim value (£m) 0 0
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Notification year
In March 2017 we consulted consultation will be considered This is in order to provide members providing maternity with DH, along with a support services including: services on the application report from consultants a national network of peer- of indicators to inform commissioned to provide to-peer support for affected the maternity element of information on international healthcare staff; advice and their contribution to the approaches to risk-based practical help on delivering CNST scheme with the aim pricing of indemnity schemes. candour in practice; point of incident mediation where of providing incentives to Over the course of the year the relationship between the members to improve maternity we have worked to prepare organisation and the family safety. Data from the Neonatal for the introduction of the is at risk of breaking down; Research Database (NNRD) on Early Notification Scheme aiding the preservation of neonatal admissions (matching for members to advise us records and other evidence; criteria for severe brain injury within 30 days of the incident and where indicated, as far as possible), and CQC of potential cases of brain a preliminary investigation maternity ratings data, in damage at birth from April of legal liability. particular the ratings under 2017. We asked members not the ‘safe’ CQC metric, were to wait for a claim, but to modelled to adjust 2017/18 contact us as soon as possible contributions on an illustrative so that help and learning can basis. The results of the be provided more quickly.
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The team managing early with NHS Improvement in Jeanette Beer, Deborah notification cases will include their work in this area. Sharp and Michele Upton, clinical expertise provided by a The hypoglycaemia workstream Tuesday 23 August 2016). midwife and obstetrician and looked at reducing harm This article was referenced we expect to receive around through learning from serious in NHS Improvement’s 500 new notifications a year. incidents, litigation claims and online ‘Resources to support other sources such as patient A Darzi Fellow joined NHS prevention, identification Resolution in October 2016 safety reports and hospital and management of to assist with our maternity admission data. These data neonatal hypoglycaemia’ work. The Darzi Fellowship sets indicated that a healthcare further reinforcing the launched four years ago to system-wide approach was recommendations of the provide hospital registrars with required to address the issue thematic review of claims. of preventing avoidable postgraduate training in clinical Pressure ulcers in maternity leadership, and help transform term admissions to neonatal London’s healthcare through intensive care units. As a result of our ‘Did you service redesign. In addition The organisational cost to Know?’ leaflet on pressure to assisting with local quality the NHS includes the cost of ulcers in maternity, we were improvement at some trusts, successful litigation claims. approached by the Royal the Fellow also undertook a 28 claims for injury secondary College of Midwives to assist thematic review of five years’ to neonatal hypoglycaemia in raising awareness of of cerebral palsy claims, where for incident dates ranging the issue, this led to the liability has been admitted. between 1995 and 2010 were development of an on-line This was to identify learning settled at a cost of £162.2 training tool for midwives to that can be shared to reduce million (this includes damages, prevent the pressure ulcer harm. He also contributed to claimant and defence costs). occurring. The tool was the national maternity steering We drew attention to the cost launched at the RCM Annual group which also includes and associated risk factors to Conference in Harrogate representatives from NHS members using one of our 19-20 October 2016. The claims England and NHS Improvement ‘Did you know?’ leaflets to data generated interest at NHS to set up the national raise awareness of these high Improvement and working with maternity and Neonatal Quality cost cases and to generate local their Maternity & Newborn Improvement project. debate that might increase the Lead at NHS Improvement Neonatal hypoglycaemia chance of early indicators of we published a joint article risk being spotted early. examining claims and incident Neonatal hypoglycaemia (low data reported to the To further raise the profile blood sugar in a newborn) National Reporting & Learning of this issue we co-authored featured as a specific strand of Service (NRLS). work this year, it is a potential an article in the British cause of neonatal morbidity Medical Journal, Neonatal and on rare occasions causes hypoglycaemia: learning from long term brain damage. We claims (BMJ, archdischild-2016- were a collaborative partner 310936v1, Jane M Hawdon,
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Sharing learning for improvement
Getting It Right which help organisations Several case stories are First Time (GIRFT) to identify potential areas available on our website. for improvement and the ‘Christine’s Story’ is a video GIRFT is a national associated costs of not case story where a patient programme supported by doing so. describes her experience from NHS Improvement which complaint through to claim. Telling the patient’s story engages clinicians working There are key messages in in acute care with their It is important to ensure the story including candour, own data to accelerate the learning is shared across the empathy and consent. adoption of evidence based whole NHS from incidents The video can be segmented practice through peer-to-peer and claims and that families to use in meetings or training discussion and review. NHS and patients have a voice in sessions. In particular the case Resolution has been supporting this process. Case stories, both story highlights the importance this improvement initiative written and in video format, of a meaningful apology which designed to help improve have been produced, often is crucial to a patient and care in the NHS by addressing in collaboration with patients family and if provided well and reducing unwarranted and families, and detail the can avoid a claim. variations in service. We implementation of learning have provided claims data by the trust shared for the to inform GIRFT dashboards, benefit of the NHS.
Jackie’s integrated care story
Key points: to the local A&E department at just after 8pm on a Friday night in March. Although • Close collaboration of care agencies she did not have a fever, her stomach provides a safe system for patients who was slightly distended, which could have are vulnerable. indicated an underlying problem. • Specialist staff are needed to support Jackie was referred by the Senior patients with learning disabilities. Registrar for an x-ray and blood tests • Early intervention by specially trained but unfortunately she was anxious and staff can make a positive difference. distressed and the staff found it impossible to carry out the tests. She was diagnosed Jackie (not her real name) suffered from with gastroenteritis and discharged back severe learning disabilities and lived in a to the care home. A letter was sent to her care home. After experiencing diarrhoea GP and a referral made to the Community and vomiting for four days she was taken Learning Disability Support Service.
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Tuesday, two months later, Jackie was Lessons learned taken to her GP. She had also seen her GP Among the many lessons learned by all in the intervening period. She had been involved in this case, two dominant themes experiencing stomach pains with vomiting emerge: for two days, had lost weight and suffered a collapse. After an examination the GP did 1. The need for collaboration. not refer her to hospital and sent her back 2. The importance of specialist support. to her care home. Greater collaboration, and in particular Just after 10pm she was taken to A&E by improved communication between the the care home staff and was admitted hospital, the GP and the care home, for further investigations. She developed would have led to better care for a fever and was later diagnosed with Jackie. In addition, establishing lines sepsis. She deteriorated over the next few of communication with other relevant hours and despite the efforts of the staff agencies would have provided more to stabilise her, sadly died at 7pm on the support. For example, if a more detailed Wednesday evening. and urgent referral to the Community Learning Disability Support Team had been The Claim made following the episode in March, which had been followed up by the Trust in Jackie’s family brought a legal claim against the event of any delay by the Community the Trust, the GP and the care home. It was Team, then intervention would have been their view that there should have been an provided earlier. This would have assisted immediate referral made to the surgical Jackie, her carers, the family and the team on Jackie’s first hospital attendance hospital staff. in March and that there should have been an effective system in place for supporting Specialist support is needed for patients with severe learning disabilities who attend patients with severe learning difficulties. an acute setting. It was impossible for the If this had happened then they argued staff to carry out the clinical tests they prompt investigations would have been deemed necessary in March. Investigations carried out resulting in treatment and a proved impossible due to Jackie’s distress better outcome. After negotiation and the and non-compliance. As a result, the involvement of NHS Resolution, the family existence of underlying problems were were awarded damages. not picked up at that stage. Had Throughout the claim process the Trust, GP appropriate support been available, and care home worked collaboratively to investigations may have been able to take achieve a positive outcome for the family, place and this situation could have been which also saved money for the NHS. managed differently.
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What has changed as a result? Two specific pathways for patients with learning disabilities exist: Following a detailed investigation a number of areas of practice have changed. • Emergency Pathway: Patient admitted via A&E, and passed to Medical The Trust now has two nurses with specific Receiving Unit. Within 12 hours patient responsibility for patients with learning is either discharged or if passed to ward disabilities. One leading on adult patients, then the Learning Disability Liaison the other on children. They train staff, Nurse is notified and reviews the patient. provide direct assistance to patients, The Pathway below is then followed. support families and lead on liaisons with external organisations. Across the various • Learning Disability Good Practice Care Trust sites they ensure that a proactive Pathway: A care plan to ensure the approach is taken and that support systems correct learning disability is identified, are activated and are robust. They have the Community Learning Disability championed the use of hospital passports Team are notified and the Hospital to assist communication and developed Passport (which belongs to individual) is easy read information. They have also set reviewed. Plus information is provided to up alerts to identify patients who the hospital so that needs are considered might need particular support due to and reasonable adjustments made. their vulnerability. The Learning Disabilities Working Group Policies have been updated to reflect the meets six times a year to ensure continuous new approach and a Learning Disabilities improvement and the safe delivery of care. Working Group established to oversee and continually improve the delivery of care Conclusion for those with learning disabilities. A Safeguarding Vulnerable Adults Team Greater and more proactive collaboration has been created to provide additional between different care organisations now support and new systems introduced to exists. The Trust has introduced systems ensure that there is appropriate briefing that enable more specialist support to for locum clinicians. be activated and targeted earlier for the individual patient’s needs. The system is The Trust now produces an annual safer and it is hoped by the Trust that they Safeguarding Adults Report, and has set can continue to make a positive difference up effective pathways for patients with to those individuals who are vulnerable learning disabilities that are monitored and need help. and reviewed regularly.
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Safety and learning Claims scorecards are a quality We visited many of our These reference groups have improvement tool, published members to support the taken place in each region and annually and show five analysis and triangulation of from October-March 2016- years’ of an organisation’s claims and identification of 17, members attending have claims profile by value and improvement work to reduce valued the opportunity to frequency. Trusts can use patient harm. In addition, we engage, network with each these to triangulate the claims set up External Safety and other and provided feedback information with their incident Learning Reference Groups to us on materials such as and complaints information to comprising clinical nominees scorecards and other products. determine trends and review from trusts and members Co-design of pilots, other by speciality for example along geographical lines. initiatives and user acceptance where complaints have are key areas for the agenda become claims. of these groups.
An example of one of our sharing and learning events
‘Voices from the Past’
An environment where colleagues across all care Loved hearing the ‘patient’s settings could share learning from the claims process voice’ - ensured everyone and the effect on people within it. The format was knew why we were here - designed to engage the audience, rather than relying made it a personal journey on ‘experts’ presenting from the front. - not cold and clinical. Workshops focused on both the stage of care (pre-care, during care and post-care) and the complete claims pathway. Personal stories, patients’ Delegates were predominantly from acute trusts, experiences - the real community/mental health and ambulance trusts were human aspect of poor care. also represented as were CCGs, independent providers, AvMA, Healthwatch and other arm’s length bodies.
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We recognise that not one Our Safety and Learning team size fits all and we have been have delivered sessions directly working particularly with with trusts and worked in mental health trusts and parallel with our panel risk ambulance trusts to consider forums to provide expert their particular challenges. speakers around subjects Our Birmingham Learning and such as duty of candour sharing event was resulted and human factors. from discussions with our
ambulance membership and
considered the need for joint working between ambulance and acute services at the pre, during and post care pathways.
Sign up to Safety In 2015, we awarded over £18.7 million of DH funds to trusts following bids for funds through the Sign up to Safety incentivisation scheme. The scheme has encouraged members’ focus on the causes of their claims and having funded safety improvement initiatives, to share their experiences with other members. Trusts reported that without the additional financial resource many of the interventions could not have been implemented.
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Service updates National Clinical Assessment Service
In 2016/17, NCAS continued through our new Professional We also re-launched a more to provide a comprehensive Support and Remediation comprehensive quality range of specialist case Service launched in March assurance framework for the management services 2017. Remediation action NCAS advice service, which which are accessed by NHS plans are developed following includes a thematic review of organisations and individual a review of the particular a sample of cases, enhanced practitioners. Our input is circumstances of each case, monitoring of cases where aimed at resolving concerns taking into account any the practitioner has been about the professional practice development needs in areas excluded or suspended from of individual doctors, dentists such as leadership, patient or practice, as well as periodic and pharmacists in some of the colleague interaction or other audit and critique of a most complex and challenging behavioural issues, in addition sample of advice provided in cases that are being managed to supporting the development individual cases. These streams across the NHS system. During of knowledge and skills in of activity all feed into the this period, we provided the context of their clinical overall programme of quality expert advice in 925 new cases practice. assurance and control for the referred to NCAS and delivered service, overseen by NCAS’ NCAS is committed to the 42 specialist assessments Quality Service Review Group. continuous improvement of the and other interventions in services we deliver to our users, In addition to the services the most complex or serious and the quality assurance, NCAS provided to the NHS, cases. 19% per cent of cases review and evaluation of our during 2016/17 we continued referred to NCAS related to services is at the heart of our to deliver a range of specialist practitioners in primary care, approach to case management. services on an income with 81% per cent relating During 2016/17, we completed generation basis to our other to those practising in a our in depth review of the healthcare partners, including secondary care environment. old Back on Track framework the General Dental Council and Doctors continued to be the which has led to the launch of the Medical Council of Ireland predominant professional the new Professional Support as well as those based in Wales group referred to NCAS, and Remediation Service to and Northern Ireland. accounting for 91% per cent reflect current best practice of the total new advice cases During 2016/17, NCAS has in this complex field. Similarly opened by NCAS in 2017/18. continued to drive forward we concluded the utility an ambitious programme of The range of assessments index review of clinical record service development to ensure and other interventions review, the results of which will that we continue to meet we delivered included full feed into the NCAS Research, the emerging needs of our performance assessments, Development and Evaluation service users. occupational health and Strategy to inform a project behavioural assessments, to develop a new, robust as well as specialist support approach for launch for practitioner remediation in 2017/18.
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Other highlights include: NCAS has defined a key data • understanding and set for cases progressing using Maintaining High • completion and review of to NCAS assessment for Professional Standards the pilot phase of NCAS’s analysis in order to better (MHPS) in the modern new assisted mediation understand patterns of NHS effectively; service, with the full service concerns about practice and due for launch in April 2017 • MHPS and the trust Board; referred practitioners’ personal • initiating the scoping of characteristics. This has been • responsible officer training: a major work programme shared with NCAS’s Expert module 3&4; and involving utility index Reference Group which brings review of NCAS’s assessment external assessment expertise • other bespoke and service to ensure that our and scrutiny to the work of customised training. NCAS, and the final data services remain efficient, NCAS has continued to set will be included in the effective and fit for purpose successfully deliver an extensive ‘evaluation’ component of the – with the work programme programme of training and NCAS Research, Development due to commence in 2017/18 education to the wider NHS. and Evaluation Strategy due as part of our Research, Demand for our programmes for launch in early 2017/18. Development and has been high. NCAS delivered Evaluation Strategy NCAS has also submitted 142 educational activities • the in depth review of several papers for publication amounting to 195 days of NCAS’s approach to the in key medical education training between 1 April 2016 formal consideration of journals describing our new and 31 March 2017. Delegates cases referred for NCAS approach to supporting ranged from HR professionals assessment, with our new remediation of practitioners, to senior clinical managers policy due for launch in and also presented at the working in frontline May 2017 European Board of Medical NHS organisations. Examiners Conference in • 53 were standard NCAS • the launch of stakeholder October 2016 and at the programmes (such as case satisfaction surveys and Faculty of Leadership in investigator and case mechanisms for NCAS Healthcare Conference in manager training) services provided across November 2016. England, Wales and • 49 were third party NCAS offers a range of Northern Ireland, with events where we sent education and consistently positive representatives/speakers feedback regarding the learning workshops: quality of services delivered • managing concerns about • 37 were attendance the performance of doctors, at Responsible Officer • the completion of a guide dentists and pharmacists; Networks to NCAS services specifically tailored for practitioners • case investigator training; • 3 were bespoke about whom concerns have programmes that been raised with NCAS, • case manager training; generated income which is due for launch in early 2017/18
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NCAS has continued to receive The feedback from these An important part of our role excellent feedback from events is reviewed centrally in supporting the management delegates, with 94% of NCAS to ensure we are able to of performance concerns is to education events rated by actively promote our work and discuss, record and monitor participants at least four out the development of NCAS’s those cases which involve the of five for effectiveness/impact services in a way which is exclusion of a practitioner from (where one is poor and five responsive to the needs of their work place in accordance is excellent). each region. NHS organisations with the requirements of Part who utilise our advice service II of the national framework: Through the regional have commented extremely Maintaining High Professional alignment of NCAS’s expert positively on the values Standards in the Modern team of case advisers, we have brought by NCAS’s regional NHS. This includes ensuring continued to strengthen our alignment arrangements, that exclusion from work is links with NHS organisations including building trust, only applied as a last resort and all Responsible Officer facilitating early successful once all other options have networks, and have regularly resolution of complex cases been considered or have been attended and presented at and providing appropriate exhausted. An example of a regional events. support and challenge to local case where discussion with case management. NCAS influenced the decision to invoke formal exclusion is set out below:
Example 1: Preventing to carefully consider the risk of recurrence unnecessary exclusion of the alleged altercation - so if the employer was satisfied that the practitioner The case involved two doctors where one was remorseful and apologetic- and was alleged to have assaulted the other at the complainant was not fearful of any work (in a pressurised environment). The reprisal - there would be greater scope for alleged victim asked for the matter to be flexibility and minimisation of risk. managed formally. NCAS had a detailed discussion about the circumstances of the The Trust ultimately managed to progress case because on the face of it exclusion matters without the need for exclusion, appeared warranted. The Trust was open and there was a formal investigation. to discussion however, and the adviser The important factor in the situation was explored several alternative scenarios to give the employer the confidence that taking account of public protection and options other than exclusion could be safety of staff, and how the complainant seen to be reasonable and proportionate, might feel about any proposals. In taking account of the specific circumstances particular it was important for the Trust of the case.
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Example 2: Professional Support & explore further any potential barriers to Remediation (PSR) Service fictional successful remediation through structured case study discussions with the practitioner and employer focusing on personal motivation, Following an increase in patient insight into the need for development, complaints over a six month period, and self efficacy and factors within the a subsequent investigation and audit of his workplace environment. clinical records, Dr X was referred to NCAS for an assessment of his practice as a A six month, structured action plan was result of concerns around his record developed, which included support through keeping, prescribing and communication the provision of a mentor, appropriate with patients. training through CPD and courses and suggestions for ongoing workplace-based An NCAS full performance assessment was assessment and feedback for Dr X. Both carried out which provided evidence that the practitioner and employer agreed to Dr X’s record keeping was poor, that his the plan and the necessary support was clinical knowledge and use of guidelines put in place. This included a sliding scale was poor and outdated, and his prescribing of supervision with regular discussions was inconsistent and may be placing and feedback with Dr X regarding his patients at risk. Furthermore, his approach progress, formal reviews on progress at to communicating with patients was not key milestones informed by evidence appropriate in all cases, and the patient gathered during the remediation plan, was seldom placed at the heart of recorded reflections and coaching to focus decision making. on the longevity of improved practice. A PSR remediation action plan was Dr X completed the plan successfully requested for Dr X by the employing / and subsequently returned to work contracting organisation, to support him unsupervised, and continues to monitor back to safe effective practice. Following his own practice in the workplace through a review of the evidence regarding the audits and reviews of complaints. Perhaps practitioner’s strengths and areas for the most challenging area to change further development highlighted in the was his approach to communicating with NCAS assessment report, the first stage patients, and he continues to work on this in the development of a PSR plan was to through reflection and CPD.
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Family Health Services Appeal Unit
Consideration and determination of appeals/disputes
The number of appeals and Of those pharmacy market Across all market entry disputes we received was lower entry appeals (including ‘hours’ application types (including (318 cases) compared to those appeals), that resulted in a ‘hours’), of those appeals we received in 2015/16 (369 substantive determination (i.e. determined, 72% of NHS cases). However we received not withdrawn or summarily England’s decisions were the usual mix of cases, our dismissed) and which did not quashed and re-determined, largest number being those require external input, 91.5% which resulted in 40% of made in accordance with were issued within a target applications being granted. the NHS (Pharmaceutical of 15 weeks and within an 27% of NHS England decisions and Local Pharmaceutical average of 13 weeks. For those were confirmed which resulted Services) Regulations 2013 determinations requiring in 15% of applications being (the Pharmacy Regulations) external input or an oral granted. Finally 1% of appeals relating to applications hearing, 67% were issued resulted in matters being from pharmacists to join the within a target of 25 weeks referred back to NHS England Pharmaceutical List (commonly and within an average of 25 for a further notification. known as ‘market entry’) or weeks. Those cases that missed We received a high number to change the terms of those target were largely due to the of appeals (94 cases) where listings. We received 250 unavailability of parties and/or NHS England had issued appeals in accordance with their representatives attending remedial/breach notices the Pharmacy Regulations as the hearings. in accordance with the opposed to 297 in the last Pharmacy Regulations. This financial year. is a relatively new provision in the regulations that allows NHS England to more closely monitor pharmacies and their compliance with their terms of service.
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Figure 21: Appeal outcomes i.e. grant/refuse regarding applications for inclusion in/amendments to the Pharmaceutical list in 2016/17
60 51 50 Refused 40 Granted
30 24
20 16 17 18 Number of appeals 10 8 7 3 1 1 2 1 0
Relocations Current need Future need Distance selling
Unforeseen benefits Change of ownership
Improvement/better access
Neither PNA/unforeseen benefits Future improvements/better access
Performers Lists applying to enter them and Between 1 April 2016 and 31 notifications and pre- NHS Resolution shall keep March 2017 the FHSAU received contract checks a record of such notifications. notification of 73 suspensions Similar provisions apply for compared to 102 in 2015/16. The National Health Service the Health Boards in Northern The breakdown by profession is (Performers Lists) (England) Ireland, Wales and Scotland. shown in Figure 22. There were Regulations 2013 currently 64 suspensions still in force as Before determining new apply to the medical, dental at 31 March 2017. There were applications to enter the and ophthalmic professions, also 1,677 other decisions Performers Lists, NHS England with similar provision for under the aforementioned is required to check with pharmacists in separate regulations, including NHS Resolution for any facts regulations. NHS England is notifications of withdrawn relating to investigations or required to provide notification applications to join a list. to NHS Resolution of any proceedings involving the adverse decisions relating to proposed applicants. those on the lists and those
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Figure 22: The number of suspensions notified to the Performers lists in 2016/17, by profession
10%
17%
Medical 73 Suspensions Dental Ophthalmic Pharmaceutical
73%
Of the 73 suspensions notified, there were none in 2016/17 from members of the pharmaceutical profession.
During the year, the FHSAU received 21,274 Provision of guidance requests for information compared to 11,366 for 2015/16 using our secure, online checking We provided guidance which sets out our system, and which provided immediate interpretation of various primary care clearance for 97.5% of checks. The remaining contracting regulations. These are available at 2.5% were referred to the FHSAU for further bit.ly/FHSAU-Guidance-Note-Regulation-24 analysis before disclosure. and bit.ly/FHSAU-Guidance-Note-Regulation-44
64 NHS Resolution Annual report and accounts 2016/17 Performance report
Provision of training in, or amendment to, the Pharmacy Appeals workshops pharmaceutical list in line User Group with NHS (Pharmaceutical and As part of our desire to share Local Pharmaceutical Services) The FHSAU’s Pharmacy Appeals the knowledge we have Regulations 2013 and for User Group met twice during attained, we developed a anyone responding to said the year. The aim of this group one-day workshop specifically applications. The workshop is to consult service users and for anyone working at NHS will explain the tests for their representatives on current England who is involved in Regulation 18 and Regulation practice and procedure, and determining applications and/ 24 applications, the decision on any proposed changes or reviewing the outcome of making process and how we to practice and procedure. appeal decisions. The workshop make decisions. Once again, we are pleased described the decision making to report that feedback from process and provided skills- We held a training workshop external group members based development to help for our panel members remains very positive. During NHS England colleagues in October where we the year, we discussed decision make robust decisions, concentrated on shared notice delays, NHS Resolution’s following applications under learning following appeals participation in Judicial the pharmacy regulations. under the Pharmacy Reviews and the Bidford and This included skills around Regulations. The Director of Community Pharmacies Ltd connecting the evidence with Operations and Support at Judgments. It also approved the Regulations and weighting the Pharmaceutical Services Pharmacy Appeals Committee the evidence. The workshop Negotiating Committee Terms of Reference and disseminated learning from attended the training reviewed of 2016 Service FHSAU’s experience of handling workshop and updated User Survey. At its November appeals, was interactive and our panel members on the meeting, the Group met those used case studies to explore changes to the way community responsible for the delivery and develop the key skills and pharmacy services will be of Capita’s market entry knowledge required. We ran organised going forward, and processing which it does on two events in October 2016 what this means for patients. behalf of NHS England. in Leeds and London and an During this year we have in-house session for one local extended the appointments of office. We also arranged for our Pharmacy panel members one further event to take place and our lay panel members for in May 2017. Feedback from a further two years in line with delegates was very positive. their Terms and Conditions The FHSAU is currently of Appointment following designing a one-day workshop successful appraisals for for anyone submitting them all. applications for inclusion
65 NHS Resolution Annual report and accounts 2016/17 Performance report
IT & facilities
During 2016/17 the number We completed the We began the process of of users of our systems virtualisation of the NHS reviewing our information increased to over 5,000, Resolution network systems systems to streamline our mainly due to members of our paving the way for our move business processes and began indemnity schemes and panel towards hosted IT services in a programme of work to firms accessing our extranet 2017/18. The completion substantially increase our service. Despite the increase, of this work: resilience to cyber-attacks. we reduced our running costs • substantially improved our We aligned our IT systems and through the closure of our network resilience and processes to the ISO standards Skipton House office and system redundancy; helping us achieve certification. relocation of the affected staff to our main London office at • improved and simplified our We enhanced our extranet Buckingham Palace Road. We disaster recovery capability; to include organisation specific had previously been working and document repositories for across two networks and had closer and more tailored successfully transitioned the IT • gives us full control over collaborations with our systems that support the NCAS the IT environment on individual members. This business processes to the NHS which our IT systems reside, feature is now used for storing Resolution network bringing paving the way for year-on- member specific scorecards. the expected benefits of: year reductions in the remit and value of • Reduced network outsourced contracts. running costs
• The removal of a number of minor contractors for system maintenance
• Reduced licensing costs
• Substantially improved communications
66 NHS Resolution Annual report and accounts 2016/17 Performance report
Feedback on our performance
Corporate customer survey
We undertook an online • Awareness and satisfaction • Customer suggestions customer survey during January was highest for the for content of a regular and February 2017, contacting claims service (89%), newsletter included sharing over 3000 individuals across while nearly seven out of knowledge, learning healthcare organisations to of ten were satisfied and good practice from find out more about their with safety and learning. claims (37%), case studies experience and perceptions of Fewer respondents were and examples (24%), details NHS Resolution. aware of the resolution of changes in legislation, of disputes between case law updates (22%), The results will help us shape primary care contractors and trend analysis of a more responsive relationship and commissioners (8%), claims (17%). with our members, customers education and learning and stakeholders while events provided by NCAS • Almost three-quarters of providing a valued service offer (22%) and the resolution of respondents (73%) used the that helps reduce the pressures concerns about individual extranet, with most finding faced by the NHS at this time. practitioners (25%). it useful (86%) particularly those working for an acute Summary of results • Respondents agreed that trust (89%). Suggestions for • 335 responses received NHS Resolution’s role content included access to from 232 organisations. was to ‘resolve concerns claims correspondence and This represented a 10% and disputes fairly and documents (35%), and more response rate. effectively’ (90%), and detailed analytic tools such to ‘deliver fair resolution as benchmarking, trends, • The majority of responders and learning from harm and comparative claims worked for an acute to improve safety’ (88%), data (16%). trust, ambulance trust or ‘offer best value’ (82%) community or mental health and to ‘provide analysis trusts, with half in claims or and expert knowledge to legal roles. the healthcare and civil justice systems to drive improvements’ (81%). A smaller proportion agreed that the role was to ‘deliver, in partnership, interventions and solutions that improve safety and save money’ (74%).
67 NHS Resolution Annual report and accounts 2016/17 Performance report
FHSAU service user survey In January, the FHSAU undertook its second “How satisfied are you with the overall service user survey. The survey ran from 9 service you received from the FHSAU January to 3 February 2017 and was available to any party who had received an FHSAU during the last year?” determination between 1 February 2016 and 23 December 2016.
Figure 20: Results of the FHSAU customer survey
2016 FHSAU user survey 2017 FHSAU user survey
Dissatisfied Dissatisfied 17% 29%
Satisfied Satisfied 83% 71%
2016 2017
1. Completely dissatisfied 1. Very dissatisfied Dissatisfied Dissatisfied 2. 2. Fairly dissatisfied
3. Satisfactory 3. Fairly satisfied Satisfied 4. Satisfied 4. Completely satisfied
5. Completely satisfied
68 NHS Resolution Annual report and accounts 2016/17 Performance report
Even in 2016 where there was 83% have used our service just once and received satisfaction rating, we were cautious that a decision adverse to them, expressing their responses might be driven by respondents dissatisfaction with an appeal outcome reactions to specific appeal decisions in the survey. We believe this is a fair affecting them. So whilst the satisfaction conclusion when one reviews the individual rate has decreased this year to 71%, this performance rating, showing consistent might be explained by respondents who high levels of satisfaction.
NCAS advice service evaluation
This year, feedback was sought from all Of the 128 who provided feedback, 40 (31%) employing and contracting organisations were the Responsible Officer in a hospital and in England who made a request to NCAS community care setting. between 1 April 2016 and 27 October 2016 via an online questionnaire. The purpose was to ascertain evaluation information from the Summary of key results Medical Directors, HR representatives and Case 95% of organisations rated the NCAS services Managers of all referring bodies in England, as ‘very helpful’ or ‘quite helpful’. to review the impact of NCAS’s advice service. An online link was sent to 550 contacts from 91% of organisations reported that their use 199 employing or contracting organisations of NCAS services had influenced or impacted on and we received 128 responses (64% response their management of the case. rate from organisations).
Testimonials
Gives confidence that The knowledge of our Really happy with the All advice complies with we are being fair and NCAS adviser is very service! Consistently our regulations. appropriate. extensive. excellent.
I have always found the The service is great, advice helpful and in Very helpful to discuss Ensure we are following individuals are polite, keeping with the high the case, discuss the appropriate processes, knowledgeable, adopt standards that I expected. options around potential validate decisions with a common sense I have developed a exclusion/restriction and respect to how to approach and appreciate positive relationship generally 'sense check' investigate cases the balance between with our liaison person the Trust’s actions. of concern. supporting the individual in NCAS who is always as well as the organisation available and responsive.
Much clearer adherence with MHPS policy, clear Involvement of a ‘3rd of obligations and It is really useful to talk party’ adds gravitas and Balanced advice, gave how to steer through through our thought credibility in the eyes of me a clear framework for the minefield that is processes and receive the referred doctor, gives dealing with the case. employment law allows constructive support and assurance that actions me to make sure processes feedback in return. taken are appropriate are good and difficult to and proportionate. challenge.
Made it possible for us Confirms with external Helping identifying to support consultants to eyes that internal correct processes and I view it as gold standard. return to work and thoughts are relevant timelines, supported avoid exclusion. and realistic. decision process.
69 NHS Resolution Annual report and accounts 2016/17 Performance report
Finance report
The main feature of NHS Resolution’s accounts is the provision for liabilities arising from the indemnity schemes that we operate on behalf of the NHS and DH. The provision in the Statement of Financial Position has increased significantly from £56.4 billion to £65.0 billion over this financial year. The main factors affecting the provision can be seen in Figure 23:
Figure 23: Changes in the provision for all claims
70 4.7 0.6 65.0 1.6 -1.8 3.5 60 56.4
50
40
30
20
Change in provisions in billions (£bn) Change in provisions 10
0 Total Increase Increase in 2016/17 Increase in Increase in Total provisions in known IBNR due to utilised in provisions provisions provisions as at claims due to extra year of year due to due to as at 31 March extra year of claims data change in change in 31 March 2016 claims data and updated PIDR HM Treasury’s 2017 and updated assumptions prescribed assumptions discount rate
70 NHS Resolution Annual report and accounts 2016/17 Performance report
A key issue affecting the There is another discount A further £3.5 billion and provision has been the change rate relevant to calculation £1.6 billion has been added in the PIDR. On 27 February of the provisions, the HM to the provision for known 2017 the Lord Chancellor Treasury-prescribed discount claims and Incurred But announced a change in the rate. This rate is used solely Not Reported (IBNR) costs PIDR from 2.5% to minus for accounting purposes, to respectively for another year’s 0.75% (relative to price discount payments from their worth of activity and changes increases). The PIDR affects due date to the date of the in assumptions. The increase the amount of lump sum accounts production. In the in provision for an additional damages settlements for claims 2015/16 accounts there was a year of known claims activity involving personal injury, as it reduction in the HM Treasury- is higher than previous years. is used to convert the element prescribed long term discount This is due to the effect of of damages related to future rate from 2.5% to minus 0.8% the 2015/16 change to the HM losses (for cost of care, for (relative to price increases) Treasury-prescribed long term example) into a present value. which significantly affected discount rate, which increased The reduction in the PIDR has the provisions, increasing the value in today’s prices increased the value of our them by £25.5 billion that year. of new Periodical Payment liabilities for claims arising from This year, the shorter term Orders. This has been partly incidents up to 31 March 2017 (for payments due within 10 offset by favourable changes by £4.7 billion. The effect of years) HM Treasury-prescribed in trends observed in claims the PIDR change is relatively discount rates were updated, data in inflation for damages low (around an 8% increase in but these have a relatively settlements, claims numbers, the total provision) because a minor effect (a £0.6 billion and probability of claims significant proportion of the increase) on the provision settling with damages paid. provision relates to periodical because the majority of the Against these increases in payment orders where annual provision is due to be settled the provision, we have payments are made over the after 10 years. settled claims to the value lifetime of the claimant. of £1.8 billion during the The valuation of these types financial year. of claim are less affected by the PIDR change because they are already included in the statement of financial position on a discounted basis.
71 NHS Resolution Annual report and accounts 2016/17 Performance report
Details on the main • £39 billion of the total This represents a minus 8% or assumptions and sensitivities provision of £65 billion plus 7% change to the value affecting the provision relates to liabilities where set out in the accounts. Even discussed briefly here are set we have yet to receive this is only an estimate of a out in Note 7 to the accounts a claim (IBNR). Based reasonable range around the (pages 138 to 158). These on observation of past provision and does not reflect assumptions are subject to experience combined an upper or lower bound varying degrees of uncertainty with current operational on the provision. which may affect the value experience, we have derived A further consideration is to we place on liabilities arising an estimate of the cost of understand the sensitivity from past events. incidents that may have of key assumptions, which occurred by the year end, The uncertainties are highlight the potential scale but this relies to some as follows: of change in future valuations degree on experience from of the liability if any of those • Claims that we have the past continuing into the assumptions changed. Figure received but are yet to future, and defining values 24 shows the potential range settle will not, at the end of for individual factors to of impacts from specified the financial year, have enable the calculation changes in the assumptions a definite value. of a single figure for from those used in the the accounts. • Those claims where we accounts to calculate the CNST have reached a settlement Given the uncertainty involved IBNR provision. For example, but will be paying costs in all of these elements, it is a 1% reduction in the short over the lifetime of the therefore worth noting that and long-term HM Treasury- claimant will have an the actual value of the total prescribed discount rates uncertain value because of liability is more likely to fall would increase the value of unknown variables such as within a range of values. Of the provision by £11.8 billion, life expectancy and future the total provision, the most whereas a 10% reduction in inflation rates. significant single element the assumption for the number at £37.5 billion is the IBNR of claims to be reported from • The consultation on the provision for the CNST scheme. recent incidents would PIDR undertaken by To illustrate, applying different reduce the provision by Ministry of Justice may values to the assumptions that about £3 billion. introduce future changes could also reasonably describe to this discount rate and historical trends relating the general approach to notably to average costs of calculating personal injury damages, claims inflation, and settlements. the length of time between reporting and settlement of claims could change the CNST IBNR provision to between £34 billion and £40 billion.
72 NHS Resolution Annual report and accounts 2016/17 Performance report
Figure 24: Sensitivity of CNST IBNR assumptions as at 31 March 2017
13,000 11,774 Increase in assumption Decrease in assumption 11,500 10,236 10,000 8,500 7,341 7,000 5,500 3,481 4,000 2,950 2,651 3,115 2,158 2,500 1,000 -500 -2,000 -2,001 -3,500 -2,293 -2,950 -3,115 -3,176 IBNR Increase/(Decrease) £m IBNR Increase/(Decrease) -5,000 -6,500 -8,000 -7,341 -7,999 -7,658 -9,500 HM Future IBNR claim Average Average Differential Probability Life Treasury Claims number creation of cost per between of a expectancy discount Value (+/- claims to claim ASHE successfully assumption rates Inflation 10% for payment (+/-20%) and RPI defended for PPOs (+/-1% pa) (+/-2% pa) incident time lag (+/-0.5% pa) claim (+/-10% years (+/-1 year) (+/-5%) change 2013/14 in life onwards) expectancy)
An added area of uncertainty ultimate effects being different losses are involved. This will this year is that relating to the to those expected. Analysis of require increased funding change in the PIDR. A sampling the data used indicates that to meet these settlements, approach based on recently due to the relatively small and at this stage, we do not settled claims was used to proportion of the provision know whether there will be quantify the impact on the that is affected by the PIDR a change in the preferences provisions from a change to the change, the range of possible of claimants for a greater PIDR. A variation of experience results is quite limited. proportion of settlements to be made through lump from that derived from However the more significant sums, exacerbating short term sampling, or more generally impact will be on the timing funding requirements. other factors affecting the of cash flows in relation settlement of claims under to the value of lump sum the new PIDR, may lead to the settlements where future
73 NHS Resolution Annual report and accounts 2016/17 Performance report
In year financial performance The settlement and on general administration Net expenditure on clinical administration of indemnity costs, e.g. salaries and goods schemes against income and schemes is funded by a and services, but also the budget set by DH can be seen combination of contributions settlement (utilisation) of in Table 3. from members (NHS and the provisions in the financial Independent Sector providers year (see Note 7 to the of health care, Clinical accounts). This is different to Commissioning Groups and the increase in the provision other DH arm’s length bodies) that is recorded in the and financing from the DH. DH Statement of Comprehensive sets a budget in respect of this Net Expenditure, which is financing on a Departmental classified as Annually Managed Expenditure Limit (DEL) basis. Expenditure (AME) in the HM This is a HM Treasury Treasury budgetary controls budgetary control8 which framework. covers income and spending
8 HM Treasury Consolidated Budgeting Guidance can be found at bit.ly/consolidated-budgeting-guidance
74 NHS Resolution Annual report and accounts 2016/17 Performance report
Table 3: Clinical schemes financial performance
Value of Income/ underspend/ Percentage budget Expenditure (overspend) underspend/ £000 £000 £000 (overspend) Member funded - CNST 1,655,444 1,585,936 69,508 4% DH funded schemes 130,000 131,224 (1,224) (1%)
Total clinical schemes 1,785,444 1,717,160 68,284 4% ww
Contributions from members for our largest scheme, CNST, increased by 17% in 2016/17 to £1,655 million, whilst expenditure on administering and settling claims increased by 14%, resulting in a £69.5 million/4% underspend.
Table 4: Non-clinical schemes financial performance
Value of Income/ underspend/ Percentage budget Expenditure (overspend) underspend/ £000 £000 £000 (overspend) Member funded – LTPS 54,688 46,940 7,748 14% Member funded – PES 4,083 8,636 (4,553) (112%) DH funded scheme 9,000 5,298 3,702 41%
Total non-clinical schemes 67,771 60,874 6,897 10% ww
75 NHS Resolution Annual report and accounts 2016/17 Performance report
Non-clinical claims costs have Funding for DH clinical NHS Resolution’s AME been levelling off in recent schemes was reduced by expenditure is in respect of the years through the introduction £12 million (22%) from the net movement in provisions for of limits on recoverable previous financial year, whilst all of the indemnity schemes, claimant legal costs and more expenditure increased by £21 i.e. the change in the provision efficient claims processing, million over the same period. less any provisions settled with these benefits being Meanwhile, whilst funding for (utilised) in year (see Note 7 reflected in a zero increase in the DH non-clinical scheme to the accounts). Performance LTPS contributions and a 20% reduced by £2.2 million (22%), against budget is set out in reduction in PES contributions expenditure reduced by £6 Table 5. The budget is set in in 2016/17. However, after million (54%), indicating a line with the Parliamentary a period of consistent continuing degree of volatility timetable, but this is before underspends in recent years, in legacy schemes. work on setting the key the PES scheme suffered a assumptions from observed All schemes except for PES significant overspend for this experience has commenced. are affected by the change in financial year. The PES scheme Prudent estimates in relation the PIDR. As the change did can be difficult to predict as to key potential variables are not take effect until 20 March claims can depend on factors therefore used to inform the 2017, quite close to the year such as the weather. Of the budget. As noted above, some end, the impact of this change £8.6 million cost incurred favourable movements in the was minimal on the final this year, £7 million of this assumptions underpinning the expenditure position. relates to 24 claims where the provision estimate contributed total payments on each claim The Department also sets a to a £4.6 billion underspend. exceeded £100,000. budget for Annually Managed Expenditure (AME). This is to cover expenditure on volatile or difficult to manage budget items, and is set on an
annual basis.
76 NHS Resolution Annual report and accounts 2016/17 Performance report
Table 5: Annually Managed Expenditure
£000 £000
Budget 13,175,673 Expenditure Cost of new claims provisions 9,717,013 Change in discount rate 604,700 Less settlement of provisions (1,764,660)
Total expenditure 8,557,053
Under/(overspend) 4,618,620 ww
Administration costs Administration costs for all of our activities NHS Resolution spent £604,000 on capital (including the costs of administering schemes expenditure, primarily on IT hardware and which have been allocated to the scheme DEL software, a 6.5% underspend against the budgets above) have increased by £1.3 million budget of £644,000. from £19 million to £20.3 million (7%) over the I am satisfied that this Performance report is a year. This primarily relates to staffing costs – we true and fair reflection of the work undertaken have made efforts to recruit to vacant posts, by NHS Resolution throughout 2016/17. and average full time equivalent staff numbers have increased by 13 from 223 to 236, against an establishment budget of 271.9. At year end, we had 253 FTE staff in post. Expenditure on the Sign up to Safety Scheme in the year related Helen Vernon to the evaluation of the grants awarded to NHS Chief Executive and Accounting Officer providers in 2015/16. Date: 30 June 2017
77 Accountability report
Accountability report Accountability report
79 NHS Resolution Annual report and accounts 2016/17 Accountability report
Corporate governance report Directors’ report
This report primarily provides information about the composition of the board of NHS Resolution which had authority or responsibility for directing or controlling the major activities of the entity during the year.
Figure 25: Who we are
Associate Non Executive Director Mike Durkin Chair Ian Dilks Non Executive Director Professor Keith Edmonds
Chief Executive Helen Vernon Non Executive Director Andrew Hauser
Non Executive Director Mike Pinkerton Executive Directors shown with photography
Head of Technical Director Director of Head of IT Director of Family Claims Director of Claims Director Membership & Facilities Health Director & Finance & of Safety Alan of National Sean Services Stakeholder Corporate John & Learning Hunter Clinical Walker Planning Appeal Unit Assessment Engagement Mead Denise (FHSAU) Service Joanne Chaffer Ian Adams (NCAS) Evans Lisa Hughes Vicky Voller
NHS Resolution publishes a register of interests of Board members on its website: bit.ly/nhs-resolution-board-register-of-interests
Data incidences
Details of the personal data related incidence are outlined in the Governance statement under ‘Information security and governance’ on page 98.
80 Accountability report
Statement of Accounting Officer’s responsibilities
Under the National Health Service Act 2006, The Accounting Officer of the Department the Secretary of State has directed NHS of Health has designated the Chief Executive Resolution to prepare for each financial year as Accounting Officer of NHS Resolution. a statement of accounts in the form and on The responsibilities of an Accounting Officer, the basis set out in the Accounts Direction. including responsibility for the propriety and The accounts are prepared on an accruals basis regularity of the public finances for which and must give a true and fair view of the state the Accounting Officer is answerable, for of affairs of NHS Resolution and of its net keeping proper records and for safeguarding expenditure, changes in taxpayers’ equity and NHS Resolution’s assets, are set out in the cash flows for the financial year. Accounting Officers’ Memorandum issued by the Department of Health. In preparing the accounts, the Accounting Officer is required to comply with the To the best of my knowledge and belief, I have requirements of the Government Financial properly discharged the responsibilities set Reporting Manual and in particular to: out in my letter of appointment as Accounting Officer. As far as I am aware, there is no relevant • observe the Accounts Direction issued by audit information of which NHS Resolution’s the Secretary of State, including the relevant auditors are unaware, and I have taken all the accounting and disclosure requirements, steps that I ought to have taken to make myself and apply suitable accounting policies on aware of any relevant audit information and a consistent basis; to establish that NHS Resolution’s auditors are • make judgements and estimates on aware of that information. I confirm that the a reasonable basis; annual report and accounts as a whole is fair, balanced and understandable. I take personal • state whether applicable accounting responsibility for the annual report and accounts standards as set out in the Government and the judgments required for determining Financial Reporting Manual have been that it is fair, balanced and understandable. followed, and disclose and explain any material departures in the accounts; and
• prepare the accounts on a going concern basis.
81 NHS Resolution Annual report and accounts 2016/17
Governance statement
Scope of responsibility
As Chief Executive and parameters and as directed from complaints is embedded Accounting Officer of NHS by the Department of Health into how we operate; risk Resolution I am responsible through development management processes; and for maintaining a sound of strategy and effective NHS Resolution’s operational system of internal control governance arrangements, in and financial systems. that supports compliance conjunction with the Board; As Accounting Officer, I am with NHS Resolution’s policies compliance with and delivery supported by NHS Resolution’s and the achievement of NHS against NHS Resolution’s Senior Management Team, Resolution’s objectives whilst framework agreement and internal audit and Audit and safeguarding public funds business plan as agreed Risk Committee and make and NHS Resolution’s assets from time to time with the recommendations to the Board in accordance with the HM Department of Health; delivery on the matters outlined in Treasury document ‘Managing against key performance this statement as they relate Public Money’. indicators as agreed with to effective governance. I am the Department of Health; supported by the Board and I have responsibility for the provision, oversight and SMT in ensuring we commit to delivery of NHS Resolution’s effective working of systems and embed the organisation’s strategic aims and objectives of internal control; oversight aims and values in everything within NHS Resolution’s of the complaints process and we do. legislative and regulatory ensuring that the learning
NHS Resolution’s values
Professional Ethical I delegate day-to-day operational responsibility for We are dedicated to We are committed to NHS Resolution’s financial providing a professional, high acting with honesty, integrity systems and internal risk quality service, working and fairness. management arrangements flexibly to find effective and Respectful to the Director of Finance and efficient solutions. Corporate Planning, who also Expert We treat people with acts as the Senior Information consideration and respect, Risk Owner (SIRO) for NHS We bring unique skills, and encourage supportive, Resolution. knowledge and expertise to collaborative and inclusive everything we do. team working.
82 Accountability report
The governance framework and structures
Figure 26: NHS Resolution governance structure
Secretary of State for Health
Senior DH Principal Departmental Accounting Officer Sponsor
Chair Accounting Officer/ NHS Resolution Board Chief Executive
Reserving and Remuneration and Senior Audit and Risk Staff Engagement Pricing Terms of Service Management Committee Group Committee Committee Team (SMT)
SMT Sub Groups
Solid line = reporting and accountability Dotted line = monitoring and/or the provision of advice and support
83 NHS Resolution Annual report and accounts 2016/17 Accountability report
The NHS Resolution Board
The NHS Resolution Board Action was taken to ensure Andrew Hauser was is led by a non-executive that the Board could operate re-appointed by the Secretary Chair and its full complement effectively through a of State for Health as comprises four non-executives combination of recruitment Non-executive Director for and four executive members and extension of terms of a further period of one year with a balance of skills and office. In addition, a further commencing 1 December 2016. experience appropriate to its Executive Director was added Ros Levenson’s position as a responsibilities. With effect to the Board to broaden the Non-executive Director ended from 1 April 2017 changes coverage of NHS Resolution’s on 31 October 2016 following to The National Health activities. the completion of her three Service Litigation Authority Vicky Voller, Director of year tenure. (Amendment) Regulations NCAS, was appointed by the 1996, relating to board Risks in relation to changes to Remuneration Committee as composition, provide our Board the Board are discussed under an Executive Director to the with the option of appointing the Key issues and risks section Board with effect from 1 July between three and five at page 28. 2016. Mike Pinkerton was non-executive directors and appointed as Non-executive The Board provides leadership executive directors. Director with effect from 16 and strategic direction for the January 2017. Dr Mike Durkin organisation and is collectively Board composition was appointed as an Associate accountable, through the Non-executive Director Chair, to the Secretary of As of 31 March 2017 the Board from 1 November 2016 to State for Health for ensuring consisted of the non-executive provide expert knowledge of a sound system of internal Chair, three non-executive patient safety in general, and control through its governance and four executive directors. strengthen NHS Resolution’s structures, and for putting For part of the year the Board links with national patient in place arrangements for had only two non-executive safety initiatives undertaken by securing assurance about the directors, which presented a NHS Improvement. This was an effectiveness of that system. risk that NHS Resolution ex-officio appointment. would have insufficient I report on the organisation’s capacity and skills to ensure Ian Dilks was re-appointed performance to the Board an effective Board. by the Secretary of State for and to the Department of Health as Chairman for a Health on a regular basis further period of two years in accordance with the commencing 1 April 2017. Framework Agreement with the Department of Health.
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Variations from anticipated progress and the action being a report on the principles performance are, where taken. The Board regularly governing the re-tender of the appropriate, accompanied by reviews these reports to ensure contract for legal services. reports from the Audit and it remains satisfied regarding Risk Committee and/or Senior the quality of information, During the period from 1 April Management Team, giving and also that it is relevant 2016 to 31 March 2017 the me, the Board, and, where and sufficient to inform the NHS Resolution Board met on appropriate, the Department business of the Board. For six occasions and attendance of Health, assurance on example, the Board requested details are as follows:
NHS Resolution Board meeting attendance
Table 6: NHS Resolution Board meeting attendance
Name Post Meetings attended
Ian Dilks Chair 6/6
Keith Edmonds Non-executive Director 5/6
Andrew Hauser Non-executive Director 6/6
Ros Levenson * Non-executive Director 3/3
Mike Pinkerton ** Non-executive Director 2/2
Helen Vernon Chief Executive 6/6
Joanne Evans Director of Finance and Corporate Planning 5/6
Denise Chaffer Director of Safety and Learning 5/6
Vicky Voller *** Director of NCAS 5/5
Mike Durkin **** Associate Non-executive Director 1/2
* Ros Levenson left the Board on 31 October 2016 ** Mike Pinkerton joined the Board on 16 January 2017 *** Vicky Voller became an Executive Director on 1 July 2016 **** Dr Mike Durkin joined as an Associate Non-executive Director on 1 November 2016
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Over the year Board members considered a range of topics at formal meetings, set out in Figure 27.
Figure 27: Frequency of topics considered by our Board over six meetings
Matters discussed throughout Standing items 2016/17 by the Board discussed at Board
Funding arrangements for Development of a mediation clinical negligence claims service within claims Delivery against Risk register the Business plan Legal services Provision of NCAS review panel tender 2 3 services to the Medical Council of Ireland Reports from 3 2 Committees of the Board 3
Workforce 6 2 succession 3 planning 4 1 Annual report 4 and accounts 6 2 2017/18 CNST pricing Business 2 consultation plan 2 Matters in relation Performance 3 to information against KPIs New strategy governance Risk appetite statement
Name change in line with new strategy
86 NHS Resolution Annual report and accounts 2016/17 Accountability report
Compliance with the corporate governance teams, recommendations from governance code an internal audit on Board effectiveness and governance, carried out in October 2015, We have reviewed our governance were also considered as part of the arrangements in line with the Code of Good evaluation, for which the majority of the Practice required for central government actions were complete. departments (‘the Code’) and have complied with the requirements where relevant. The findings indicated that the Board is performing well in most areas with key Board effectiveness developments in the areas such as risk management. The review also highlighted In December 2016 the Board carried out a opportunities to further build effectiveness, review of its own governance arrangements particularly in the areas set out in to ensure that these meet the requirements of Table 7 following. ‘the Code’. A Board evaluation questionnaire was completed by the executive and corporate
Table 7: Opportunities to build Board effectiveness
Principal Opportunity Action
Although the Board do have in place Standing Corporate Governance Team are Orders and Standing Financial Instructions, working with the senior team to the Board could also have in place scheme of develop a scheme of delegation delegation which is approved on an annual basis. which will set out transparency for Propriety, A Scheme of Delegation will set out clearly who responsibility and decision making fraud and has the authority to make decisions within within NHS Resolution for Board other leakage NHS Resolution. approval by December 2017. The Board should receive fraud reports as Fraud reports have been added to this will provide assurance that the risk of the Board agenda on an at least fraud and corruption to the organisation annual basis. is being addressed. The Board should receive regular updates on progress of major profile programmes and projects to be assured that risks, resources and Establishment of the NHS Delivery chain time are being managed. Resolution Change Management and project Group will ensure reports to management The Board should receive robust post-evaluation reviews of all major projects and programmes to the Board. enable an assessment of whether all the benefits were realised. The Board need to ensure full membership as NHS Resolution Chair working soon as possible, to ensure that there is the The Board with DH to ensure current vacancy right knowledge skills and experience within it room and the position which will be membership to provide optimum value vacated in November are filled. to the organisation.
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Committees of the Board
The Board is supported by for example, a cross-cutting • Consideration of the three committees which were review of cyber risks was information asset register established to enable the undertaken across all health which sets out the Board and me as Accounting ALBs, from the findings we organisation’s information Officer, to discharge our have ensured the project for assets and the risks to them. responsibilities and to ensure plans to upgrade firewall and that effective financial distributed denial of service • Regular assessment and stewardship and internal (DDoS) protection solution mitigation of the impact of controls are in place. A review (which is already in place) was changes to the PIDR. of the Terms of Reference for started as a priority. The Committee also monitored the three committees was During 2016/17, the Committee progress in relation to carried out in 2016/17 to assure supported and challenged internal and external audit their fitness for purpose. a major effort by the NHS recommendations from Resolution management team previous years. Audit and Risk Committee to upgrade and professionalise the risk framework, including: The ARC supports me and the ARC effectiveness review • Development of a new and Board in our responsibilities ARC members and other key fully-specified risk appetite on matters related to internal attendees completed a self- statement, ultimately and external audit, corporate effectiveness questionnaire. agreed by the Board. governance, anti-fraud The Committee considered policies, internal control and • A complete overhaul of that, as a whole, its processes risk management, and NHS the strategic risk register, and deliberations were Resolution’s Annual Accounts. refreshing all categories of effective and robust. The The ARC is chaired by a risk scoring, and integrating report showed good scores Non-executive Director and the register with the new across many measures, is supported in delivery of risk appetite statement. including the metrics of its function by internal and membership, independence external auditors. • Receiving updates on the and objectivity; there was a overall position in relation The ARC is attended regularly clear understanding of the to IT development projects by a representative of DH. The ARC’s role, well-structured and assurance that any Chair of the DH ARC attended agendas, a challenge of the associated risks were being the ARC meetings of 9 June risk framework and managed within resource 2016 and 8 June 2017. engagement with internal – an exercise that led to Where possible, experience and external audit. the development of a new is drawn from the wider ALB projects structure. sector in order to inform areas of common concern,
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The main area of challenge The ARC Chair will be The Committee met three lay in ensuring the Committee considering options to ensure times in the year, rather than had access to a sufficiently an effective Committee with four as the meeting schedule broad and deep range of the NHS Resolution Chair, was adjusted to better fit with skills to pursue all elements this will cover membership the financial reporting cycle. of its mission. The Committee numbers and range of skill sets. All of the activities expected of was relatively small in size. ARC have been undertaken by The ARC Chair’s term There was a risk that should a the committee. of appointment ends in member be unable to attend November 2017, which also a meeting, due to unforeseen poses a risk. Recruitment to the circumstances, the Committee position is underway so as to would not be quorate. ensure an effective handover These matters were more from the incumbent ARC Chair apparent with the one vacancy to the new. on the Committee.
Table 8: Audit and Risk Committee meeting attendance
Name Post Meetings attended
Andrew Hauser Non-executive Director and Chair of ARC 3/3
Keith Edmonds Non-executive Director 3/3
Ros Levenson * Non-executive Director 2/2
* Ros Levenson left the Committee on 31 October 2016
89 NHS Resolution Annual report and accounts 2016/17
Remuneration and Terms of Service Committee The Remuneration and Terms Other matters dealt with by The Committee considered of Service Committee is a the Committee during the its performance in 2016 as Non-executive Committee year included: satisfactory and concluded whose role includes the that it had discharged its • The introduction of the new determination of the obligations as noted in the NHS Executive and Senior remuneration, benefits terms of reference (ToR). Managers pay framework and terms of services of all and the impact on NHS The Committee also posts covered by the Pay Resolution considered that the ToR remain Framework for Executive and appropriate subject to two Senior Managers. The annual • Ministry of Justice judicial small changes. The revised Executive Director performance fees payable from the ToR were submitted to, and reviews presented by the 1 April 2016 which were received approval by, Chief Executive, who was in duly noted and agreed the Board. attendance, were noted by the Committee and the • The performance and subsequent annual pay objectives of the award and performance Chief Executive related payments were • The proposal for the approved. The data return possible appointment to DH confirming the pay of an Associate awards processed was Non-executive Director completed by Human Resources and shared with the Chair of the Committee.
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Reserving and Pricing Committee
I chair an internal Reserving • develop cashflow estimates recommended to Audit and and Pricing Committee (RPC) to inform budgetary Risk Committee and the Board with membership comprised requirements and set for approval. The actuarial of the Director of Finance contribution levels for adviser has provided an and Corporate Planning, indemnity scheme members; opinion on the methodology Director of Claims and a non- and and assumptions used to executive director, currently calculate a key estimate in the NHS Resolution’s Chair. The • ensure that the accounts, the IBNR provision. committee is attended by NHS framework for assurance A review of business critical Resolution’s actuarial advisers for models used for models conducted during and meets regularly in calculating business critical the year in line with the order to: information is applied in line with the Macpherson Macpherson requirements • set the methodology and recommendations. identified that further work assumptions for calculating is required to document the the value of the provisions The results of the work models and the updating for the statutory financial undertaken by RPC on process. This work will be accounts; calculating the key estimates carried out during 2017/18. for the accounts in respect of the provision are
I, Martin Clarke, am the Government all schemes as at 31 March 2017 using the Actuary and a Fellow of the Institute and method and assumptions selected by NHS Faculty of Actuaries. In my opinion, the Resolution. This opinion statement should IBNR provisions for NHS Resolution as be considered in the context of my advice to at 31 March 2017 to be included in NHS the Reserving and Pricing Committee. Resolution’s report and accounts have There are a number of uncertainties been calculated using an appropriate underlying the IBNR provisions. My advice actuarial methodology and assumptions to the Reserving and Pricing Committee which are within a reasonable range, and Note 7 to NHS Resolution’s report given the purpose of the calculation and and accounts describe this uncertainty taking into account discussions held with and quantify the sensitivity of the IBNR NHS Resolution’s Reserving and Pricing provisions to key assumptions. This opinion Committee. The actuarial assumptions does not negate the fact that the future were initially selected on a best estimate cash flows will not develop exactly as basis, with an explicit margin for prudence projected and may, in fact, vary significantly from the projections. added and quantified. I have calculated the IBNR provisions to be £39,034 million for
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Senior Management Team The Senior Management Team During the year, SMT held a Sub-groups of the SMT (SMT) includes Directors and series of facilitated sessions to Heads of all operating areas in develop a five year strategy During June 2016 I the organisation. SMT meets and a proposal to re-name the commissioned the Corporate most weeks and discusses organisation for consideration Governance Team to carry issues concerned with the and approval by the Board. The out a review of the sub- activity of NHS Resolution resulting strategy, ‘Delivering groups which report to SMT for which SMT oversight or fair resolution and learning ensure current governance approval is required including from harm’ was approved by arrangements are fit for resource management Ministers and published. purpose and aligned to the and planning, governance organisation’s priorities. The I report on the work of the arrangements, complaints and review identified the need for SMT to the Board and hold stakeholder management. new groups and committees members of the SMT to The SMT reviews in depth which were formed, along with account for delivering against particular areas of NHS the cessation of other groups agreed objectives which are Resolution’s activity or areas and committees which were linked to delivery of NHS of development and considers no longer required. Resolution’s strategy and any changes in the external business plan. environment that may have an impact on NHS Resolution and its services.
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Figure 28: Subgroups reporting to the SMT
Senior Management Accounting Officer Team (SMT) (AO)
Information Governance Workforce Strategy (IG) Group Group (WSG) Reporting to SMT on assurance Reporting directly to the AO on that the agreed NHS IG Toolkit matters in relation to recruitment and other IG requirements are (internal and external) any being operated and delivered to changes to employees’ roles and/ the required ISO standards. or terms and conditions.
Operations Risk Review Group (ORG) Carries out cross functional reviews of operational and team risk registers, reviewing all incidents and reporting operational matters to SMT.
Change Management Group (CMG) CMG has been established to collectively share responsibility for delivering the organisation’s Strategy by overseeing and facilitating successful change management.
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The control environment
The system of internal control is designed to The key issues and risks NHS Resolution has eliminate risk, where possible, and manage faced are described in detail on page 28, the residual risk to a reasonable level, rather than to table below illustrates some of the key controls eliminate all risk of failure to achieve objectives. we have in place to manage those risks. Therefore, it provides a reasonable and not absolute assurance of effectiveness.
Table 9: Key controls to manage corporate risks
Key issue or risk Key controls in place
• Performance and financial controls Financial sustainability • Regular liaison with and reporting to DH • Support to DH by informing policy development
• Information security and governance controls Data and information • Internal audits • Oversight by ARC and the Board
• SMT review of developments in environment Legal environment • Reports to the Board • Regular liaison with DH
• Performance and financial controls New models of care delivery • SMT review of developing models • Regular liaison with DH
• Performance and financial controls Capacity and skills • SMT, ARC and Board review • Regular liaison with DH
Capacity to handle risk NHS Resolution has in across NHS Resolution. The encourages consideration place a risk management risk management policy was of internal and external framework, which supports revised and identifies the roles impacts in the business. the organisation in risk and responsibilities of staff at The procedure sets out the management. all levels relating to risk. A risk risk escalation process to Significant work has taken management procedure was ensure risks are managed and place over 2016/17 to improve developed which supports all reported appropriately. and embed risk management staff in the risk process and
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Figure 29: Risk management process
Identify
Monitor Risk Assess & & Review Management Evaluate
Plan
Identify – risk identification: Plan – treatment plan: Report and escalate:
Through meetings at team Where it has been considered The corporate operational and level, SMT and sub groups the risk requires further action strategic risk registers are an risks are considered where to reduce the likelihood and/or integral part of the system of there is a potential threat impact of a threat or maximise internal control and define the (or opportunity) to the the likelihood of opportunities highest priority risks which may achievement of NHS a risk treatment plan should impact on NHS Resolution’s Resolution objectives. be devised. ability to deliver its objectives. SMT receive updates on the Assess and evaluate – risk Monitor and review: team risk registers through assessment and evaluation: Reviews of the risk registers sub group reports and director A risk assessment is a and the treatment plans will be updates, and review the qualitative or quantitative carried out in discussion with corporate operational and evaluation of the nature and Directors and Heads of Service strategic risk registers on an magnitude of the risk. The as well as at the Information at least quarterly basis. assessment is completed by Governance and Operational Escalation of risks scoring the likelihood of the Review Groups. Escalated risks risk occurring and the impact and associated treatments will This table sets out the process should it occur. be reported and reviewed by for how risks can be escalated Senior Management Team at for inclusion on the corporate
least quarterly. operational and strategic risk registers. It is recommended that at each level amber and red risks are escalated.
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Table 10: Strategic risk management
Risk score Risk response Action By whom Escalation
High risk Treat/Transfer/Terminate
Risks deemed as high • Corporate operational risk SMT require a systems register reviewed by SMT approach to identify the to consider escalation to root causes of the risk and Strategic Risk Register. thereby help choose an appropriate risk response. • SMT review Strategic 15-25 Risk Register for addition Where it is not possible to or removal of risks and terminate or transfer the recommend to the Board. risk a treatment plan will be in place.
Moderate risk Treat
Risks deemed as moderate • Risk register discussed Directors to high will require a with Director/Head of and CEO treatment plan in line with Service. direct the risk appetite. reports • Risks identifed as amber Those risks where it and red reported to ORG/IG is deemed no further the Operations Review/ treatment can reduce Information Governance SMT the risk will be reviewed Groups for inclusion 8-12 regularly to assess impact on the Corporate on the organisation. Operational Risk Register.
• Amber and red risks and associated treatment plans reviewed by ORG/IG and reported to SMT.
• SMT review report from ORG and Directors.
Low risk Tolerate
Risks graded as 1-6 either • Risk is identified. All staff require no action or can be managed through • Risk added to team local action or by an risk register. appropriate person or • Action to reduce risk department. where necessary is 1-6 considered.
• Risk register discussed at team meetings.
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Risk appetite Internal audit Performance and financial controls The Board has developed a An internal audit plan is statement of risk appetite. developed in conjunction NHS Resolution’s financial The Board’s approach is to with management and the and operational performance minimise its exposure to risk Audit and Risk Committee is reported regularly to the in relation to the delivery of to focus on the areas of risk, Senior Management Team, its operations and compliance and provide insight, advice to the Board and to me. NHS with good standards of and assurance on the internal Resolution’s financial position, governance. The Board is control framework. together with operational KPIs, prepared to accept a greater is reported quarterly to DH to In 2016/17 the Head of Internal degree of risk in relation to demonstrate that expenditure Audit provided a moderate NHS Resolution’s position and commitments are in line with assurance opinion in the role in the health system, given forecasts and budgetary limits. case of Risk Management the increasingly financially and Governance and a There are policies and challenging environment the substantial assurance opinion procedures for the NHS is operating within, and management of finances and the need to work with other was provided in the case of CMS, financial and payroll resources, including a scheme organisations to address this of delegated authorities for challenge on several fronts. controls. In my role as AO, I was provided with an overall the approval of expenditure. Moderate assurance opinion, The internal audit programme Management assurance highlighting that internal routinely covers key financial controls and processes are controls to provide assurance NHS Resolution’s assurance operating effectively. to management and the Board. framework brings together Governance arrangements governance and quality linked During the year a procurement through the Reserving and to NHS Resolution’s strategic exercise for an Internal Audit Pricing Committee for the objectives. Its purpose is supplier and Head of Internal setting of reserves for to ensure that systems and Audit was undertaken as the claims are set out earlier information are available to contract with PwC came to in this statement. provide assurance on identified an end on 31 March 2017. corporate risks and that such Our internal audit service risks are being controlled and is provided by Government objectives achieved. Internal Audit Agency (GIIA), A complementary assurance who have contracted RSM map exercise commissioned Risk Assurance Services LLP by the SMT, was carried out to undertake the work. to ascertain levels of control The 2016/17 work programme against core NHS Resolution has been completed, and we activities and from this have commenced the no significant gaps 2017/18 planning with were identified. the new supplier.
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Fraud Surveillance is approved by Information security me on a case by case basis and and governance As with all NHS organisations, fraudulent cases are reported the risk of fraud is a significant to NHS Protect. There were no NHS Resolution achieved ISO consideration. The nature cases of fraud reported to NHS 27001 Information Security of NHS Resolution’s work Protect in 2016/17. Management certification inevitably focuses our attention in December 2016 which on the risk of fraudulent An internal audit review of demonstrates that we have an claims being brought against our internal counter fraud effective information security our members. arrangements gave a limited management system. This opinion. Key areas to improve illustrates the importance We continue our membership included; ensuring an up to we place on protecting our to the Claims and Underwriting date anti-fraud and corruption information and the quality of Exchange (CUE), a database policy and awareness raising the arrangements we have in of non-clinical claims reported for staff as well as fraud place to manage and protect to insurers. This enables us to response plans to manage our information assets. share information with other any internal fraud matters. indemnifiers so as to identify We have established an action Through our control objectives potentially fraudulent claims. plan to address the issues and we have ensured software We are fully alive to the will work closely with our new patches are applied in a timely information governance risks Local Counter Fraud Specialist way to our IT systems. This has entailed in such an initiative team to ensure robust proved to be of significance and ensure that due legal governance arrangements given the NHS wide cyber process is adhered to. are in place. security incident in May 2017, which as a result of precautions There have been no recorded taken, did not affect us incidents of fraud carried out directly. We continually by staff for 2016/17. monitor the cyber environment and tighten controls to ensure we can reduce significant cyber risks.
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NHS Resolution is committed to During the year, NHS All staff completed their minimising the risks associated Resolution submitted its annual training, with 2% of with information handling annual return on the NHS staff failing the assessment. and to ensuring that all Digital Information Governance The individuals concerned staff are fully aware of their toolkit, scoring 100% for the were given individual training responsibilities in relation to second year running. sessions as a result. information governance.
Figure 30: Information governance incidents reported between 2014/15 to 2016/17 by severity
50
45 46 40 42 41 35
30 2014/15 25 2015/16 25 2016/17 20
Number of incidents 15 17
10
5 2 5 1 0 0 Level 0 incidents Level 1 incidents Level 2 incidents (near miss) (non-reportable) (serious reportable)
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During this year there were Further awareness raising Responding to members 67 information governance sessions are taking place to of the public incidents reported, of which increase the understanding of 25 were near misses. This is a these types of errors through Effective processes were similar number of incidents to root cause analysis where that in place throughout the that reported last year (65), is appropriate and to look year which ensured a although the percentage at working closely with the swift response to all public of near misses is higher and relevant function to consider enquiries, correspondence, there were no incidents which a range of options which parliamentary questions, issues required reporting by NHS might assist with reducing raised under Data Protection Resolution to the Information levels of incidents. We have (DPA) legislation, Freedom Commissioner. also strengthened information of Information requests and governance requirements complaints. NHS Resolution with key contractors as part received 281 requests under of our work to assess our the Freedom of Information key information risks, and Act and 94% have been informed by learning from provided within the statutory individual incidents. 20 working day deadline.
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Figure 31: Freedom of Information requests received in 2016/17
40 34 35 32 31 30 30 29 26 25 20 21 20 18 18
15 11 11
Nnumber of requests 10
5
0
Jul-16 Apr-16 May-16 Jun-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Number of requests Average of working days taken to respond
NHS Resolution receives two of crime and taxation. 45 There were three requests for types of requests under the SARs were responded to this reviews of decisions in 2016/17, DPA. Subject Access Requests financial year, three of which two relating to Freedom of (SARs) give individuals the were completed outside of Information decisions and one right to request to any the 40 calendar day deadline, relating to a SAR decision. information held about meaning 93% have been themselves; and requests under responded to on time. Section 29 of the DPA (S29) The average response time which allows NHS Resolution has been 27 days, five requests to share information with an under S29 of the DPA were authority for the purposes also received.
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Complaints and feedback Whistleblowing Accounting Officer’s conclusion From 1 April 2016 to 31 March NHS Resolution has an 2017 NHS Resolution received established whistleblowing The governance arrangements 38 complaints which were policy and guidance. There detailed in the statement aim reviewed through the formal were no internal incidents to support NHS Resolution to complaints policy. There handled during the financial maximise its understanding have been no complaints year 2016/17. We also engaged and use all of the available which were referred to the with the National Guardian to information about the quality Parliamentary and Health consider how NHS Resolution and effectiveness of our Service Ombudsman. NHS may support and ensure that systems to help us improve Resolution is committed to external parties who raise services and satisfy assurance ensuring that complaints and concerns directly with NHS requirements about the feedback about our services Resolution are signposted effectiveness of our systems of are reviewed and that we are appropriately; this has internal control. Based on my engaging with complainants informed a programme for review, I am not aware of any by offering meetings rather review of NHS Resolution significant control issues and than relying solely on policy and procedure. I am content that appropriate correspondence. arrangements are in place for
The SMT and I review the discharge of all statutory complaints and feedback functions for which NHS about our services and I report Resolution is responsible, and the findings to the Board. that they are in line with the There is oversight by the recommendations as set out in Chair in accordance with the the Harris Review. Complaints Policy. I ensure that In summary, I am satisfied NHS Resolution identifies any that the framework of learning from complaints and governance, risk management I also consider complaints with and system of internal controls the SMT to identify any new are adequate and have risks, which are included in the been effectively maintained risk register as appropriate. throughout 2016/17.
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Remuneration and staff report
Remuneration policy NHS Resolution is bound by modernised working practices. The relevant NHS Resolution the National Health Service Nationally, employer and policies applied during the Terms and Conditions of trades union representatives financial year in relation to Service (known as Agenda for have agreed to work in salaries were the Recruitment Change). With the exception partnership to maintain an and Selection Policy and of the Directors who are paid NHS pay system which supports Procedure (HR16) and the in accordance with DH Pay NHS service modernisation National Terms and Conditions Framework for Executive and and meets the reasonable of Service noted above. Senior Managers in Arm’s aspirations of staff. Allowances to staff in payment Length Bodies, all staff are The DH pay framework for during the year other than paid in accordance with Executive and Senior Managers basic salary were high cost area Agenda for Change. in arm’s lengths bodies replaces supplements, recruitment and Full details on the Agenda for the previous ALB Very Senior retention premia (RRP), and on Change Terms and Conditions Manager (VSM) pay framework call allowances for Information of Service, including a copy of with the revised version Systems and Governance staff. the current handbook can be reducing the fragmentation found on the NHS Employers of 41 pay levels into a smaller The Remuneration and Terms website. The provisions set number of grades with broader of Service Committee met out in this handbook are pay bands. The new framework twice during the 2016/17 year. based on the need to ensure clusters roles of broadly similar a fair system of pay for NHS levels of responsibility and employees which supports accountability.
Table 11: Remuneration and Terms of Service Committee meeting attendance
Name Post Meetings attended
Ian Dilks Chair 2 of 2
Keith Edmonds Non-executive Director 2 of 2
Andrew Hauser Non-executive Director 2 of 2
Ros Levenson Non-executive Director 1 of 1
Mike Pinkerton Non-executive Director 1 of 1
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Remuneration for Directors The tables following provide There were a number of the contractual salary and changes to the NHS Resolution pension details of those senior Board Membership managers and non-executive throughout 2016/17. directors who had control over the major activities of NHS Resolution during 2016/17. Tables 12, 13 and 14 are subject to audit.
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Table 12: Executive and non-executive director salaries and allowances for 2016/17
2016-17
Salary Expense Performance Long term All Total (bands payments pay and performance pension- (bands of (taxable) bonuses pay and related of £5,000) total to (bands of bonuses benefits £5,000) nearest £5,000) (bands of (bands of £100 £5,000) £2,500) Name and title £000 £00 £000 £000 £000 £000
Ian Dilks 60–65 0 0 0 N/A 60–65 (Chair) Helen Vernon 145–150 0 0-5 0 37.5-40 185-190 (Chief Executive) Joanne Evans (Director of Finance 115-120 0 0 0 25-27.5 140-145 and Corporate Planning) Denise Chaffer (Director of Safety 105-110 0 0 0 20-22.5 125-130 and Learning) Vicky Voller1 (Director of National 75-80 0 0 0 82.5-85 155-160 Clinical Assessment Service) Keith Edmonds (Non-executive 5–10 0 N/A N/A N/A 5–10 Member) Ros Levenson2 (Non-executive 0-5 0 N/A N/A N/A 0-5 Member) Andrew Hauser3 (Non-executive N/A N/A N/A N/A N/A N/A Member) Michael Pinkerton4 (Non-executive 0-5 0 N/A N/A N/A 0-5 Member) Mike Durkin5 (Associate Non- N/A 0 N/A N/A N/A N/A executive Member)
1 Vicky Voller was appointed as an Executive Director from 1 July 2016. Full year equivalent salary is in the band £100k-105k. 2 Ros Levenson left the Board with effect from 31 October 2016. 3 Andrew Hauser’s appointment as Non-executive Director is unpaid. 4 Michael Pinkerton was appointed as a Non-executive Director from 16 January 2017. Full year equivalent salary is in the band £5k-10k. 5 Mike Durkin’s appointment as Associate Non-executive is unpaid.
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Table 13: Executive and non-executive director salaries and allowances for 2015/16
2015-16
Salary Expense Performance Long term All Total (bands payments pay and performance pension- (bands of (taxable) bonuses pay and related of £5,000) total to (bands of bonuses benefits £5,000) nearest £5,000) (bands of (bands of £100 £5,000) £2,500) Name and title £000 £00 £000 £000 £000 £000
Ian Dilks 60–65 0 0 0 N/A 60–65 (Chair) Helen Vernon 145–150 0 0 0 132.5 - 135 275 - 280 (Chief Executive) Joanne Evans1 (Director of Finance 25–30 0 0 0 5 - 7.5 35 - 40 and Corporate Planning) Tom Fothergill2 (Director of Finance 90–95 0 0 0 5 - 7.5 95 - 100 and Corporate Planning) Denise Chaffer3 (Director of Safety 85–90 0 0 0 (22.5) - (25) 65 - 70 and Learning) Keith Edmonds (Non-executive 5–10 0 N/A N/A N/A 5–10 Member) Nina Wrightson OBE4 (Non-executive 0–5 0 N/A N/A N/A 0–5 Member) Ros Levenson (Non-executive 5–10 0 N/A N/A N/A 5–10 Member) Andrew Hauser5 (Non-executive N/A N/A N/A N/A N/A N/A Member)
1 Joanne Evans was appointed as Director of Finance and Corporate Planning on 1 January 2016. 2 Tom Fothergill left NHS Resolution on 31 October 2015. Full year equivalent salary is in the band £150k-155k. 3 Denise Chaffer was appointed as Director of Safety and Learning on 1 June 2015. 4 Nina Wrightson left the Board with effect from 30 April 2015. 5 Andrew Hauser’s appointment as Non-executive Director is unpaid.
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to 21 17 11 16 £000 pension Employer’s Employer’s stakeholder contribution
41 24 43 55 Real £000 Value in Cash Transfer Transfer increase increase Equivalent
6 420 141 742 Cash £000 Transfer Transfer Equivalent Value at 31 Value March 2016 March
30 461 198 798 Cash £000
Transfer Transfer Equivalent Value at 31 Value March 2017 March
0 £000 80-85 40-45 £5,000) 105–110 (bands of to accrued March 2017 March Lump sum at pension at 31 age 60 related age 60 related Pensions website at www.nhsbsa.nhs.uk/pensions further set are details out in financial statement section.
0– 5 £000 Total Total 30-35 15-20 35-40 £5,000) accrued (bands of pension at March 2017 March age 60 at 31
0 Real £000 0-2.5 2.5-5 7.5-10 £2,500) increase increase (bands of lump sum in pension at aged 60
provisions of the NHS Pensions Pensions NHS the of provisions benefits the Scheme. of Details under these provisions payable can NHS be on the found Real £000 2.5-5 2.5-5 0–2.5 0–2.5 £2,500) increase increase at age 60 (bands of in pension
Helen Vernon Helen Vernon Name and title (Chief Executive) (Director of Finance and Corporate Planning) (Director of National Clinical Assessment Service) (Director of Safety and Learning) Joanne Evans Vicky Voller Denise Chaffer Denise Chaffer Pension entitlements for Executive Directors Directors Executive for entitlements Pension DirectorsAll NHS at Resolution NHS the Pension into pay Scheme. Past present and the by covered are employees Table 14: Pension entitlements for Executive Directors Table
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Cash Equivalent accrued to the member as Payments to past Directors Transfer Values a result of their purchasing additional years of pension There were no payments A Cash Equivalent Transfer service in the scheme at their made to past Directors. This is Value (CETV) is the actuarially own cost. CETVs are calculated subject to audit. assessed capital value of the within the guidelines and pension scheme benefits framework prescribed by the Fair pay disclosure accrued by a member at Institute and Faculty a particular point in time. of Actuaries. The median remuneration The benefits valued are the within NHS Resolution is member’s accrued benefits £43,808. This is based on and any contingent spouse’s Real increase in CETV annualised, full-time equivalent pension payable from the This reflects the increase in remuneration of all permanent scheme. A CETV is a payment CETV effectively funded by staff as at the reporting date. made by a pension scheme or the employer. It takes account Staff remuneration ranges arrangement to secure pension of the increase in accrued from £19,409 to £146,554. benefits in another pension pension due to inflation, scheme or arrangement when The banded remuneration contributions paid by the the member leaves a scheme of the highest paid Director employee (including the value and chooses to transfer the within NHS Resolution in the of any benefits transferred benefits accrued in their 2016/17 financial year was from another scheme or former scheme. The pension £145,000-150,000. This was 3.4 arrangement) and uses figures shown relate to the times the median remuneration common market valuation benefits that the individual has of the workforce of £43,808. factors for the start accrued as a consequence of This is the same as the ratio for and end of the period. their total membership of the the previous year (2015/16) and pension scheme, not just their is due to all salaries, including senior manager pay, increasing service in a senior capacity Compensation on early by 1% in 2016/17. This is to which disclosure applies. retirement or for loss subject to audit. The CETV figures and the of office other pension details include the value of any pension There were no early benefits in another scheme retirements or other exit or arrangement which the arrangements for Directors individual has transferred to during the reporting period. the NHS pension scheme. This is subject to audit. They also include any additional pension benefit
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Staff report
The 2016/17 year has been We have also delivered training skills. Successfully delivering an important period for the for claims staff on working our planned activities was organisation in respect of its with unrepresented claimants vital in order to improve workforce and organisational and those with mental staff engagement which is a development activities, which health issues. stepping stone to us achieving have been pivotal in the our new strategy to 2022. NHS Resolution has seen a delivery of its business plan steady period of growth during and strategic objectives. 2016/17 with the average full Temporary worker In 2016/17 we have been time equivalent (FTE) staffing placements lasting preparing for significant increasing by 5.8% from 223 longer than six months changes in the way we deliver in 2015/16 to 236, against an reduced to zero. services including a restructure establishment budget of 271.9. of our claims function and The organisation had carried a the development a regional number of vacant posts within model of service delivery. We the Claims and Corporate There has been a particular began the process of aligning functions which have now emphasis on the monitoring the claims function with other been filled. This is in addition and management of temporary areas of our business, and to the establishment of the workers in 2016/17 which has with the wider NHS. This is Membership and Stakeholder seen a continued reduction in order to take advantage Engagement, and Business in the number of agency of opportunities to improve Development functions. To workers engaged and for operational efficiency and enable the organisation to much shorter periods. In March 2017 the organisation was effectiveness. As part of this fully support the development able to report that none of work we have been striving of management and staff in it current temporary workers to place the injured party and the pursuit of our business were engaged for more than 6 their family at the centre of objectives, we established a months; something which has any claim or complaint. new Human Resources and not been possible since at least Organisational Development In order to improve the August 2015. team with the right level of already strong relationships establishment with the right Tables 15 and 16 set out we have with our members staff costs and average staff and the collaborative numbers, which are subject working relationships with The new HR and OD to audit. our colleagues across the Team is made up of
NHS, claims staff underwent 8 people totalling mandatory relationship 7.6 W TE. management training.
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Table 15: Staff costs for 2015/16 and 2016/17
Permanently Other 2016/17 2015/16 employed staff Total Total Staff numbers and related costs £000 £000 £000 £000
Salaries and wages 10,634 718 11,352 10,508
Social security costs 1,232 0 1,232 901 Employer contributions to 1,397 0 1,397 1,255 NHS Pensions NEST pension contributions 1 0 1 2
Total 13,264 718 13,982 12,666
Table 16: Average full time equivalent staff numbers
Average number of persons Permanently Other* 2016/17 2015/16 employed / staff numbers employed staff Total Total and related costs
Total 223 13 236 223
*Other is temporary/agency workers engaged with the organisation.
As at 31 March 2017 of The gender split ratio for The organisation regularly the 7 Executive and Senior the whole of NHS Resolution reports to the Board the details Managers, 3 were male (43%) was 40% male and of its workforce gender by pay and 4 were female (57%). 60% female. band including senior managers.
110 NHS Resolution Annual report and accounts 2016/17 Accountability report
Figure 32 : Headcount by gender and grade
40
35
30
25
20
Headcount 15
10
5
0 Band Band Band Band Band Band Band Band Band Band Band ESM 2 3 4 5 6 7 8A 8B 8C 8D 9 Female 4 1 15 13 24 36 19 19 9 4 0 4 Male 2 1 6 4 16 26 13 13 14 2 1 3
111 NHS Resolution Annual report and accounts 2016/17 Accountability report
The following graphs detail how the organisation’s workforce is made up in respect of the other monitored characteristics which are included under the Equality Act 2010:
Figure 33: Workforce - disability Figure 34: Workforce – sexual orientation
2%
14% 18%
9%
77% 80%
No Heterosexual Yes Do not wish to disclose Not declared LGBT
Disability an interview if they meet during 2016/17 who identified the minimum criteria for the as being disabled and who NHS Resolution applies the job vacancy. In 2016 NHS were offered an interview was ‘Two Ticks’ symbol for internal Resolution also signed up to 25%. This is higher than the and external applicants 9 the Mindful Employer Charter ratio of applicants who did not during recruitment exercises. which is intended to support declare themselves as having a Employers who have signed the organisation in attracting disability which was 21%. up to the ‘Two Ticks’ scheme a more diverse workforce. guarantee disabled people The percentage of applicants
112 NHS Resolution Annual report and accounts 2016/17 Accountability report
Figure 35: Workforce - ethnicity Figure 36: Workforce – religion/belief
2% 2% 1%
5% 4% 13%
32%
24%
66% 3% 48%
White Atheism Islam BME Christianity Judaism Not stated Hinduism Other Do not wish to disclose Sikhism
Ethnicity Whilst the ratios are closely The organisation regularly aligned to the regional reports to the board the The proportion of black population of 60% white and details of its workforce and minority ethnic (BME) 40% BME, we still show a slight ethnicity by pay band employees has remained underrepresentation within including senior managers. consistent throughout 2016/17. the BME categories.
9 MINDFUL EMPLOYER® is a NHS initiative run by Workways, a service of Devon Partnership NHS Trust, to help support employers to support mental wellbeing at work.
113 NHS Resolution Annual report and accounts 2016/17 Accountability report
Figure 37: Headcount by ethnicity
40
35
30
25
20 Headcount 15
10
5
0 Band Band Band Band Band Band Band Band Band Band Band ESM 2 3 4 5 6 7 8A 8B 8C 8D 9 White 1 0 13 10 28 34 23 23 19 5 0 7 BME 5 2 7 7 12 27 8 7 4 1 1 0 Not Disclosed 0 0 1 0 0 1 1 2 0 0 0 0
We undertook a personal We have already produced data audit for all staff in order internal reports in response 73% of employees to ensure we hold accurate to the Government Equalities completed and and up to date personal Office Gender Pay Gap returned their personal information including all of Reporting requirements data audit forms. the 9 protected characteristics which come into effect from under the Equality Act 2010. April 2017. This information continues to Table 17 notes a reduction in be presented in the HR&OD the average number of sick Board Report and will be used days per FTE, down from 4.9 to inform future equality, days in 2015/16 to 4.2 days diversity and inclusion plans. in 2016/17.
114 NHS Resolution Annual report and accounts 2016/17 Accountability report
Table 17: Sickness absence for the period 1 January 2016 to 31 December 2016
Figures converted by DH to best estimates Statistics produced by NHS Digital from of required data items the ESR data warehouse
Adjusted FTE days Average sick days FTE-days lost to Average FTE 2016 lost (to Cabinet FTE-days available per FTE sickness absence Office definitions) 221 934 4.2 80,541 1,514
Notes 1. NHS sickness absence statistics are published by NHS Digital, using data from the NHS Electronic Staff Record (ESR) Data Warehouse. 2. The number of FTE-days lost to sickness absence has been taken directly from ESR. The adjusted FTE days lost has been calculated by multiplying by 225/365 to give the Cabinet Office measure. 3. NHS Days Lost figures are on a full-time equivalent basis.
In addition the annual of management, behaviours A third of all HR/OD performance appraisal process and development. The policies have been has been reviewed and engagement sessions included updated during 2016/17. simplified following feedback both full and part-time staff from staff and managers about covering London, Leeds and the issues they had using the home workers. The outcomes A number of HR and OD existing system. The revised from these sessions were used policies and procedures have process is now in place and we to develop an engagement been updated in order to have implemented a reporting action plan and to inform a ensure they are offering the process in order to monitor and number of recommendations right level of support and track appraisal completions to be taken forward in order guidance in their application; which will be presented to the to improve management the emphasis being to Senior Management Team on support, consistency in policy underpin good practice an on-going basis. application and reinforcing and provide the required our organisational values knowledge to manage firmly Following the results of and expected behaviours. but fairly and equitably. our 2015 Staff Survey; it This includes the Sickness was decided by the Senior Absence and Promoting Management Team (SMT) Attendance policy which has and our Staff Engagement introduced transparent trigger Group (SEG) to engage staff points for the management further through a series of of absence whilst maximising focus groups in order to support available for staff gain a better insight into through occupational health staff view and opinions. and our employee Whilst overall the survey was assistance programme. positive, there were pockets of concerns raised in the areas
115 NHS Resolution Annual report and accounts 2016/17 Accountability report
Staff engagement 18 Focus Groups | 80 Employees | 33% of all Staff In order to support the implementation of the revised polices and staff engagement This work will continue to • there is now a high level of activities, we have delivered form part of the organisations openness and transparency a number of HR and OD overarching Workforce and certainly significantly Workshops for both staff and Strategy and will be widened higher than even a couple managers covering a number to incorporate succession of years ago; of topics including: planning across all levels of staff. We have designed • there is a very strong work • Good professional a series of leadership ethic in our organisation behaviours development programmes and people want to behave in a way that is appropriate; • Managing and developing which will be made available to and performance employees across all levels of the organisation. • • Handling investigations there is a very strong belief These programmes will in and demonstration of • Coaching provide employees with the learning and development, • Recruitment selection and opportunity to improve or not only from individuals interviewing skills develop their leadership but from the organisation. capabilities in line with both • Managing sickness absence our strategic and business aims. • Having difficult We have successfully conversations obtained Investors In People The Senior Management (IIP) accreditation which Team has completed an demonstrates our commitment initial assessment of the to leading, managing and senior workforce across the supporting our workforce. organisation in relation to During the assessment process more than 80% of our succession planning and workforce completed their developing future talent. surveys with our accreditation reporting that:
36 Leadership 7 Sessions, development 71 Attendees 07 36 places offered
116 Accountability report
The HR and OD Team have significant duration with Exit packages been able offer a higher some in excess of a year, level of coaching and support however during 2016/17 There were no compulsory to line managers and staff they were all brought to a or voluntary redundancies in managing performance, resolution with just one new during 2016/17 financial year. conduct and employment case currently outstanding. A special severance payment; matters, ensuring where as detailed in Table 18 appropriate these are following, was approved by the NHS Resolution managed informally. Our 11 Formal Remuneration Committee, new approach to coaching employee relation the DH and HM Treasury. managers and supporting 11 cases reduced to 1 staff has resulted in better This is subject to audit. engagement and subsequently a significant reduction in the Off-payroll engagements number of formal employee relation issues, with just 1 case NHS Resolution have had no outstanding at year end. A off payroll engagements for number of the historical cases more than £220 per day had been outstanding for a that have lasted longer than six months during 2016/17.
Table 18: Exit packages for staff leaving in 2016/17
2016/17 2016/17 2016/17 2015/16 Number of Number of other Total number of Total number of compulsory departures exit packages by exit packages by Payment bands redundancies agreed cost band cost band
< £10,000 0 0 0 0 £10,000 - £25,000 0 0 0 0 £25,000 - £50,000 0 1 1 0 £50,000 - £100,000 0 0 0 0 £100,000 - £150,000 0 0 0 0 £150,000 - £200,000 0 0 0 0 Total number 0 1 1 0
Total cost (£’000s) 0 30 30 0
117 NHS Resolution Annual report and accounts 2016/17 Accountability report
Table 19: Analysis of other departures
Agreements Total value of Name (number) agreements (£000’s) Voluntary redundancies including early – – retirement contractual costs
Mutually agreed resignations (MARS) contractual costs – –
Early retirements in the efficiency of the service – – contractual costs
Contractual payments in lieu of notice – –
Exit payments following Employment Tribunals – – or court orders
Non-contractual payments requiring HMT approval 1 30
Total 1 30
118 NHS Resolution Annual report and accounts 2016/17 Accountability report
Parliamentary accountability and audit report
This section provides other information disclosed in the public interest and is subject to audit.
Losses and special payments Therefore, there is no recognition of potential There were no losses and special payments change in the value of the provision arising made in 2016/17 above £300,000, nor in 2015/16. from policy developments, in particular around Fees and charges efforts to improve safety in the NHS (other than through experience reflected in current and past Contribution levels for members of the claims), and considerations relating to applying indemnity schemes that NHS Resolution a limit to recoverable claimant costs for lower operates, i.e. the CNST, LTPS and PES schemes, value claims. are determined in order to meet members’ liabilities as they fall due, in accordance with our At this stage following the change in the PIDR, no adjustments have been made to the value accounting policy at Note 1.3 to the accounts or timing of liabilities arising from potential on page 129. The contributions collected are set increases in claims numbers, or changes in on a full cost recovery basis, and can be seen in claimant preferences for lump sums rather than Note 3 to the accounts on page 136. periodical payment orders. Expenditure on consultancy There have been three recent consultations There was no expenditure on consultancy that may have some bearing in future on costs, services either in 2016/17, nor the previous year. and consequently, liabilities in relation to NHS Resolution’s indemnity schemes. These are Publicity and advertising discussed in the section ‘The environment we Publicity and advertising spend for the year work in’ on page 27. Until the government’s was £25,938. This compares to £25,797 in the responses to these consultations are published, previous year. no account of potential impacts has been taken. Remote contingent liabilities I am satisfied that this Accountability report is a true and fair reflection of the work undertaken The judgments taken to place a value on by NHS Resolution throughout 2016/17. the provision and contingent liabilities (see
Notes 7 and 8 to the accounts) arising from the indemnity schemes that NHS Resolution operates do not include an assessment for Helen Vernon events that at this point in time are too Chief Executive and Accounting Officer uncertain or remote to include. Date: 30 June 2017
119 NHS Resolution Annual report and accounts 2016/17 Accountability report
The certificate and report of the Comptroller and Auditor General to the Houses of Parliament
I certify that I have audited the financial Scope of the audit of the statements of the NHS Litigation Authority financial statements (herein referred to as NHS Resolution) An audit involves obtaining evidence about for the year ended 31 March 2017 under the amounts and disclosures in the financial the National Health Service Act 2006. The statements sufficient to give reasonable financial statements comprise: the Statement assurance that the financial statements are free of Comprehensive Net Expenditure, from material misstatement, whether caused by the Statement of Financial Position, the fraud or error. This includes an assessment of: Statement of Cash Flows, the Statement whether the accounting policies are appropriate of Changes in Taxpayers’ Equity; and the to NHS Resolution’s circumstances and have related notes. These financial statements been consistently applied and adequately have been prepared under the accounting disclosed; the reasonableness of significant policies set out within them. I have also accounting estimates made by NHS Resolution; audited the information in the Remuneration and the overall presentation of the financial and Staff Report and the Parliamentary statements. In addition I read all the financial Accountability Disclosures that is described and non-financial information in the Annual in that report as having been audited. Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent Respective responsibilities of the with, the knowledge acquired by me in the Accounting Officer and auditor course of performing the audit. If I become As explained more fully in the Statement aware of any apparent material misstatements of the Accounting Officer’s Responsibilities, or inconsistencies I consider the implications for the Accounting Officer is responsible for the my certificate. preparation of the financial statements and I am required to obtain evidence sufficient to for being satisfied that they give a true and give reasonable assurance that the expenditure fair view. My responsibility is to audit, certify and income recorded in the financial statements and report on the financial statements in have been applied to the purposes intended accordance with the National Health Service by Parliament and the financial transactions Act 2006. I conducted my audit in accordance recorded in the financial statements conform to with International Standards on Auditing (UK the authorities which govern them. and Ireland). Those standards require me and my staff to comply with the Auditing Practices Opinion on regularity Board’s Ethical Standards for Auditors. In my opinion, in all material respects the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
120 NHS Resolution Annual report and accounts 2016/17 Accountability report
Opinion on financial statements • the information given in the Performance report and Accountability report for the In my opinion: financial year for which the financial • the financial statements give a true and statements are prepared is consistent with fair view of the state of NHS Resolution’s the financial statements. affairs as at 31 March 2017 and of its net Matters on which I report by exception expenditure; and I have nothing to report in respect of the • the financial statements have been properly following matters which I report to you if, prepared in accordance with the National in my opinion: Health Service Act 2006 and Secretary of State directions issued thereunder. • adequate accounting records have not been kept or returns adequate for my audit have Emphasis of matter –provision for Clinical not been received from branches not visited Negligence Scheme for Trusts by my staff; or
Without qualifying my opinion, I draw attention • the financial statements and the parts of to the disclosures made in note 7 to the financial the Remuneration and Staff Report and the statements concerning the uncertainties Parliamentary Accountability disclosures to inherent in the claims provision for the Clinical be audited are not in agreement with the Negligence Scheme for Trusts. As set out in note accounting records and returns; or 7, given the long-term nature of the liabilities and the number and nature of the assumptions • I have not received all of the information and on which the estimate of the provision is explanations I require for my audit; or based, a considerable degree of uncertainty • the Governance Statement does not reflect remains over the value of the liability recorded compliance with HM Treasury’s guidance. by NHS Resolution. Significant changes to the liability could occur as a result of subsequent Report information and events which are different from the current assumptions adopted by I have no observations to make on these NHS Resolution. financial statements. Opinion on other matters
In my opinion:
• the part of Remuneration and Staff Report Sir Amyas C E Morse and the Parliamentary Accountability Date: 5 July 2017 disclosures to be audited has been properly prepared in accordance with the Secretary of Comptroller and Auditor General State’s directions issued under the National National Audit Office Health Services Act 2006. 157–197 Buckingham Palace Road Victoria, London SW1W 9SP
121 Financial statements
Financial statements Financial statements
123 NHS Resolution Annual report and accounts 2016/17
Statement of comprehensive net expenditure for the year ended 31 March 2017
31 March 2017 31 March 2016 Notes £000 £000
Other operating income 3 (1,715,600) (1,480,853)
Total operating income (1,715,600) (1,480,853)
Staff costs 2 13,982 12,666 Purchase of goods and services 2 4,497 4,375 Depreciation and impairment charges 2 588 558 Provision expense 7 10,499,148 29,331,883 Other operating expenditure 2 1,455 20,137
Total operating expenditure 10,519,670 29,369,619
Net operating expenditure 8,804,070 27,888,766
Finance expenditure 7 (177,435) 46,583
Net expenditure for the year 8,626,635 27,935,349
Other comprehensive net expenditure 0 0
Comprehensive net expenditure for the year 8,626,635 27,935,349
The Notes at pages 128 to 163 form part of these accounts.
124 Financial statements
Statement of financial position as at 31 March 2017
31 March 2017 31 March 2016 Notes £000 £000 Non-current assets: Property, plant and equipment 1,437 1,388 Intangible assets 547 642 Total non-current assets 1,984 2,030 Current assets: Trade and other receivables 4 20,419 8,929 Cash and cash equivalents 5 152,673 94,949 Total current assets 173,092 103,878
Total assets 175,076 105,908 Current liabilities: Trade and other payables 6 (48,174) (56,397) Provisions for liabilities and charges - known claims 7 (2,683,332) (1,827,649) Provisions for liabilities and charges - IBNR 7 0 0 Total current liabilities (2,731,506) (1,884,046)
Total assets less current liabilities (2,556,430) (1,778,138) Non-current liabilities: Provisions for liabilities and charges - known claims 7 (23,280,433) (21,224,063) Provisions for liabilities and charges - IBNR 7 (39,034,000) (33,389,000) Total non-current liabilities (62,314,433) (54,613,063)
Total assets less liabilities (64,870,863) (56,391,201) Taxpayers' equity General fund 98 (2,633) ELS reserve (1,264,929) (1,445,389) Ex-RHA reserve (80,260) (89,287) DH clinical reserve (3,516,788) (3,763,292) DH non-clinical reserve (122,692) (157,478) CNST reserve (59,720,617) (50,757,969) PES reserve (2,303) (229) LTPS reserve (163,372) (174,924) Total taxpayers' equity (64,870,863) (56,391,201)
The General Fund and individual scheme reserves are used to account for all financial resources. See the ‘Understanding our schemes’ section for a brief description of each scheme to which the reserves relate. The Financial statements on pages 122 to 127 were approved by the Board on Wednesday 21 June 2017. The Notes at pages 128 to 163 form part of these accounts.
Helen Vernon Chief Executive and Accounting Officer Date: 30 June 2017
125 NHS Resolution Annual report and accounts 2016/17
Statement of cash flows for the year ended 31 March 2017
31 March 2017 31 March 2016 Notes £000 £000 Cash flows from operating activities Net expenditure (8,626,635) (27,935,349) Other cash flow adjustments 2 588 558 (Increase)/decrease in receivables 4 (11,490) 3,416 Increase/(decrease) in payables 6 (8,223) 14,178 Increase/(decrease) in provisions 7 8,557,053 27,830,642
Net cash (outflow) from operating activities (88,707) (86,555)
Cash flows from investing activities Purchase of property, plant and equipment (429) (327) Purchase of intangible assets (175) (102) Asset write-off 62 0 Net cash (outflow) from investing activities (542) (429)
Cash flows from financing activities Net Parliamentary funding 146,973 149,044
Net financing 146,973 149,044
Net increase in cash and cash equivalents 57,724 62,060
Cash and cash equivalents at the beginning of the period 94,949 32,889
Cash and cash equivalents at the end of the period 5 152,673 94,949
The Notes at pages 128 to 163 form part of these accounts.
126 Financial statements
£000 Total Total 149,044 146,973 (20,522) Reserves 1,715,600 (4,676,713) (5,645,000) (8,626,635) (64,870,863) (56,391,201) (10,342,235) (28,604,896) (27,935,349) (27,935,349)
0 0 LTPS LTPS £000 8,000 54,688 27,699 11,552 27,699 (3,323) Reserve (47,813) (43,136) (163,372) (174,924) (202,623)
0 0 0 PES 847 (49) £000 (229) 4,083 (6,108) (2,303) (6,157) (1,076) (2,074) (1,076) Reserve
0 0 £000 CNST (9,982) Reserve 1,655,444 (4,451,110) (6,157,000) (8,962,648) (59,720,617) (10,618,092) (25,632,615) (25,125,354) (50,757,969) (25,125,354)
0 £000 (108) 9,000 25,786 11,464 29,000 25,786 clinical (3,106) Reserve (55,686) (55,686) DH Non- (122,692) (113,256) (157,478)
0 £000 (330) 82,771 146,504 234,000 146,504 100,000 Reserve (87,166) DH Clinical (3,516,788) (1,997,089) (1,848,974) (3,763,292) (1,848,974)
0 (6) £000 8,027 1,118 8,027 1,000 11,000 (2,967) Reserve (80,260) (37,362) (53,043) (89,287) (53,043) Ex-RHAs
0 ELS (97) £000 26,637 29,000 151,460 230,000 151,460 Reserve (78,443) (616,683) (855,343) (855,343) (1,264,929) (1,445,389)
0 0 98 £000 Fund 1,385 7,973 27,054 (6,627) (6,115) (2,633) (5,242) (6,627) General (23,572) (23,572)
7 7 3 2 Notes 1 The Net Parliamentary funding represents the cash drawdown of £146,973k in 2016/17 for DH-funded
indemnity schemes and administration costs. The Notes at pages 128 to 163 form part of these accounts. Income Expenditure Balance at 31 March 2015 Balance at 31 March Changes in taxpayers’ equity for 2015/16 Net expenditure for the year income and recognised Total expense for 2015/16 Net Parliamentary funding 2016 Balance at 31 March Changes in taxpayers’ equity for 2016/17 Authority and claims administration (Increase)/decrease in provision for known claims (Increase)/decrease in the provision for IBNR Scheme and other income income and recognised Total expense for 2016/17 Net Parliamentary funding 2017 Balance at 31 March 1 Statement of changes in taxpayers’ equity for the year ended 31 March 2017 Statement of changes in taxpayers’ equity for the year ended 31 March
127 NHS Resolution Annual report and accounts 2016/17 Financial statements
Notes to the accounts
1. Accounting policies
The Financial statements have been prepared Standards, amendments and interpretations in in accordance with the 2016/17 Government issue but not yet effective or adopted Financial Reporting Manual (FReM) issued International Accounting Standard 8, accounting by HM Treasury. The accounting policies policies, changes in accounting estimates contained in the FReM apply IFRS as adapted or and errors, requires disclosure in respect of interpreted for the public sector context. Where new IFRSs, amendments and interpretations the FReM permits a choice of accounting policy, that are, or will be, applicable after the the accounting policy which is judged to be accounting period. There are a number of IFRSs, most appropriate to the particular circumstances amendments and interpretations issued by the of NHS Resolution for the purpose of giving International Accounting Standards Board that a true and fair view has been selected. The are effective for Financial statements after this particular policies adopted by NHS Resolution accounting period. are described below. They have been applied consistently in dealing with items that are The following have not been adopted early in considered material to the accounts. these accounts:
The accounts are presented in pounds sterling • IAS 1 Presentation of Financial statements: and all values are rounded to the nearest Effective date not yet agreed but expected thousand pounds (£000). The functional towards the end 2017. currency of NHS Resolution is pounds sterling. • IAS 7 Statement of Cash Flows: with a view to including in the 2018-19 FReM. The effective 1.1. Accounting conventions date is for accounting periods beginning on, or after 1 January 2017. This account is prepared under the historical cost convention, modified to account for the • IAS 8 Accounting policies, changes in revaluation of property, plant and equipment accounting estimates and errors: Effective and intangible assets where material, at their date not yet agreed. Exposure draft expected value to the business by reference to current June 2017 cost. This is in accordance with directions • IFRS 9 Financial Instruments: The effective issued by the Secretary of State for Health and date is for accounting periods beginning on, approved by HM Treasury. or after 1 January 2018.
• IFRS 14 Regulatory Deferral Accounts: 1.2. Early adoption of standards, The standard will be adopted in the FReM amendments and interpretations once it has received EU adoption (The NHS Resolution has not European Financial reporting Advisory Group adopted any IFRSs, amendments or recommends that the standard will interpretations early. be unlikely to be endorsed by many EU Countries);
128 NHS Resolution Annual report and accounts 2016/17 Financial statements
• IFRS 15 Revenue from Contracts with 1.4. Taxation Customers: with a view to including in the 2017-18 FReM. The effective date is for NHS Resolution is not liable to pay corporation accounting periods beginning on, tax. Expenditure is shown net of recoverable or after 1 January 2018. VAT. Irrecoverable VAT is charged to the most appropriate expenditure heading or capitalised • IFRIC 21 Levies: EU adopted in June 2014 but if it relates to an asset. not yet adopted by HM Treasury;
• IFRS 16 Leases: The effective date is for 1.5. Pension costs accounting periods beginning on, or after 1 January 2019. NHS Resolution offers two defined contribution pension schemes to staff, the NHS pension NHS Resolution is reviewing all existing contracts scheme and the National Employment Savings and also operational leases to ensure that when Trust (NEST). the standards are adopted we are prepared to provide a true and fair position on the Financial statements. None of these new or amended 1.6. NHS Pensions Scheme standards and interpretations are anticipated Past and present employees are covered by the to have future material impact on the Financial provisions of the NHS Pensions Scheme. Details statements of NHS Resolution. of the benefits payable under these provisions can be found on the NHS Pensions website at www.nhsbsa.nhs.uk/pensions. The scheme is an 1.3. Income unfunded, defined benefit scheme that covers Income is accounted for by applying the NHS employers, GP practices and other bodies, accruals convention. A major source of funding allowed under the direction of the Secretary for the Special Health Authority is Parliamentary of State, in England and Wales. The scheme grant from DH within an approved cash limit, is not designed to be run in a way that would which funds the ELS and Ex-RHA, DH clinical and enable NHS bodies to identify their share of non-clinical liabilities schemes. Parliamentary the underlying scheme assets and liabilities. funding is recognised in the financial period in Therefore, the scheme is accounted for as if it which it is received. were a defined contribution scheme: the cost to the NHS Body of participating in the scheme is Operating income is that which relates directly taken as equal to the contributions payable to to the operating activities of NHS Resolution. the scheme for the accounting period. It principally comprises annual contributions charged to member NHS bodies for the CNST, LTPS and PES schemes for likely claims payments in year. Where income is received for a specific activity which is to be delivered in the following financial year, that income is deferred.
129 NHS Resolution Annual report and accounts 2016/17 Financial statements
In order that the defined benefit obligations demographic experience), and to recommend recognised in the Financial statements do not the contribution rates. differ materially from those that would be The last published actuarial valuation determined at the reporting date by a formal undertaken for the NHS Pension Scheme was actuarial valuation, the FReM requires that completed for the year ending 31 March 2017. “the period between formal valuations shall be four years, with approximate assessments in The Scheme Regulations were changed to allow intervening years”. An outline of these follows: contribution rates to be set by the Secretary of State for Health, with the consent of HM i) Accounting valuation Treasury, and consideration of the advice of A valuation of the scheme liability is carried out the Scheme Actuary and appropriate employee annually by the scheme actuary as at the end of and employer representatives as deemed the reporting period. This utilises an actuarial appropriate. assessment for the previous accounting period iii) Scheme provisions in conjunction with updated membership and financial data for the current reporting period, The NHS Pension Scheme provided defined and are accepted as providing suitably robust benefits, which are summarised below. This list figures for financial reporting purposes. The is an illustrative guide only, and is not intended valuation of the scheme liability as at 31 March to detail all the benefits provided by the Scheme 2017 is based on valuation data as 31 March or the specific conditions that must be met 2016, updated to 31 March 2017 with summary before these benefits can be obtained: global member and accounting data. The Scheme is a “final salary” scheme. Annual In undertaking this actuarial assessment, the pensions are normally based on 1/80th for the methodology prescribed in IAS 19, relevant 1995 section and of the best of the last three FReM interpretations, and the discount rate years pensionable pay for each year of service, prescribed by HM Treasury have also been and 1/60th for the 2008 section of reckonable used. The latest assessment of the liabilities of pay per year of membership. Members who the scheme is contained in the scheme actuary are practitioners as defined by the Scheme report, which forms part of the annual NHS Regulations have their annual pensions based Pension Scheme (England upon total pensionable earnings over the and Wales) Pension Accounts, published relevant pensionable service. annually. These accounts can be viewed on With effect from 1 April 2008 members can the NHS Pensions website. Copies can also be choose to give up some of their annual pension obtained from The Stationery Office. for an additional tax free lump sum, up to a ii) Full actuarial (funding) valuation maximum amount permitted under HMRC rules. This new provision is known as The purpose of this valuation is to assess the “pension commutation”. level of liability in respect of the benefits due under the scheme (taking into account its recent
130 NHS Resolution Annual report and accounts 2016/17 Financial statements
Annual increases are applied to pension 1.7. Pensions costs – NEST payments at rates defined by the Pensions (Increase) Act 1971, and are based on changes The Pensions Act 2008 and 2011 Automatic in retail prices in the twelve months ending 30 Enrolment regulations required all employers September in the previous calendar year. From to enrol workers meeting certain criteria into 2011-12 the Consumer Price Index (CPI) has been a pension scheme and pay contributions toward used and replaced the Retail Prices Index (RPI). their retirement. For those staff not entitled to join the NHS Pension Scheme, NHS Early payment of a pension, with enhancement, Resolution utilised an alternative pension is available to members of the scheme who are scheme called NEST to fulfil its Automatic permanently incapable of fulfilling their duties Enrolment obligations. effectively through illness or infirmity. A death gratuity of twice final year’s pensionable pay NEST stands for National Employment Savings for death in service, and five times their annual Trust and is a defined contribution pension pension for death after retirement is payable. scheme established by law to support the introduction of Auto Enrolment. Contributions For early retirements other than those due to are taken from qualifying earnings, which are ill health the additional pension liabilities are currently from £5,824 up to £43,000, but will be not funded by the scheme. The full amount of reviewed every year by the government. the liability for the additional costs is charged to The initial employee contribution is 1% the employer. of qualifying earnings, with an employer Members can purchase additional service in the contribution of 1%. This will increase in stages NHS Scheme and contribute to money purchase to meet levels set by government. AVC’s run by the Scheme’s approved providers or by other Free Standing Additional Voluntary Contributions (FSAVC) providers.
Employee and employer contributions to NEST
Employee Employer Total Date contributions (%) contributions (%) contributions (%)
1 April 2014 1 1 2
6 April 2018 3 2 5
6 April 2019 5 3 8
131 NHS Resolution Annual report and accounts 2016/17 Financial statements
Annual contribution to a NEST retirement fund 1.9. Provisions is limited to £4,900 for the 2016/2017 tax year. This will be reviewed each year and is likely to NHS Resolution provides for legal or constructive increase. Pension members can make additional obligations that are of uncertain timing or contributions to their pension fund at any time amount at the balance sheet date on the basis up to the annual limit. Pension members can of the best estimate of the expenditure required choose to let NEST manage their retirement to settle the obligation. Where the effect of the fund or take control themselves and alter time value of money is significant, the estimated contribution levels and switch between different risk-adjusted cash flows are discounted using the funds. If pension members leave NHS Resolution HM Treasury’s discount rate. The HM Treasury they can continue to pay into NEST. discount rate was adjusted in December 2016 as follows: short -2.70% (15/16 -1.55%), medium NEST Pension members can take their money -1.95% (15/16 -1.00%) and long-term -0.8% out of NEST at any time from age 55. If suffering (15/16 -0.8%). from serious ill health or incapable of working due to illness members can request to take The ELS, Ex-RHA and DH clinical and non-clinical their money out of NEST early. They can take schemes are funded by DH, CNST, LTPS and the entire retirement fund as cash, use it to PES from member contributions, and the buy a retirement income or a combination. accounts for the schemes are prepared in Additionally members can transfer their NEST accordance with IAS 37. A provision for these retirement fund to another scheme. NEST schemes is calculated in accordance with IAS 37 is run by NEST Corporation, a trustee body by discounting the gross value of all claims which is a non-departmental public body received: this is disclosed in Note 7.1. operating at arm’s length from government The calculation is made using: and is accountable to Parliament through the Department for Work and Pensions. i) Probability factors - The probability of each claim having to be settled is assessed between 10% and 94%. This probability is applied to 1.8. Short term employee benefits the gross value to give the probable cost of each claim; and Salaries, wages and employment-related payments are recognised in the period in which ii) a discount factor calculated using the real the service is received from employees. Leave discount rates noted above, RPI of 3.55% and that has been earned but not taken at the year claims inflation (varying between schemes) of end is not accrued on the grounds of materiality. between 1.6% and 10.6%, is applied to the probable cost to take into account the likely time to settlement.
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The difference between the gross value of NHS Resolution assesses whether any financial claims and the probable cost of each claim as assets are impaired, and impairment losses calculated above is also discounted, taking into recognised, if there is objective evidence of account the likely time to settlement, and is impairment as a result of one or more events included in contingent liabilities as set out which occurred after the initial recognition in Note 8. of the asset and which have an impact on the estimated future cash flows of the asset. For Resolution of claims is difficult to predict as financial assets carried at amortised cost, the many factors can lead to delay during the amount of the impairment loss is measured as settlement process whilst emerging evidence the difference between the asset’s carrying can alter valuation and thus NHS Resolution amount and the present value of the revised makes a best estimate regarding the likely year future cash flows discounted at the asset’s of settlement and expected value of the claim original effective interest rate. The loss is against each notified claim. These estimates are recognised in the Statement of Comprehensive reviewed throughout the life of the claim and Net Expenditure. amended to reflect variations in expectations which inevitably alter the value provided. 1.11. Financial liabilities
1.10. Financial assets Financial liabilities are recognised in the Statement of Financial Position when it becomes NHS Resolution recognises financial assets on a party to the contractual provisions of the its Statement of Financial Position when, and financial instrument or, in the case of trade only when, it becomes a party to the contractual payables, when the goods or services have been provisions of the instrument. On initial received. Financial liabilities are de-recognised recognition IAS 39 requires NHS Resolution when the liability has been discharged; that is, to recognise all financial assets at fair value. the liability has been paid or has expired. The fair value of a financial asset on initial recognition is normally represented by Financial liabilities are initially recognised at the transaction price. fair value. Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market.
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1.12. Critical judgements and key sources The work of the membership of the Reserving of estimation uncertainty Committee includes the Accounting Officer, as Chair, alongside key executive staff from within In the application of NHS Resolution’s NHS Resolution and also a representative non- accounting policies, which are described in executive director. Note 1, the directors are required to make judgements, estimates and assumptions NHS Resolution do not consider that any of our about the carrying amounts of assets and indemnity schemes (see ‘Understanding our liabilities that are not readily apparent from indemnity schemes’) fall under the definition other sources. The estimates and associated of an insurance contract as per IFRS 4 Insurance assumptions are based on historical experience Contracts, because they are risk pooling schemes and other factors that are considered to be and the significant insurance risk is passed back relevant. The judgements that have the most to the members through annual contributions significant effect on the amounts recognised in which cover the expected costs of the schemes the Financial statements relate to the calculation or directly to the Department of Health. of the provisions for known claims and for IBNR, as explained in Note 7. Actual results may differ 1.13. IFRS 8 – operating segments from these estimates. NHS Resolution has one reportable segment The estimates and underlying assumptions under IFRS 8 but income and expenditure are are reviewed on an ongoing basis by NHS disaggregated by different scheme types in the Resolution, supported by its actuaries, the Statement of Changes in Taxpayers’ Equity. Government Actuary’s Department (GAD). Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. NHS Resolution’s Reserving and Pricing Committee document this ongoing review process and to facilitate the review of the various assumptions used in constructing the actuarial models which the Accounting Officer relies upon when confirming the estimates used within these accounts.
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2. Expenditure
2016/17 2015/16 Notes £000 £000 Non-executive Members' remuneration 83 87 Other salaries and wages1 Salaries and wages 11,352 10,508 Social security costs 1,232 901 Pension costs 1,398 1,257 Establishment expenses 1,028 867 Hire and operating lease rental Land and buildings 959 897 Lease cars 3 3 Photocopiers 25 21 Franking machine 3 11 Vending machine 6 4 Transport and moveable plant 1 1 Premises and fixed plant 1,962 2,264 External contractors Actuary's advice 690 683 Appeals Unit advisory expenditure 100 128 External corporate legal fees2 293 115 NCAS assessment expenditure 360 333 NCAS professional services 29 32 Sign up to Safety3 183 18,737 Other4 1 136 Auditor's remuneration: audit fees5 138 118 Internal audit fees 79 75 Bank charges and interest 9 0 19,934 37,178 Depreciation 381 349 Amortisation 207 209 588 558 20,522 37,736 Other finance costs - unwinding of discount 7 (177,435) 46,583 Increase in provision for known claims (excl. 7 4,642,448 2,583,815 unwinding of discounts and change in discount rate) Change in the discount rate6 7 604,700 25,473,368 Increase / (decrease) in the provision for IBNR* 7 5,252,000 1,274,700 10,499,148 10,342,235 29,416,202
1 Additional explanations can be found in Accountability report. 2 External corporate legal fees do not include legal fees in relation to clinical and non-clinical claims. These costs are included within Note 7 Provisions. 3 £183,000 relates to the evaluation of the grant expenditure of £18.7 million in 2015/16 relating to the Sign up to Safety incentivisation fund. 4 Other expenditure includes laboratory tests, payroll and professional services and release of accruals no longer required. 5 NHS Resolution did not make any payments to its auditors for non-audit work. 6 The discount rates used are mandated by HM Treasury and are set out at Note 1.9 to the accounts. Of the £10,342 million shown above, £5.72 million is shown as administration expenditure in the DH consolidated group accounts.
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3. Operating income
2016/17 2015/16 £000 £000 CNST contributions 1,655,444 1,419,513 LTPS contributions 54,688 54,688 PES contributions 4,083 5,119 NCAS 1,333 1,460 Other income 52 73
Total 1,715,600 1,480,853
136 NHS Resolution Annual report and accounts 2016/17 Financial statements
642 2016 £000 Total 2016 £000 2016 £000 Total Total (211) 8,495 3,705 3,001 1,751 4,388 8,929 56,397 43,555 32,889 62,060 94,949 31 March 31 March 31 March
115 2017 £000 Total 2017 £000 2017 £000 Total Total 5,666 1,128 5,772 3,232 48,174 30,585 10,795 94,949 57,724 11,300 20,419 152,673 31 March 31 March 31 March
24 90 603 270 634 115 £000 £000 £000 3,130 2,233 5,647 5,018 2,533 3,372 10,665 Administration Administration Administration
0 0 0
363 218 751 399 LTPS LTPS £000 £000 1,332 3,377 3,776 LTPS £000 3,703 30,338 34,041
0 0 0 0 70 38 14 PES 108
367 PES 353 £000 £000 PES £000 6,240 10,219 (3,979)
0 0 478 £000 CNST 2,235 5,831 8,544
£000 CNST 7,845 3,133 38,186 27,208 £000 CNST 52,447 99,576 0 0 0
47,129 0 0 688 688 74 23 51 £000 £000 clinical
DH non- clinical DH non-
ELS 635 0 0 £000 1,466 2,101
DH 0 0 £000 1,024 1,594 2,618 DH 115 clinical £000 1,601 1,486 clinical
0 0 50 150 ELS
777 491 £000 (100) 0 £000 1,268 Ex-RHA ELS 888 333 £000 3,484 2,263
0 0 10 35 45 Ex- RHA £000 Other payables At 1 April 2016 Accruals Prepayments NHS receivables - revenue Accrued income Other receivables Change during the year At 31 March 2017 NHS payables revenue Prepaid income 4. Receivables 5. Cash and cash equivalents liabilities payables and other current 6. Trade
137 NHS Resolution Annual report and accounts 2016/17 Financial statements
£000 Total 211,700 393,000 (177,435) 2,912,053 5,645,000 5,252,000 2,683,332 64,997,765 23,051,712 56,440,712 11,048,106 25,963,765 64,997,765 47,322,741 33,389,000 39,034,000 14,991,692 (4,694,847) (1,764,660) (1,710,811)
0 LTPS £000 1,378 3,000 (302) 4,201 98,864 74,784 50,313 90,000 82,000 (8,000) (1,468) 185,065 188,864 103,065 185,065 134,752 (43,612) (11,000) (26,579)
0 0 0 0 0 0 0 PES £000 8,650 8,302 3,586 2,000 2,000 6,716 10,302 10,778 12,778 10,302 (2,476) (8,584) (2,542)
£000 CNST 177,278 381,000 6,157,000 2,875,167 5,776,000 9,852,657 2,427,183 (265,507) 59,783,571 19,451,404 50,751,404 22,326,571 59,783,571 43,203,208 31,300,000 37,457,000 14,153,180 (3,818,486) (1,575,943) (1,494,832)
2 (37) (42) £000 8,387 2,000 8,967 15,908 13,716 96,205 20,544 (2,192) (5,298) (5,204) 125,716 156,908 125,716 141,000 112,000 (29,000) (31,000) DH non-clinical
£000 3,000 23,865 59,210 701,769 142,471 507,375 (13,059) (234,000) 3,515,597 2,403,656 3,762,656 2,390,597 3,515,597 2,865,751 1,359,000 1,125,000 (561,957) (237,000) (100,225) (135,721) DH clinical
ELS £000 8,519 3,000 48,608 27,390 48,819 473,000 384,492 243,000 165,214 (29,835) (45,933) (230,000) (233,000) 1,297,093 1,005,485 1,478,485 1,054,093 1,297,093 1,083,060 (296,025)
2 0 658 £000 1,804 1,816 1,000 1,993 3,911 80,421 65,617 24,000 89,617 17,367 67,421 13,000 80,421 74,517 (1,163) Ex-RHA (11,000) (16,874) (12,000) 1 1 Discounting Opening provision for known claims Opening provisions for IBNR as at 1 April 2016 provisions Total Movement in known claims Provided in the year Provision not required written back Unwinding of discount Change in discount rate Provisions utilised in the year Movement in IBNR Change in discount rate Provided in the year Closing provision for known claims Closing provisions for IBNR 2017 as at 31 March provision Total Analysis of expected timing discounted cash flows Not later than one year Later than one year and not later five years Later than 5 years The change in discount rate represents the change in provision as result of a change in the discount rates set by HM Treasury. Discounted cash flowtimings are based upon actuarial estimates for knownclaims and IBNR. Actual cash flows varywill to adue number of factors including claims settling on a periodical payment basis rather than lump sum, claims which longer take than anticipated resolve to and changes in the value and timing of payments. 7. Provisions for liabilities and charges 7. Provisions The provisions relating NHS to Resolution’s indemnity schemes are the only provisions made by NHS Resolution. 1 The total change in provision due the to change in discount rates million for is known £604.7 claims and £393.0 million, (£211.7 million for IBNR). 2
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£000 Total 46,583 1,274,700 1,827,649 9,499,368 56,440,712 17,248,700 10,581,942 16,140,300 10,678,371 15,974,000 23,051,712 56,440,712 44,006,584 12,469,770 28,610,070 33,389,000 10,606,479 (6,409,485) (1,685,071) (1,547,824)
0 LTPS £000 (146) 2,170 68,800 98,864 53,841 90,000 (1,966) 11,000 (5,630) 188,864 104,800 188,864 104,494 209,294 135,023 (14,800) (29,896) (44,592) (25,800)
0 0 0 0 0 0 0 PES £000 2,479 2,000 8,051 4,036 8,299 2,000 8,742 12,778 10,778 12,778 10,299 (1,940) (3,632)
£000 CNST (18,179) 9,018,344 1,258,200 1,632,954 7,941,595 9,914,253 50,751,404 16,139,200 15,160,800 10,015,801 14,881,000 19,451,404 50,751,404 39,204,197 10,433,060 25,593,860 31,300,000 (6,178,402) (1,364,209) (1,378,262)
225 226 £000 (194) 8,859 83,100 11,085 47,000 15,908 29,591 22,655 57,900 10,900 156,908 156,908 125,394 112,691 141,000 (13,879) (11,146) (13,683) DH non-clinical
£000 98,430 46,900 717,400 641,600 347,097 794,000 403,752 (82,503) (76,600) (131,087) (177,170) 3,762,656 1,048,801 2,403,656 3,762,656 3,260,474 1,354,855 1,996,455 1,045,564 1,359,000 DH clinical
ELS £000 28,545 16,602 497,206 508,279 141,500 649,779 221,373 479,072 229,000 473,000 118,295 (91,104) (26,574) 331,500 102,500 (102,163) 1,478,485 1,005,485 1,478,485 1,331,645
984 £000 3,908 6,500 6,164 1,600 5,500 3,759 89,617 17,500 34,425 31,192 37,692 30,741 12,000 65,617 24,000 89,617 84,874 (6,873) (1,115) Ex-RHA
Discounting
Opening provision for known claims Opening provisions for IBNR as at 1 April 2015 provisions Total Movement in known claims Provided in the year Provision not required written back Unwinding of discount Change in discount rate Provisions utilised in the year Movement in Net IBNR Change in discount rate Provided in the year Closing provision for known claims Closing provisions for IBNR 2016 as at 31 March provision Total Analysis of expected timing discounted cash flows Not later than one year Later than one year and not later five years Later than 5 years Provisions for liabilities and charges (prior year) Provisions
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7.1. Explanatory notes Nature of the obligation Claims against DH clinical and non-clinical Liabilities relate to claims against dissolved NHS Resolution provides indemnity cover for bodies where there is no successor body and clinical negligence and non-clinical claims under a number of other claims NHS Resolution is seven schemes. Provisions are calculated in managing on behalf of DH. accordance with IAS 37, and relate to liabilities arising from incidents covered by these schemes Clinical Negligence Scheme for Trusts (CNST) in relation to: This scheme provides indemnity cover to • Claims received by NHS Resolution providers of NHS services, NHS commissioners, (known claims) and Health arm’s length bodies for claims arising from incidents involving clinical negligence. • Settled Periodical Payment Orders (PPOs) Contributions are collected from members to where the settlement of a claim involves make settlements and administer claims on payments to the claimant into the future, their behalf. The scheme has been operating generally for their lifetime since 1 April 1995, and claims are included in the • Incurred but not reported (IBNR) provision provision where: where claims have not yet been received but • NHS Resolution has assessed the probable where it can be reasonably predicted that: cost and time to settlement in accordance • an adverse incident has occurred, and with the scheme guidelines; • a transfer of economic benefits will • they are qualifying incidents; and occur, and • the organisation against which the • a reasonable estimate of the likely claim is being made remains a member of value can be made. the scheme.
As at 31 March 2002 all outstanding claims for Scope of the schemes incidents post 1st April 1995 became the direct responsibility of NHS Resolution. This ‘call in’ Existing Liabilities Scheme (ELS), Ex-Regional of CNST claims effectively means that member Health Authorities (Ex-RHA) and DH clinical trusts are no longer responsible for accounting and non-clinical Liabilities Schemes for claims made against them although they do remain the legal defendant. Claims are included in the ELS provision on the basis that the incident occurred on or before Property Expenses Scheme (PES) and Liability 31 March 1995. Qualifying claims under the to Third Parties Scheme (LTPS) Ex-RHA scheme are claims brought against the former Regional Health Authorities whose The PES and LTPS schemes were introduced in clinical negligence liabilities passed to NHS April 1999 following the Secretary of State’s Resolution with effect from 1 April 1996. decision that NHS Trusts should not insure with commercial companies for non-clinical risks,
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other than motor vehicles and other defined Treasury prescribe the discount rates to be used areas (e.g. PFI schemes). in calculating the provisions. There are other factors that influence the provision that are also The schemes are managed and funded via outside of NHS Resolution’s control, for example the same mechanisms as the CNST except that patients (and their legal representatives) have specific excesses exist for some types of claims. an element of control over the timing of the Thus the provision recorded in these accounts reporting of claims. The Reserving and Pricing relates only to NHS Resolution’s proportion Committee keeps all of the factors affecting the of each claim. calculation of provisions under review to ensure Assumption of liabilities upon cessation that the final provisions reflect the experience of the organisation and are adjusted in a If a Strategic Health Authority, a Primary Care timely manner. Trust, an NHS trust or a Special Health Authority ceases to exist, the Secretary of State must The methodologies for the three key elements exercise his or her functions so as to secure in NHS Resolution’s provisions are as follows: that all of the body’s liabilities (other than any • Known claims - The provision is based on criminal liabilities) are dealt with. A liability is the case estimates of individual reported dealt with by being transferred to an NHS body, claims received by NHS Resolution. The the Secretary of State or the Welsh Ministers. case estimates are adjusted for the case (NHS Act 2006). handlers’ estimated probability of each claim Process and methodology for setting being successful, for expected future claims the provision inflation to settlement, for the likelihood that they will go on to settle as PPOs (rather NHS Resolution contracts actuarial advisers, the than as lump sums), and for the assumed Government Actuary’s Department, to assist additional cost if the case were to settle as a with the preparation of Financial statements PPO. The resulting adjusted claim values are through analysis and modelling of claims data. then discounted for the time value of money This is combined with information provided (at the Treasury-prescribed rates) to give a by management on the current economic and present value at the accounting date. claims environment in order to provide estimates for management to consider in relation to • Settled PPOs - To estimate the provision for determining the valuation of the liabilities for settled PPO claims, the expected future cash the accounts. flows from each individual settled PPO are projected and weighted by the claimants’ NHS Resolution’s Reserving and Pricing probability of survival to each payment. The Committee is responsible for making decisions present value of these cash flows is calculated on the key judgements and estimates, using the Treasury-prescribed discount rates. supported by the advice of the actuaries. Future cash flows are modelled based on One of the key assumptions used in the individual claim data. production of the estimates reported is outside the formal control of NHS Resolution, as HM
141 NHS Resolution Annual report and accounts 2016/17 Financial statements
This includes the agreed annual payments based on mortality assumptions derived and any agreed future steps in those from the settled PPO claims. Lump sum payments, the index to which payments are settlements are assumed to be paid out in linked and the assumed probability of survival full around settlement time. of the claimant to each future payment. The • The final step in the process is to calculate probabilities of survival for each claimant are the present value of the projected based on estimated life expectancy, agreed by future cash flows (using the Treasury- medical experts in each case. prescribed discount rate), and this gives the estimated IBNR provision at the • IBNR – To estimate the IBNR provision at the accounting date. accounting date, the actuaries model the future cash flows expected to arise from IBNR • For CNST, ELS and DH Clinical Liabilities, claims and calculate a present value (at the these calculations are carried out Treasury-prescribed discount rates). The steps separately for damages, defence costs to arrive at an estimate are: and claimant costs, and for PPO and non- PPO type claims. • A characteristic pattern of claims reporting from claim incident year is The provisions are accounting estimates, identified to determine the ultimate and although determined on the basis of number of claims that are expected to information currently available, the ultimate arise from incidents that have occurred in liabilities may vary as a result of subsequent each past year up to the accounting date. developments. This allows a projection to be made for the number of IBNR claims expected to be For 2016/17 the provision for known claims and reported in each future year. IBNR has been uplifted for the effect of the change in the PIDR from 2.5% to minus 0.75%, • Assumptions are then made about the which was announced by the Lord Chancellor average claim sizes for different types on 27th February 2017 and came into effect on of claim. Adjustments are made to these 20th March 2017. This uplift has been applied assumed claim sizes to allow for expected to reflect the higher value of claims involving future claims inflation. a future loss settled by means of lump sum • By combining the average claim sizes under the new rate. As there is insufficient data with the claim numbers and patterns currently available on the impact of the new for the reporting to payment time lag PIDR on individual claims, a sample of recently appropriately, a projection is made for settled claims was reviewed in order to identify the total value of claim payments for the proportion of settlements sensitive to the IBNR claims in each future year. change in the PIDR. This was used to calculate • For claims that are assumed to settle as the effect of the change. A set of assumptions PPOs, an estimated payment pattern were derived from this analysis to apply an uplift is used to model the future cash flows, to claims reserves by claims value.
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7.2. Key assumptions and areas of uncertainty As with any actuarial projection there are areas The legal environment is a particular area of uncertainty within the claims provisions of uncertainty, given there are a number of estimates. This is particularly so for the CNST, current and recent consultations that might, ELS and DH clinical schemes given the long-term in particular, impact the schemes’ provisions nature of the liabilities. in the future (“Introducing a Rapid Resolution and Redress Scheme for Severe Avoidable Birth The table following shows the key assumptions Injury” and “Introducing Fixed Recoverable used to determine the CNST IBNR and settled Costs in Lower Value Clinical Negligence Claims“, PPO provisions. For each assumption, the degree both issued by the Department of Health, and of uncertainty in the assumption and the impact “The Personal Injury Discount Rate, How it of the assumption on the level of provisions has should be set in future” issued by the Ministry of been categorised subjectively as ‘high’, ‘medium’ Justice). As there is no certainty on the decisions or ‘low’. that will arise out of these consultations, no As an example, the following table shows that adjustments have been made to the IBNR for the there is a medium level of uncertainty in the potential effects of such changes at this stage. assumed number of claims incurred in each year and that this assumption has a high impact on the value of the provision.
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Effect of Effect change (CNST) small +£3.5bn (attributed to PIDR change) Relatively Zero Combined -£0.8bn effect: +£0.3bn
Change in CNST assumption between 2017 2016 and 31 March 31 March Assumption remains the same as last year Lags range from 2.8 – 7.1 years depending on the segment and are not materially changed since last year. Average claim value assumptions have increased, Average mainly due to the PIDR change. For non-PPO claims, increase is around 30%, whereas for PPOs the is around 10%. PPOs have less of an increase, as annual by the PIDR. payments under PPOs are not affected The expected number of future PPO claims has increased, whereas the expected number of future non- PPO (i.e. smaller value) claims has reduced, reflecting emerging experience. A similar value-based threshold has been used to identify potential PPO claims this year and last year. (RPI + 1% pa). Claims inflation generally has increased due to increased future expectations for price inflation. This in some segments (such as PPO damages) by is offset lower rates of increase in recently reported claims. Probabilities have been updated to reflect emerging favourable experience. Expected future lifetime of PPO claimants at settlement has remained the same (37 years). Small and medium term discount rates have reduced, The long term rate by 1.15% and 0.95% respectively. remains the same.
Sensitivity to changes* High (for PPOs) High High Medium Medium High Medium Low** High Degree of Degree uncertainty* Medium High Medium Medium Low High Medium Medium Prescribed
Based on earnings increases relative to RPI over the longer-term Approach Derived from past Derived from past settled claims – set separately for damages, defence costs and claimant costs Derived from past claim numbers and development patterns threshold derived Value from recent years’ settled claims data Derived from past settled claims settled claims Derived from past settled claims, adjusted for incomplete development Based on analysis of past settled PPO claims Prescribed – HMT PES approach
percentile) th Creation to Creation Claim inflation of Probability Assumption cost Average per claim Ultimate number of claims paying damages settle as PPO payment lags Cash flow pattern for PPO payments Real discount rates to RPI) (relative (80 Propensity to Propensity ASHE 6115 * These columns are somewhat subjective, but give an indication of the relative uncertainty and importance of each assumption. The** IBNR reserves in respect of PPO claims are driven predominantly by the assumed total value of the claim rather than the cash flow profile. Key assumptions in the CNST provision
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The following are key areas of uncertainty in the estimation of the claims provision. Clinical negligence claims can take a number The uncertainty in the average claim value of years to be reported following the incident assumption is currently higher than might that gives rise to the claim. The IBNR provision normally be expected as a result of the PIDR depends on an assumed time lag pattern for change. At the time of writing there is limited how claims are reported to NHS Resolution evidence of the impact of the PIDR change on following the incident. If the true pattern of actual claim settlements and the behaviour of reporting is faster than that assumed, this may claimants as a result of the change. There are mean that the number of IBNR claims has been a number of other factors also influencing the over-estimated, and vice versa. Changing trends level of uncertainty around the average claim in this pattern over time, for example as a result value assumption including changing numbers of changes to the legal environment, increased of claims reported over time and changes in awareness of the availability of compensation the proportion of claims settling as PPOs, which and a lack of past data preceding the formation could be affected by the PIDR change or other of NHS Resolution increases the uncertainty in environmental influences. this assumption. Because of the long-term nature of the The numbers of clinical claims reported to NHS liabilities, even small changes to the assumed Resolution have increased in recent years, but rate of future claim value inflation can have a this effect generally seems to be levelling off significant impact on the estimated provisions. and slowly reducing. Nonetheless, there remains Claim value inflation has historically increased considerable uncertainty when projecting claim at a significantly higher rate than price inflation. numbers in the future, due to the changing For clinical negligence claims, inflation is claims environment and resulting instability in affected by a number of external factors such past claim trends. as the PIDR, changes in legal precedent PPOs remain a key area of uncertainty, given (eg rules relating to accommodation costs the high value of PPO settlements, the limited determined by Roberts vs Johnstone) and stable past data to base future claim number changes in legal costs. The variety of potential projections upon and the changing propensity external influences on future claims inflation to award PPOs to claimants. PPO claim means that the assumption is subject to settlements are paid over the lifetime of the significant uncertainty. claimant, and consequently there are additional inflation and longevity uncertainties, compared to equivalent lump sum settlements.
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The recent change in the PIDR has resulted in a The majority of PPOs have payments linked to significant increase in the value of settlements the retail price index (RPI) and/or ASHE 6115 which involve future losses. There is the (a wage inflation index) and the future rates potential for this to result in lump settlements of increase in these indices are uncertain. becoming more attractive to claimants, which In particular, ASHE 6115 relates specifically may affect the propensity for claims to settle to care and home workers and external with PPOs, or shift the balance between the factors impacting this market in recent years amount of the settlement paid upfront, thereby have increased the uncertainty in setting affecting the timing of cash flows. In addition, this assumption. the application of a discount rate with a minus value affects the calculation of accommodation costs under Roberts vs Johnstone. At the end CNST IBNR sensitivities as at 31 March 2017 of the reporting period, NHS Resolution has Reasonable range of results no evidence on which to base any adjustments to the assumptions for claimant behaviour The CNST IBNR provision is the single largest developed from observed experience and element within the total provision. Changes to therefore no adjustments have been made. the assumptions underpinning this element have the greatest potential to affect the estimate of the total provision. The provisions in respect of settled PPOs are sensitive to the assumed life expectancy of The provision in the accounts is based on a set claimants. Each claimant’s life expectancy is of chosen assumptions. It is possible to have estimated at settlement by medical experts. a range of different results if a different set The actual future lifetime of the claimant of assumptions had been chosen. Estimation may differ significantly from this estimate. of a reasonable range of results is possible, Furthermore, it is difficult to determine whether by selecting assumptions based on analysis of the life expectancies estimated by medical historical data that could reasonably have experts will prove to be too long or too short served the purpose of providing an estimate for on average across all claimants. The average life the accounts. expectancy of claimants could also be influenced A reasonable range of results is set out below, by future advances in medical care or other although it should be noted that this in itself events (e.g. epidemics). does not reflect the potential uncertainty in the assumptions underpinning the provision as future experience may differ to the past, changes may occur in the claims and legal environment, and the modelling approach may not adequately represent real life.
146 NHS Resolution Annual report and accounts 2016/17 Financial statements
CNST IBNR reasonable range
Value Difference to accounts estimate
CNST IBNR accounts estimate £37.5bn
Reasonable upper range £40.2bn +7.2%
Reasonable lower range £34.4bn -8.1%
These results were achieved by the following Sensitivity analysis adjustments to assumptions, all of which could have reasonably been applied: varying The following tables show the impacts of the assumptions for the average value and adjusting the key assumptions used for the annual inflation of a PPO damages claim by IBNR estimate for CNST. In each case the base +/-£0.5m and +/-0.25% respectively; reducing assumption used for the accounting estimates the estimate for the lag between reporting is shown in the middle of the table. and settlement of PPO claims and varying less The ranges of the sensitivity tests shown below material assumptions based on the are based on the variability observed in past data available. data. They do not represent the maxima or In summary, the provision in the accounts for minima of past observed values, nor the range CNST IBNR could have been reasonably set at of possible outcomes, but they do capture future a value between £34.4 billion and £40.2 billion, values that could reasonably occur. Each change if the same data, method and approach were is shown separately, but in practice combinations used, but different reasonable assumptions are possible, as different assumptions can selected on the basis of the past data. be correlated. This is compared to the accounts estimate The sensitivity analysis is included in these Notes of £37.5 billion. to enable readers to understand the impacts Changes in individual assumptions may such adjustments would have on the accounts. have a greater or smaller impact on the It should be noted that the relationship provisions estimate. between changes in the value of assumptions and the IBNR provision is not always linear, particularly for assumptions such as inflation and the Treasury-prescribed discount rate.
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Figure 38: CNST IBNR sensitivities as at 31 March 2017
40%
Increase in assumption (%) Decrease in assumption (%) 30% 31% 27% 20% 20%
10% 8% 9% 8% 6% 7% 0% -5% -6% -8% -8% -8% -10%
IBNR Increase/(Decrease) £m IBNR Increase/(Decrease) -21% -20% -20% -20%
HM Treasury Future IBNR claim Average Average Differential Probability Life -30% discount Claims Value number creation of cost between of a expectancy rates Inflation (+/-10% for claims to per claim ASHE and successfully assumption (+/-1% pa) (+/-2% pa) incident payment (+/-20%) RPI defended for PPOs (+/- years time lag (+/-0.5% pa) claim 10% change 2013/14 (+/-1 year) (+/-5%) in life onwards) expectancy)
The chart above sets out both the value and percentage impact of variations in the key assumptions within the CNST IBNR estimate which are also explained in the remainder of this note.
Sensitivity of estimated CNST IBNR provision as at 31 March 2017 to movements in the HM Treasury tiered real discount rate
In 2016/17 HM Treasury changed the ‘tiered’ The table following shows that if the HM discount rate for general provisions, short-term Treasury discount rates were to be increased minus 2.70% (15/16: minus 1.55%), medium- by 1% pa the IBNR recorded in the SOFP term minus 1.95% (15/16: minus 1.0%) and would reduce by £7,999 million and likewise a long-term minus 0.8% (15/16: minus 0.8%) as set reduction of 1%pa would increase the IBNR out in HM Treasury’s Public Expenditure System by £11,774 million. (2016) 10 paper published 2 December 2016, where all discount rates are real rates relative to price inflation.
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Sensitivity to changes in the Treasury-prescribed discount rate on estimated IBNR provisions
Estimated Change to the Percentage Sensitivity to changes IBNR provision original IBNR change to the in the discount rate £m estimate £m original estimate
All rates - 1% 49,232 11,774 31%
Tiered real discount rate structure 37,457 0 0%
All rates +1% 29,458 (7,999) -21%
This graph shows a range of impacts (for For example, an increase of 4 percentage points illustrative purposes – it is not intended as a would approximately halve the value of the reasonable range of values), that a change in provision, but a 4 percentage point decrease all of the tiered discount rates may have on the would almost quadruple the value. value of the IBNR element of the CNST provision.
Figure 39: CNST IBNR (£ billion) adjusted by Treasury-prescribed discount rate
400
350
300
250
200
Base provision: £37.5 billion
IBNR provisions 150
100
50
0 -6% -5% -4% -3% -2% -1% +0% +1% +2% +3% +4% +5% +6%
Change in real discount rate
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Note that whilst in 2016/17 the short and and consequently is less sensitive to changes medium-term discount rates have decreased by in the short and medium-term rates, hence around 1%, the long-term rate has not changed. the relatively small impact of the discount rate The majority of CNST IBNR provision is expected change of £381 million in 2016/17. to settle over the long term (over 10 years),
Sensitivity to future claims value inflation assumption
IBNR as at Percentage change Claims value inflation 31 March 2017 to original estimate £m
All rates - 2% 29,800 -20%
Base assumptions 37,457 0%
All rates +2% 47,694 27%
Figure 40: CNST IBNR (£ billion) adjusted by claims inflation
90
80
70 Base provision: £37.5 billion 60
50
40
IBNR provisions 30
20
10
0 -6% -5% -4% -3% -2% -1% +0% +1% +2% +3% +4% +5% +6%
Change in claims inflation
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From the previous table and graph, we can see While a 2% increase in inflation would increase that an increase in inflation has a much greater the overall provision by 27%, a 2% decrease impact on the provision than a decrease in would only reduce the provision by 20%. inflation would at the same rate.
Sensitivity to assumptions of number of IBNR claims
IBNR as at IBNR claim number assumptions Percentage change 31 March 2017 (including PPOs) to original estimate £m No adjustment prior to 2013/14; 34,508 -8% 10% decrease thereafter
Base assumptions 37,457 0%
No adjustment prior to 2013/14; 40,407 8% 10% increase thereafter
The projected number of claims is determined value of provisions. If the number of IBNR claims by development patterns from previous years. increases by 10% for incidents from recent years, The assumption in relation to the number of the CNST provision value will increase by 8% IBNR claims is directly proportionate to the as a result and vice versa.
Sensitivity to creation of claim to payment time lag pattern
IBNR as at Average term based on assumed Percentage change 31 March 2017 time lag pattern to original estimate £m Reduction in average time lag 35,456 -5% of one year
Base assumptions 37,457 0%
Increase in average time lag 39,615 6% of one year
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A pattern is used to describe the lag between This sensitivity approximately adjusts the lag when a claim is created and when it is paid. pattern to be one year longer and one year As the time lag increases, this increases the value shorter, which results in a 6% increase and 5% of the provision because of the effect of claims decrease in the provision respectively. inflation – if we take longer to settle a claim, the cost will increase because of inflation.
Sensitivity to average costs of claim assumption
IBNR as at Factor applied to all average claim Percentage change 31 March 2017 value assumptions to original estimate £m Reduction in average claim values of 20% 30,116 -20%
Base assumptions 37,457 0%
Increase in average claim values of 20% 44,799 20%
The average claim value assumptions are As we can see from the previous table, derived from claims settled in previous years, an increase of average claim value of 20% with separate calculations for damages, will result in a 20% increase in the value defence costs and claimant costs. of the provision.
Sensitivity to differential between ASHE and RPI
IBNR as at Differential between ASHE Percentage change 31 March 2017 and RPI assumption to original estimate £m Reduction of 0.5% 35,164 -6%
Base assumption (Differential of 1.0%) 37,457 0%
Increase of 0.5% 40,109 7%
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The ASHE index used in the calculation of The table and graph show the effect on the damages in PPO cases where care costs are a value of the CNST IBNR provision where this component, measures the rate of change in differential is varied and as the chart below the wages of carers. The current assumption is shows, this is a non-linear relationship. that the rate of inflation in carers’ wages is 1% An additional +/- 0.5% difference between higher than price inflation each year. ASHE and RPI will either increase the provision by 7% or reduce it by 6% respectively.
Figure 41: CNST IBNR (£ billion) adjusted by ASHE index
140
120
100
80 Base provision: £37.5 billion
60 IBNR provisions 40
20
0 -6% -5% -4% -3% -2% -1% +0% +1% +2% +3% +4% +5% +6%
Change in ASHE index
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Sensitivity to the assumed probability of a successfully defended claim
IBNR as at Probability of a successfully defended Percentage change 31 March 2017 claim in every incident year to original estimate £m All probabilities -5% 40,573 8%
Base assumption 37,457 0%
All probabilities +5% 34,342 -8%
The assumption for the probability of A reduction in that success rate of 5% would successfully defending a claim is based on increase the provision by 8%, for example. historical data.
Sensitivity tests considering the impact of the PIDR change A sample of claims data was used to model The impact of using the 25th and 75th percentiles the impact of the PIDR change on the IBNR of sample claims has been tested to assess provision. Average values from the sample were the sensitivity of the CNST IBNR provision to a used to inform the uplift to claims values. broad range of uplift values.
Sensitivity test IBNR effect £bn IBNR effect (%)
25th percentile of sample data -£1.4bn -3.7%
75th percentile of sample data +£1.2bn +3.1%
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Despite this being a relatively severe test using The IBNR provision is based on assumptions a broad range of uplift values, the potential relating to the expectation of the number change to the provision is relatively small. of claims where damages are expected to This is due to there being only a relatively small be paid, that certain proportions will settle proportion of the IBNR provision relating to the as lump sums rather than PPOs, and average lump sum settlements (about three quarters is time lags for reporting and settlement. The for PPO settlements and legal costs), and of this, impact of a change in the number of PPO around a third relates to past losses which are settlements arising as a result of potential not affected by the PIDR change. claimant behaviour changes (keeping all other assumptions the same) is set out as follows: There is also uncertainty about whether the propensity to settle claims through PPOs will be affected as the PIDR change may make lump sum settlements relatively more attractive.
Proportionate change in number IBNR effect IBNR effect of PPO claims £bn (%) +/-5% +/-£0.2bn +/-0.5%
+/-10% +/-£0.5bn +/-1.3%
+/-20% +/-£0.9bn +/-2.4%
+/-50% +/-£2.3bn +/-6.1%
The effect on the provision is relatively minor. There may be other behavioural impacts of the This is because the PIDR is now more aligned PIDR change. The sensitivity analysis set out with the HM Treasury-prescribed long-term above in relation to the potential effect discount rate of minus 0.8% for accounting of changes in claims numbers, average costs, purposes, and as a result, the present value claims inflation and the probability of of a PPO is much more aligned to the valuation successfully defending claims, can be used of the claim on a lump sum basis under the to consider the potential effects. current PIDR. However, the effect of changes in the propensity of claims to settle as PPOs would be significant on cash flows in the immediate term as the cost of lump settlements would change accordingly.
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Sensitivity of provision for settled Periodical Payment Orders (PPOs) to key assumptions
HM Treasury discount rate assumptions Due to the long term nature of PPOs, where As shown previously in the discussion of the PPO claims can be expected to continue for CNST IBNR provision sensitivity, the relationship 50 years or longer, the PPO element of the between the value of the provision and the provision is very sensitive to changes in the effect of changes in the discount rate is not a HM Treasury-prescribed discount rate, especially proportionate one. A reduction of 1% in the the long-term discount rate. In general, the discount rates will increase the PPO element of clinical schemes are more sensitive to changes the CNST provision by 38%, but a 1% increase in the discount rate than non-clinical schemes, will reduce the provision by 25%. again, due to the longer term nature of clinical claims.
Provision for settled PPOs at 31 March 2017
DH DH non- HM Treasury Total CNST ELS clinical Ex-RHA LTPS clinical Discount rate £m £m £m £m £m £m £m
All rates -1% pa 16,339 12,459 1,127 2,670 80 3 1
Base assumption 11,955 9,022 828 2,042 60 2 1
All rates +1% pa 9,081 6,797 629 1,606 46 2 1
Percentage change to provision
HM Treasury DH DH non- Discount rate Total CNST ELS clinical Ex-RHA LTPS clinical
All rates -1% pa 37% 38% 36% 31% 34% 17% 16%
Base assumption 0% 0% 0% 0% 0% 0% 0%
All rates +1% pa -24% -25% -24% -21% -23% -14% -13%
156 Financial statements
Differential between retail price index (RPI) and annual hourly earnings (ASHE) index over the long-term assumption
The ASHE index used in the calculation of These show the effect on the value of the damages in PPO cases where care costs are a PPO element of the schemes’ provisions where component, measures the rate of change in the this differential is varied. An additional +/- 0.5% wages of carers. It is currently assumed that the difference between ASHE and RPI will either rate of inflation in carers’ wages is 1% higher increase the CNST PPO provision by 15% or than RPI annually. reduce it by 12% respectively.
Provision for settled PPOs at 31 March 2017
DH DH non- Differential between Total CNST ELS clinical Ex-RHA LTPS clinical RPI and ASHE £m £m £m £m £m £m £m
All rates - 0.5% 10,562 7,897 745 1,863 54 2 1
Base assumption: 1% pa 11,955 9,022 828 2,042 60 2 1
All rates +0.5% 13,656 10,401 929 2,255 67 2 1
Percentage change to provision
Differential between DH DH non- RPI and ASHE Total CNST ELS clinical Ex-RHA LTPS clinical
All rates - 0.5% -12% -12% -10% -9% -10% -7% 0%
Base assumption: 1% pa 0% 0% 0% 0% 0% 0% 0%
All rates +0.5% 14% 15% 12% 10% 12% 7% 0%
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Life expectancy assumptions The provisions in respect of settled PPOs 10%, the provision for CNST PPOs will increase are sensitive to the assumed life expectancy by 17%. A 10% reduction in life expectancy will of claimants. Where the life expectancy of reduce the CNST provision by 15%. individual claimants at settlement is increased by
Provision for settled PPOs at 31 March 2017
Change applied to DH DH non- life expectancy at Total CNST ELS clinical Ex-RHA LTPS clinical settlement £m £m £m £m £m £m £m
Reduced by 10% 10,141 7,646 702 1,739 51 2 1
Base assumption: 11,955 9,022 828 2,042 60 2 1
Increased by 10% 13,940 10,524 970 2,373 70 2 1
Percentage change to provision
Change applied to life expectancy at DH DH non- settlement Total CNST ELS clinical Ex-RHA LTPS clinical
Reduced by 10% -15% -15% -15% -15% -15% -11% -17%
Base assumption 0% 0% 0% 0% 0% 0% 0%
Increased by 10% 17% 17% 17% 16% 18% 12% 13%
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8. Contingent liabilities
DH DH non- Ex-RHA ELS clinical clinical CNST PES LTPS Total £000 £000 £000 £000 £000 £000 £000 £000 Contingent liability for claims 30,472 596,760 984,255 110,118 33,643,497 9,303 141,924 35,516,329 2016/17 Contingent liability for claims 17,530 371,396 931,435 139,303 25,205,117 6,012 135,213 26,806,006 2015/16
NHS Resolution makes a provision in its accounts Any valid claims arising from the activities of for the likely value of future claims payments, those organisations will be dealt with by NHS and records contingent liabilities that represent Resolution and funded in full by DH. possible additional claims payments to those NHS Resolution currently has a VAT case where already provided for. These amounts are not we may have a present obligation but payment included in the accounts but shown as a Note to is not probable and the amount cannot be the Financial statements because a transfer of measured reliably at this time. These amounts economic benefit is not deemed likely. have not been included in the accounts and As a result of the dissolution of NHS PCTs and also not included in the amount shown above Strategic Health Authorities (on 1st April 2013), in Note 8. NHS Resolution has taken on responsibility for any outstanding criminal liabilities, on behalf of the Secretary of State for Health.
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9. Commitments under operating leases The total future minimum lease payments under non-cancellable operating leases payable in each of the following periods are:
2016/17 2015/16 Land and buildings £000 £000 Amounts payable: within 1 year 1,348 727 between 1 and 5 years 2,753 2,752 after 5 years 0 0
4,101 3,479
Other leases Amounts payable: within 1 year 10 24 between 1 and 5 years 4 14 after 5 years 0 0
14 38
10. Related parties
NHS Resolution is a corporate body established transactions with DH and with other entities, by order of the Secretary of State to whom NHS Resolution provides clinical and for Health. DH is regarded as a controlling non-clinical risk pooling services, for which DH related party. During the year NHS Resolution is regarded as the parent Department, has had a significant number of material for example:
All clinical commissioning groups Health Research Authority All commissioning support units NHS Blood and Transplant All English NHS foundation trusts NHS Business Services Authority All English NHS trusts NHS England Care Quality Commission NHS Property Services NHS Digital NHS Trust Development Authority Health Education England Public Health England
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1 16 37 11 £000 related party related Amount due from Amount due from
0 0 0 0 £000 Amount owed to related party to related
£000 8,393 13,434 28,081 26,570 related party related Receipts from Receipts from
0 0 0 0 £000 Payments to related party related for the roles they perform they roles is the disclosed the for NHS in for Resolution staff and Remuneration report on page 103. The transactions between parties related the and NHS Resolution indemnity NHS from Resolution those solely arising concern table. the in to schemes, referred individuals the not
Midwife Partner is a Consultant Radiologist Consultant Gynaecologist Researcher Nature Nature of relationship Epsom and St Helier NHS Trust Croydon University NHS Trust Imperial College Healthcare NHS Trust Kings College London Organisation
Ros Levenson, Name and position in Director of Denise Chaffer, Safety and Learning Director of Denise Chaffer, Safety and Learning Keith Edmonds, Non-executive Director Non-executive Director NHS Resolution NHS Resolution Directors and transactions with other organisations NHS Resolution Directors NHS director within hold positions individuals The following has transacted NHS Resolution year the during and Resolution directors the connected. which are to organisations other with transactions and set are out below. these of Details relationships non-executive and directors executive for The remuneration
161 NHS Resolution Annual report and accounts 2016/17 Financial statements
11. Financial instruments IFRS 7 Financial Instruments: NHS Resolution holds financial Market risk (including Disclosures requires disclosure assets in the form of NHS and foreign currency and of the role that financial other receivables, and cash, interest rate risk) instruments have had during as set out in Notes 4 and 5 the period in creating or respectively, and financial None of NHS Resolution’s changing the risks an entity liabilities in the form of NHS financial assets and liabilities faces in undertaking its and other payables, as set out carry rates of interest. NHS activities. Because of the way in Note 6. As these receivables Resolution has negligible Special Health Authorities are and payables are due to foreign currency income and financed, NHS Resolution is mature or become payable expenditure. NHS Resolution not exposed to the degree within 12 months from the is, therefore, not exposed to of financial risk faced by Statement of Financial Position significant interest rate or business entities. Also date, NHS Resolution considers foreign currency risk. financial instruments play a that the carrying value is a much more limited role in reasonable approximation Credit risk creating or changing risk than to fair value for these would be typical of the listed financial instruments. As noted, NHS Resolution companies to which IFRS 7 receives its income from NHS mainly applies. NHS Resolution member organisations. As a Liquidity risk has limited powers to borrow consequence, its NHS and other or invest surplus funds, and NHS Resolution’s net receivables are not impaired, financial assets and liabilities expenditure is financed from and there are no significant are generated by day-to-day resources voted annually receivable balances with bodies operational activities rather by Parliament and scheme external to government. than being held to change the contributions from NHS NHS Resolution is, therefore, risks facing NHS Resolution in Member Organisations. NHS not exposed to significant undertaking its activities. Resolution finances its capital credit risk. expenditure from funds made available from Government under an agreed capital resource limit. NHS Resolution is, therefore, not exposed to significant liquidity risks.
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12. Events after the reporting period There are no adjusting events Reference has been made in These financial statements after the reporting period this document to the Ministry were authorised for issue on which will have a material of Justice consultation, Personal the date that the Comptroller effect on the financial injury discount rate: how it and Auditor General certified statements of NHS Resolution. should be set in future. At the the accounts. point that the consultation response is published, NHS Resolution will review the impact on its future operations and financial statements.
163 NHS Resolution Annual report and accounts 2016/17 Glossary
Glossary
ALB – Arm’s Length Body. ELS – Existing Liabilities Scheme is funded by DH and is a clinical negligence claims scheme that indemnifies pre-April 1995 incidents. CCGs – Clinical Commissioning Groups have taken over commissioning from primary care trusts (PCTs). Ex-RHA – the Ex Regional Health Authorities Scheme, is funded by DH and a clinical negligence claims scheme that indemnifies the CNST – the Clinical Negligence Scheme for liabilities of former Regional Health Authorities. Trusts indemnifies members for clinical negligence claims. Extranet – A secure web portal providing our members and our solicitors with real time access CTG – Cardiotocograph is a technical means to their claims data. The data help our members of recording the fetal heartbeat and the uterine prevent harm to patients and staff, which might contractions during pregnancy, typically in otherwise lead to future claims against the NHS. the third trimester.
FHSAU – Family Health Services Appeal Unit. DH – Department of Health.
HPAN – Healthcare Professional Alert Notice is HM Treasury Discount Rates – These discount an alert system managed nationally by NCAS rates are designed to recognise the value of to alert employers to the existence of serious money over time: £1 now may be worth more grounds for concern about a regulated health or less in the future. Applying a discount rate to practitioner who has departed the organisation the amounts we expect to pay out in the future and for whom the concerns were unresolved. enables us to put a value on those outgoings at This differs from performers’ list management today’s prices. It tells us how much we would (restrictions on practice), which are logged need to pay out if we settled all of those centrally by FHSAU and shared with requesting future obligations today. health bodies.
Duty of Candour – The Statutory Duty of IBNR – Incurred But Not Reported claims; claims Candour places a requirement on providers that may be brought in the future. of health and adult social care to be open with patients when things go wrong. It means providers must notify the patient about LASPO – Legal Aid Sentencing and Punishment incidents where ‘serious harm’ has occurred of Offenders Act. Legal reforms that came into and provide an apology and explanation force on 1 April 2013. The reforms change, where appropriate. amongst other matters, the amount that claimant solicitors can recover from the defendant under conditional fee agreements and limit after the event insurance.
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Legal costs – Amounts paid out by NHS NRLS – The National Reporting and Learning Resolution in legal costs for claims resolved, System was established in 2003, is a system including defence and claimant costs this can that enables patient safety incident reports to include expert and counsel fees as well be submitted to a national database. This as court costs. data is then analysed to identify hazards, risks and opportunities to improve the safety of patient care. LTPS – the Liabilities to Third Parties Scheme indemnifies the NHS for employers’ liability, public liability and professional indemnity claims PES – The Property Expenses Scheme made against the NHS. indemnifies NHS members for property claims.
Member – NHS Resolution is a membership PIDR – Personal Injury Discount Rate. organisation comprising NHS Trusts, CCGs, independent healthcare providers to the PNA – Pharmaceutical needs assessment. NHS and other Government agencies related to healthcare. PPO – A Periodical Payment Order is a court order that grants the claimant a lump sum MOJ Portal – A secure electronic payment followed by regular payments over communication tool for processing low value the life of claimant. personal injury claims, covered by the Ministry of Justice’s (MOJ) pre-action protocols, which limit the costs recoverable. SHAs – Strategic health authorities. Regional NHS organisations abolished on 1 April 2013 by the Health and Social Care Act 2012. NCAS – National Clinical Assessment Service helps resolve concerns about the professional practice of doctors, dentists and pharmacists Sign up to Safety Improvement Plan – in the UK. As part of its involvement in the Sign up to Safety campaign, NHS Resolution offered NHS trusts a discretionary incentive payment of up NHS LA – National Health Service to 10% of their contribution to the 2015/16 Litigation Authority. CNST where they produced robust Safety Improvement Plans to demonstrate how their organisation would reduce its higher volume and/or higher value claims.
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