9th Report, 2012 (Session 4): NHS Boards Budget Scrutiny

SP Paper 171

HC/S4/12/R9

9th Report, 2012 (Session 4)

NHS Boards Budget Scrutiny

CONTENTS

Remit and membership

Report

Introduction

Approach

Findings

Financial Pressures and Savings
Shifting care from acute to community
Other Findings

Issues

Financial flows
Making savings
Planning for savings
Protecting quality while making savings
Levers for change
Agenda for future investigation by the Committee
Data availability

Conclusion

Annexe A: EXTRACT FROM MINUTES OF THE HEALTH AND SPORT COMMITTEE

Annexe B: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

Annexe C: LIST OF OTHER WRITTEN EVIDENCE

Annexe D: BUDGET ADVISER EVIDENCE

Remit and membership

Remit:

To consider and report on health policy, the NHS in Scotland, anti poverty measures, equalities, sport and other matters falling within the responsibility of the Cabinet Secretary for Health, Wellbeing and Cities Strategy apart from those covered by the remit of the Economy, Energy and Tourism Committee.

Membership:

Bob Doris (Deputy Convener)
Jim Eadie
Richard Lyle
Fiona McLeod
Duncan McNeil (Convener)
Nanette Milne
Gil Paterson
Dr Richard Simpson
Drew Smith

Committee Clerking Team:

Clerk to the Committee
Douglas Wands

Senior Assistant Clerk
Rodger Evans

Assistant Clerk
Rebecca Lamb

Committee Assistant
Myra Leckie

NHS Boards Budget Scrutiny

The Committee reports to the Parliament as follows—

INTRODUCTION

1. At its meeting on 13 December 2011 the Health and Sport Committee agreed, as a follow up to scrutiny of the draft budget, to scrutinise NHS board allocations in spring 2012.

2. At this stage, NHS boards should have received their budget allocations and have finalised their financial plans for 2012-13. This would allow the Committee to pose more detailed questions than were possible when discussing the national budget that only provides indicative information down to the level of the total revenue allocation for each board.

3. The Committee agreed to seek responses from all 14 territorial health boards and the eight special health boards to a series of questions regarding NHS board allocations. The Committee also agreed, on the basis of the information received, that it would select representatives from a handful of boards to give oral evidence.

4. A general issue of concern to the Committee was that the budget document continues to cover national spending on health in detail but does not give detail on how health boards use their allocation.

5. Professor David Bell, adviser to the Finance Committee, said in evidence last October—

"It seems to me that much of this is about the failure to properly inform the Parliament and the people of Scotland about how £10 billion or £11 billion is really being spent."1

6. By way of context, the table below sets out Level 2 spending plans for the health, wellbeing and cities budget portfolio in real terms over the duration of the period of the spending review (2012-2015)—

Health, Wellbeing and Cities budget – Level 2 spending plans (real terms)2

£m
2011-12 prices
2011-12 2012-13 2013-14 2014-15 Change 2011-12 to 2012-13 Change 2011-12 to 2014-15
NHS and Special Health Boards 8,645.1 8,646.1 8,673.8  8,686.3 0.0% 0.5%
Total Health, Wellbeing and Cities 11,466.3 11,402.8 11,368.0 11,270.4 -0.6% -1.7%
NHS and Special Health Boards as % of total Health, Wellbeing and Cities budget 75% 76% 76% 77%    

7. It is noted that the health budget has received the full health revenue Barnett consequentials over this period: £249 million towards its resource budget in 2012-13, £293 million in 2013-14 and £284 million in 2014-15; which has lifted the resource budget by 2.3 per cent to more than £11.0 billion in 2012-13.3

8. The Committee has sought to address what Professor Bell calls the “failure to properly” inform by holding the evidence sessions with NHS boards when their plans became available and by discussion with the Scottish Government Health Directorate (“SGHD”) about supplementary information that will be required in scrutinising next year's budget.

9. The Committee highlighted these matters in last November’s report4 to the Finance Committee on scrutiny of the Scottish Spending Review 2011 and Draft Budget 2012-13 document (“SSRDB”).

10. That report included the following specific points that the Health and Sport Committee wished to re-examine—

  • That it is unclear how the transition [from funding pilot schemes] to mainstream takes place. (Paragraph 48)5
  • The Committee awaits with interest further information about how the change funds have been invested. (Paragraph 56)6
  • The Committee supports the concepts of prevention and integration. However, these raise a number of issues in the context of the scrutiny of the SSRDB document, and the Committee will want to return to these in future years to assess the progress that has been made. (Paragraph 97)7
  • The Committee will wish to revisit the progress on preventative spending - including FNP (Family Nurse Partnerships) and Keep Well, the success or otherwise of other preventative measures, how the Change Fund is being deployed and its impact on quality of care and value for money - more systematically over the course of the spending review, and for the duration of this Parliamentary session. (Paragraph 98)8

11. This report covers evidence considered by the Committee in April and May 2012 as part of its on-going scrutiny of the health budget and spending plans, and in seeking to address the above points.

12. At its meeting on 17 April 2012, the Committee considered an analysis of the responses to a questionnaire that was sent to all NHS boards and agreed to take oral evidence from four boards and SGHD officials detailed in paragraph 19. This evidence was heard at a meeting on 1 May.

13. The Committee extends its thanks to all those who provided evidence and participated in this inquiry. It would also like to record its gratitude to its budget adviser, Dr Andrew Walker of the University of Glasgow, and also to Nicola Hudson from the Parliament’s Financial Scrutiny Unit.

APPROACH

14. In January 2012, a survey form, consisting of 11 questions, was sent to NHS boards including—

  • The 14 boards responsible for planning and providing health care to Scotland’s population within their geographical boundaries, referred to as the territorial boards; and
  • The eight health boards with specific roles or functions, referred to as the special boards.

15. All boards responded to the timescale requested; clarifications and follow-up questions were sent, and responses were received in a timeous manner.

16. Responses were collated, and replies to individual questions were entered into Excel files for analysis (available to members on request); key tables are provided in this report.

17. Where quoted, the 2012-13 allocations to boards in the tables are those announced by the Scottish Government in February 2012.9

18. That document included two sets of 2011-12 figures: the first column (initial allocation) showing the amounts that were announced the previous February, with the second 2011-12 column (baseline) showing the baseline figures that are the basis for the funding uplift percentages shown in the 2012 press release.

19. To supplement its survey, the Committee heard oral evidence from witnesses representing NHS boards (the finance directors of NHS Greater Glasgow and Clyde, Lanarkshire, Western Isles, and Dumfries and Galloway) and from SGHD (the Director-General of Health and Social Care and the Director of Health Finance and Information).

FINDINGS

20. The Committee’s findings can be grouped under two main headings—

  • Financial pressures and savings
  • Shifting care from acute to community

21. These are dealt with in turn, followed by other findings that do not fall under either heading.

Financial Pressures and Savings

Inflationary pressures

22. In response to a survey question, NHS boards reported anticipated cost pressures as follows—

  • Pay: 0.3% to 1.8%
  • Supplies: 0.9% to 2.7% due to price changes, 0% to 1.2% due to volume changes
  • GP prescribing: 0.5% to 4.1% due to price changes, 3% to 8% due to volume changes
  • Hospital prescribing: 1% to 9% due to price changes, 3% to 9.1% due to volume changes

23. Questioned about the cost pressure of pay, Laura Ace, Director of Finance, NHS Lanarkshire, pointed out the national pay restraint that was in place for the current financial year in recognition of the economic climate.

24. Ms Ace said—

“The position that we are all reporting now would look significantly worse if pay restraint had not been operating in the background. The lowest paid, who earn under £21,000, get an element of rise but, beyond that, inflationary rises – and for senior managers, the element is counted as PRP – have been frozen for just now.”10

25. She told the Committee—

“Other staff progress incrementally up their pay scale, but senior managers can progress only if they demonstrate that they have met their objectives.”11

Savings plans

26. The Committee asked NHS boards about their savings plans for 2012-13. The average level of planned savings for 2012-13 among the territorial boards is 2.9% and among the special boards 2.8%. Savings targets of 2-3% have been the norm for boards in the recent past. While boards have achieved savings of around this level before, it is not clear how sustainable that is.

27. Generally speaking, special boards have higher savings targets but one of the largest special boards, NHS Education for Scotland (“NES”), has the lowest level of planned savings as a percentage of allocation of any board in Scotland. Excluding NES gives a savings target for special boards of 3.8%.

28. Within the territorial boards there was a range in targets from a low of 1.7% in Grampian to a high of 6.8% in Shetland. Those boards covering urban areas appear to have lower savings targets than boards serving populations in remote and rural areas.

29. When asked to list their top three areas for savings, boards reported that around 40% of their savings were from the prescribing budget, around 40% from support services and 20% from improved efficiency through redesign of “front-line services”. For some smaller boards there was also potential for savings from switching care of patients from hospitals in other boards’ facilities to care at a local hospital.

30. Asked about the process by which boards decide what spending will be reduced to make savings, Marion Fordham, Director of Finance of NHS Western Isles, said—

“We prefer not to impose the nature of savings on the front line; we expect people to come forward with proposals…when areas can identify additional savings, that will mitigate the situation in struggling areas.”12

31. Craig Marriott, Director of Finance, NHS Dumfries and Galloway, told the Committee—

“…we have probably targeted the operational aspect much more until now. We are moving into the strategy and tactical stuff, which will involve much bigger service changes over a longer timeframe.”13

32. Ms Ace said of NHS Lanarkshire’s approach—

“We tend to work from the bottom up. The directorates and divisions come up with the efficiency proposals that they think could be managed.”14

33. Asked about the robustness of the process, Mr Marriott suggested that the scale of the proposal would inform the degree of rigour applied, telling the Committee—

“It again comes down to quantum and the materiality…Proposals that will deliver savings of £1 million have rigid financial and service plans put in place to monitor the process and deliver the expected service outcome.”15

34. He described his board’s approach as being—

“…to look at innovation and creativity, and some of the productivity issues, and to try to build up that approach throughout the year.”16

35. Paul James, Executive Director and Director of Finance, NHS Greater Glasgow and Clyde, told the Committee there was no simple formula or overall target applied to each area. He said—

“Indicative targets were given to managers within the board, who went away to work on them…Any concept of silo working is incorrect, because at that point we were discussing and assessing the various proposals that had come forward.”17

36. Asked about benchmarking, Ms Ace told the Committee—

“Part of our iterative process is a stocktake against the national productivity and efficiency programme to ensure that we have covered everything that has been identified.”18

37. Mr Marriott said—

“The issue with benchmarking is how we take the money out of the back end. That is sometimes about capacity release and sometimes about cost avoidance. When we talk about efficiencies, it is really just about trying to get to the cash, which can be a bit more difficult.”19

38. John Matheson, Director of Health Finance and Information, told the Committee—

“The efficiency savings that the territorial boards deliver – in their financial plans, they anticipate that those will be about 3% in 2012-13 – are totally retained within the territorial board area.”20

39. This contrasted with the approach to special boards that were not “directly patient facing”. Mr Matheson said—

“The special boards have opportunities for savings in the way in which they support the delivery of quality clinical care. For example, national procurement in NSS [NHS National Services Scotland] has delivered savings of £74 million in the past four years, which has been reinvested.”

40. Derek Feeley, Director General of Health and Social Care, told the Committee about the steering group established by the Scottish Government to support the boards in addressing efficiency and productivity. The focus of the group would be on acute flow, outpatients prescribing, procurement and shared services.21

41. Mr Feeley said there was also a quality and efficiency support team, set up to help boards share information. He told the Committee—

“We are getting more adept at providing information services to boards, although we could do more and do better…I agree that we should be benchmarking and sharing information with boards, but we should also get the clinical information to the people who make the decisions – that is, the clinicians.”22

Risks in financial planning

42. Boards were asked what they had identified as the top three risks in their financial planning. There were a variety of risks specific to individual boards but the main ones were—

  • Cost pressures (especially prescribing) exceeding the levels they have planned for;
  • Delivering the programme of savings in view of the number of schemes required to achieve this and “high-risk” nature of some of them (i.e. a risk specific schemes would not achieve their target savings); and
  • Impact of capital budget changes on maintenance and equipment replacement.

43. Questioned about risk associated with maintenance budgets for hospitals, Mr James said—

“…we must ensure that, in our capital plans, we give priority to the estates that we need to invest in…I assure you that we prioritise our service redesigns to reduce those costs.”23

44. Ms Ace told the Committee—

“The reason why the risk has not been mentioned in the financial plan is that we have as far as we can built it into the plan. Lanarkshire has risk-assessed its entire estate, particularly Monklands hospital…and we have put in place a risk-based programme to ensure that we tackle that first. We have been putting in £5 million over the past few years and, indeed, have allocated £6.6 million in this year’s capital plan.”24

45. Of other premises, she said—

“Our programme of community health centre development has taken away some of our worst premises and the others are prioritised according to risk…We are mindful of the issue and it is covered in our monthly financial planning.”25

46. In the boards’ oral evidence, the merits of certainty and of flexibility were explored against the backdrop of service targets, cost pressures and delivering savings.

47. Mr James told the Committee—

“It is helpful to us in achieving our targets to have some ability to move funding within larger bundles…We are in the business of providing health infrastructure, which is not always easy to change over just one year. Longer-term funding figures are helpful to us.”26

48. Ms Ace said—

“We recognise that policy makers want the money to be directed to the area where the objective is in order to achieve it, so we are used to working with earmarked funding.”27

49. From the SGHD perspective, Mr Matheson talked of promoting the “concept of bundling” in a risk context. He said—

“Rather than micromanage boards and give them allocations at a reasonably small level, allocations are bundled in themes. That gives the boards the ability to use money flexibly and creatively and the assurance that money is not just a one-off – although it is earmarked in the bundle, it is not earmarked at a micro level.”28

50. In more general terms, Mr Feeley told the Committee—

“We expect risk to be a fundamental part of boards’ planning…to be picked up in the development of proposals.”29

Level of service developments that could be funded

51. Boards were asked for examples of services developments that they had been able to fund and also for examples of services that they would see as priorities but could not fund in 2012-13. The intention was to assess the extent to which financial pressures were constricting planned change.

52. They reported that a wide variety of services received additional funding, including national priorities (e.g. screening for aortic aneurysms) and regional priorities (e.g. medium secure unit for forensic psychiatry in the north of Scotland). Of locally determined priorities, acute services and medicines costs took up a major share.

53. Boards also reported a range of services that they would ideally wish to fund but for which money was not available. The areas were diverse and included health promotion, screening, services for mental health and for surgery, and infrastructure projects.

54. The list did not include any services in priority areas such as cancer care and funding for medicines did not feature. Five boards said there were no service developments regarded as priorities they could not fund.

55. One programme explored in oral evidence was the funding of abdominal aortic aneurism screening (“AAA”). Mr Feeley stated that all boards would be funding this though he accepted that: “A few have not yet identified the financial means to do it”.30

56. It is noted, in line with that statement, that the Committee received clarification in writing from the Finance Director of NHS Lothian, further to her original questionnaire response, saying—

“I can confirm that the AAA screening programme is funded at a national level and is going ahead in both NHS Lothian and NHS Borders as planned. This will be funded on a non-recurring basis in 2012/13 with full recurring funding to be provided from 2013/14.”31

Preventative spending

57. The Committee has noted before that it is interested in all aspects of prevention relevant to good planning of health services and in the specific issue of whether preventative spending realises savings that help boards address financial pressures.

58. In response to the survey question, all boards believed there are long-term benefits to preventative spending but they do not include these in financial planning.

59. Several reasons were given, including difficulties in obtaining evidence of savings, identifying savings, and actually realising savings in cash terms. A practical difficulty was that, for health promotion spending, the expected impacts were expected to occur decades into the future while NHS financial planning is usually over three-to-five years.

60. Mr Marriott told the Committee—

“By the very nature of preventative spend, the timeframe for recovery or generating the efficiency might be slightly outwith the timeframe for our financial plans”.32

61. Marion Fordham, Director of Finance, NHS Western Isles, said—

“…we introduced near-patient testing and anticipatory care for heart failure more than five years ago and can point to statistics now that say that, as a result, we have reduced the anticipated bed days by 60%. However, we still have a hospital with beds in it, so until we have a bigger service change that affects how the hospital is utilised, we will not realise the associated savings in a tangible way.”33

62. Ms Ace referred to the findings of an Audit Scotland report on cardiology services that new cases of coronary heart disease had declined by a third since 2000 while national spend had risen by £63 million as patients were living longer and new treatments becoming available. She said—

“The preventative approach has helped us to cope with demand and to fund advances in technology, but no money has come out of the area – indeed, we are still investing in it.”34

63. She added—

“It is not that the acute sector is sucking money in; the sector is responding to policy initiatives, expectations and demand.”35

64. Pointing out that preventative spending was not something beginning from scratch, Mr Matheson referred to such initiatives as the family nurse partnerships, healthy start, childsmile, and coronary heart disease. He said—

“We look at the totality of the spend and the added value of spend at various points, and…we consider the impact on healthy life expectancy of moving some of the resources from the illness side to the preventative side.”36

65. Mr Feeley highlighted the use of the integrated resource framework (“IRF”) in respect of encouraging better understanding of the impact of spend on health and social care. He told the Committee—

“The IRF is starting to generate useful information, so people can ask “If I invest in X, what will the benefits be?””37

66. He undertook to provide the Committee with information on the work that has been undertaken to that end. 38

67. That information was subsequently provided in a letter to the Committee.39

Shifting care from acute to community

68. Given the financial climate, the issue of cost pressures and savings is particularly important in the NHS. However, the Committee did not wish to lose sight of longer-term goals such as shifting the balance of care away from acute hospitals and toward community-based services. This also requires financial planning, given the financial flows in the NHS can help or hinder that shift.

The balance of spending between acute and community services

69. There was some evidence that boards had used different definitions when providing these figures.

70. In the initial responses, boards reported that in 2011-12, 48% of spending was on acute services, 45% on primary and community services, and 7% on “other” services. However, there was some considerable variation between boards and clarification was sought.

71. The revised figures were 50%, 47% and 3% respectively. Compared with the figures for 2010-11, the figure for “other” had fallen slightly (3.04% to 2.86%) with the share of the other two programmes increasing—

  Acute   Primary and community Other services
  2011-12 2012-13 2011-12 2012-13 2011-12 2012-13
  as % of total as % of total as % of total as % of total as % of total as % of total
Ayrshire & Arran 56% 56% 42% 42% 2% 2%
Borders 54% 54% 44% 44% 2% 2%
Dumfries & Galloway 52% 52% 44% 45% 4% 4%
Fife 43% 45% 54% 53% 3% 3%
Forth Valley 45% 46% 51% 52% 4% 3%
Grampian 57% 57% 40% 39% 4% 3%
Greater Glasgow and Clyde 50% 50% 47% 47% 3% 3%
Highland 53% 53% 44% 44% 3% 3%
Lanarkshire 45% 46% 51% 52% 4% 3%
Lothian 46% 46% 50% 51% 3% 3%
Orkney 44% 43% 53% 54% 3% 3%
Shetland 60% 61% 35% 35% 4% 4%
Tayside 54% 54% 44% 44% 2% 2%
Western Isles 42% 42% 55% 55% 3% 3%
Scotland 50.06% 50.13% 46.90% 47.01% 3.04% 2.86%

72. Evidently there is variation across boards but no clear patterns emerge in terms of differences between large and small boards, or city and rural settings.

73. Speaking on the matter in the context of integration, Mr Feeley said—

“…we have been discussing a set of national outcomes to apply consistently across every health and social partnership. We are nearly through the process of agreeing the outcomes.”40

74. He emphasised the need to make progress in a “gradual, managed and clinical way.”41

75. Mr Matheson said—

“The challenge for us is to have a robust business case that will engender significant sign-up to it and public engagement with it, in terms of the additional investment in community facilities.”42

Change Funds

76. The process of change may speed up as a result of the introduction of change funds, funding earmarked to alter the process of care. Boards were asked about their planned allocation of the change funds for older people’s services and early years intervention for 2012-13, whether this funding was being supplemented by local authorities, and whether any of the money would be transferred to third sector organisations to support delivery.

77. Some boards reported that the change fund for older people represents over 1% of their revenue budget allocation. They indicated that where decisions had been made on the local allocation of funds, much of the spending will be on preventative services and support at home to avoid the need for hospital care.

78. Some local authorities have made financial contributions to the change fund covering their population. Others have not. Some funding has been transferred to the third sector but in the case of several boards this was less than 10%.

79. Mr James explained that NHS Greater Glasgow and Clyde’s change fund plans were not complete at the time of their responding to the Committee’s questionnaire. He said—

“…a variety of initiatives has been developed by individual community health partnerships….it is a catalyst. It is about giving people the ability to invest in certain areas in which they think that it is possible to shift the balance of care.”43

80. Within a wider picture, he told the Committee—

“The change fund is not the core funding area. We are redesigning services within the core funding area all the time, cognisant of the change fund initiatives.”44

81. The view from NHS Lanarkshire was one of realism: demographic change demanded a change in service delivery. Ms Ace said—

“We are engaging multiple partners, and there has been a lot of capacity building in the first year…we want to ensure that when we have an idea for a new service, that service will deliver what we want it to”.45

82. Mr Feeley told the Committee of the Scottish Government’s confidence in the change fund and its potential to contribute to capacity building and the redesign of services. He said—

“We still have quite a lot to do to ensure that the good practice that we are starting to see locally around anticipatory care, hospital at home and so on happens reliably across the country…I acknowledge that it is a work in progress, but I think that we are heading in the right direction.”46

Resource transfer from the NHS to local authorities

83. While it is not formally part of the change fund initiative, the Committee was also interested in the long-standing resource transfer that takes place between NHS boards and local government.

84. This was introduced more than a decade ago as part of the resettlement of people from long-stay institutions into community care. The Committee was clear that this funding is earmarked for the care of certain patients but it does have some characteristics of a change fund.

85. Boards reported that the amount of money going from health boards to local authorities in resource transfer is more than three times as much as was allocated to boards through the change fund in 2012-13. This is used to provide social care for a variety of groups of clients. Little detail was forthcoming, however, suggesting perhaps that NHS boards are removed from decision-making.

Other Findings

Earmarked funding

86. Earmarked funding makes up 12% of the allocation to NHS territorial boards, and this is slightly lower than 2011-12 because funding for waiting time targets and for health care for prisoners has moved to the main budget.

87. Non-recurring funding has fallen from 5% in 2011-12 to 2% of the budget allocation in 2012-13. Some boards (Lanarkshire, Dumfries and Galloway, and Fife) receive more than others. It is possible that boards have used different definitions when providing these figures.

88. NHS Lanarkshire submitted a clarification on how a particular recurring allocation had been classified and Ms Ace said that, once this was taken into account, they did not have a high level of non-recurring funds. 47

89. Similarly, NHS Dumfries and Galloway emphasised an issue to do with impairment and Mr Marriott said that they used non-recurring funds for non-recurring purposes.48

Projects moving from ring-fenced funding to mainstream

90. Comparatively few examples were available of local projects previously funded on a pilot basis but then switched to mainstream funding. One example from NHS Borders showed that monitoring would be on-going but it was unclear how common this was.

Provision for equalities group and monitoring of outcomes

91. There was considerable variation in the level of detail provided, likely indicating differing emphasis given to equalities issues across boards and that different structures were in place.

92. Some Boards limited their response to identification of specific services aimed at equalities groups. Eight Boards mentioned the provision of translation services.

93. Other services that were mentioned by more than one Board were—

Services to support blind people

  • Services targeted at the lesbian, gay, bisexual and transgender population
  • Firmbase, aimed at returning servicemen and women
  • Use of sign language
  • Support for those with mental health and/or learning difficulties

94. The majority of territorial Boards mentioned use of equality impact assessments (“EIAs”) either across all services/policies or when changes are proposed. As the question did not specifically ask about EIAs, it should not be assumed that those boards that failed to mention EIAs were not making use of them.

95. Two Boards (Borders and Grampian) referred to the mainstreaming of equality and diversity issues, while one (Shetland) referred to the challenges of running targeted services for specific groups within a small population and the potential stigmatisation of individuals within such communities.

96. Nine of the 14 territorial Boards made reference to monitoring of the outcomes of services aimed at equalities groups. The answers given varied from a very general reference to routine monitoring of services, to specific details of individual services.

97. Grampian and Highland gave the most detailed responses in this respect, describing the various bodies with a bearing on equalities issues and the role of these bodies in respect of monitoring activities.

98. In oral evidence, NHS Dumfries and Galloway told the Committee—

“…sitting down to do equality impact assessments of our efficiency programme has become normal in our business. That is a common question around our board table.”49

ISSUES

Financial flows

99. The Committee can now start to sketch the decisions made in between an allocation being made to the portfolio within which health services reside and people receiving care:

  • Step One – allocation within the portfolio to health versus sport, cities or wellbeing.
  • Step Two – allocation within “health” to NHS boards or to other programmes and services (e.g. capital programme, national public health programmes, research, etc.)
  • Step Three – within the allocation to NHS boards, the division between “geographical” boards (providing care for people living in a defined area) and “special” boards (defined national roles and functions)
  • Step Four – allocation within geographical boards to “provider functions” (e.g. acute, community) and funding for specific new services
  • Step Five – within “provider units”, allocation to groups of specialities (e.g. medical, surgical) or support services (e.g. laboratories, estates).
  • Step Six – within groups of services, allocation to staff (number of staff and employment cost), prescribing, buildings, equipment, etc.
  • Step Seven – teams of staff provide services for patients and determine which treatments to provide.

100. NHS boards reconcile spending within their area and take lead responsibility for issues such as the change fund.

101. This characterisation of the financial flows from national budget to patient also makes the important point that at step six, funds are spent on paying for staff, buildings and equipment. They are not spent on specific treatments.

102. Put differently, the budget-holder within a group of specialties in a hospital does not fund operation X for one patient and operation Y for another patient. Instead, they pay for a surgical team who make decisions on which treatment to provide for each patient. Some decisions are directed by national policies (e.g. waiting times targets), some by national clinical guidance, and some on the basis of their own judgement.

103. The point is that NHS funding is for the team, not for the individual treatments. Operation X costs £2,000 in the sense that the care involved uses resources such as staff time which, valued at their average cost (e.g. salary cost divided by total hours worked) comes to £2,000.

104. If the operation is cancelled or availability of a new medicine avoids the need for surgery, the team is still in place and now slightly less productive than they were before (in the sense of doing less work). The time freed up could be used to treat a patient from the waiting list, and this is a positive thing, but the change is time-releasing, not cash-releasing.

Making savings

105. The Committee has identified the fixed nature of costs as one obstacle to making savings.

106. A second issue, in terms of financial planning, is that a change designed to achieve savings is not launched in isolation, as many other changes will be happening to the service at the same time.

107. NHS Lanarkshire articulated this view—

“Although preventative programmes do often contain an evaluation of the wider and longer-term savings our financial plans do not rely on any savings for these in the next few years. The demographic challenge, advance of technology and new expensive drugs are constantly pushing costs upwards. The impact of preventative spend is often gradual and much longer term. An effective preventative spend could mean people who would otherwise have presented for treatment in years to come now will not but if this is against a backdrop of an increasing number of people expected to develop this and other conditions and if the treatment options have expanded and become more expensive there will be no ability to release cash from the system.

For example, secondary prevention measures for cardiovascular conditions have been very successful in reducing mortality rates. However there has been no release from our investment in cardiac surgery, in fact, investment has increased to support service improvements through the creation of a national cardiothoracic centre and the emergence of new high cost procedures such as TAVI which has a £25,000 cost per case. If the preventative spend had not taken place the costs could have risen even higher but there is no direct cash release.”50

108. This helps explain why the impact of preventative spending over the last decade or more has been difficult to track – it is one “downward pressure” among numerous other pressures that are pushing costs both up and down.

109. On balance, many people would agree that it must have had some effect but quantifying this retrospectively is not possible.

Planning for savings

110. As a consequence, boards remain very cautious when planning for savings. It would be going too far to say that spending on preventative programmes is an act of faith, but it is certainly difficult to retrospectively audit the value-for-money of such programmes.

111. This poses a challenge to managers, governments and the Parliament.

112. The danger is not that preventative spending is a flawed concept; rather the chances are that not every programme claiming it will make savings will actually deliver.

113. The Committee will return to this issue in the next round of budget scrutiny.

Protecting quality while making savings

114. The Committee is aware that saving money is only one part of the story and the quality of service for the patient must be maintained. Budget scrutiny tends to concentrate on the allocation of budgets and all the data that the Committee has seen concerns spending, budget plans, estimates of cost pressures, savings plans etc. There are no comparable measures of quality.

115. The Committee shall explore this in greater depth with NHS boards in its next round of scrutiny.

Levers for change

116. The switch in funding from acute to community services is glacially slow. While this may be disappointing for switching the balance of care, the Committee is mindful that services based in acute hospitals play an important role in meeting health care needs.

117. Acute hospitals continue to absorb a substantial amount of the money that boards have for service developments – the funding given to maintain and expand imaging services, for example, capacity (staffing), as well as for medicines such as those for hepatitis C and biological therapies for various illnesses.

118. Only Greater Glasgow and Clyde mentioned health promotion among the major initiatives funded, although the national screening programme for AAA is preventative care.

119. The slow pace of change from acute to community care reflects in part the importance of issues such as waiting times for treatment, access to the latest imaging techniques and access to new medicines for hospital use (after evaluation by the Scottish Medicines Consortium).

120. Given that cost pressures from these sources are unlikely to reduce over time, the Committee appreciates the strong case for change funds.

121. It is too early to judge how successful these change funds have been. The Committee’s concern at this stage has been to see that third sector organisations are fully included in discussions about the use of funds and are given a fair chance to bid for funding.

122. The Committee has highlighted its concern about the evaluation of pilot schemes (especially in preventative care) and mechanisms for switching the funding of successful examples of such schemes from earmarked funding to mainstream funding after an appropriate evaluation.

123. The Committee will return to these issues again in scrutinising budget plans for 2013-14.

Agenda for future investigation by the Committee

124. The Committee believes very strongly that the public has every right to expect it to be able to answer all of the following questions—

  • Are we satisfied that levels of health spending are adequate to deliver the quality of service expected of the NHS in Scotland?
  • Is the available budget maximising the benefit for patients? In short: Are we spending wisely?
  • How are we ensuring that services are efficient? Can more be done?
  • What are we doing to ensure that the quality of service regarding outcomes for patients is protected as savings are made?
  • How are we planning for change in the NHS over the next 10 years? Is the pace of change appropriate?

125. Specific issues will arise that add to this list and it may change over time, but these questions are fundamental to any meaningful scrutiny of planning and budgets.

126. Considering these briefly in turn—

Are levels of health spending adequate?

127. The Committee will continue to scrutinise the balance between changes in funding and cost pressures. The ability of the NHS to achieve the required level of savings is critical. In this report the Committee reported on cost pressures. It has also reported boards’ own assessments of risk.

128. In the next round of scrutiny, the Committee will make a more systematic assessment of the balance of additional funding versus cost pressures across the whole system. It may also consider a system-wide assessment of risks rather than the view from boards themselves.

Are we spending wisely?

129. So far the Committee has mainly considered the headings in the budget projections provided. These make good sense from the point of view of passing funds from one budget holder to another but they do not give a good sense of what services are provided. The Committee wishes to explore this in the next round of scrutiny.

130. In this report, the Committee has assessed which new service developments could be afforded this year and which could not. Boards reported that there were no service developments that were priorities which could not be afforded. This is an important finding and the Committee will enquire further into the provision of certain new services across NHS boards in future scrutiny.

How are we ensuring that services are efficient?

131. This report sets out NHS boards’ planned levels of savings for 2012-13. The Committee notes that the NHS continues to deliver efficiency savings each year and it notes also the boards’ assessment of the risks.

132. The Committee wishes to delve more deeply into details of how savings were achieved in future scrutiny, a concern being that in some years boards may achieve target levels of savings via non-recurring savings. These are by definition only a temporary solution and may conceal underlying financial problems.

What are we doing to ensure that the quality of service regarding outcomes for patients is protected?

133. This is an area that the Committee plans to return to in the next round of scrutiny. It is very well for guarantees to be given, in good faith, that the quality of services will not suffer at a time of savings but the Committee reserves the right to be sceptical if such guarantees are not backed up by measure or audit.

How are we planning for change?

134. This report presents the Committee’s findings on the early stages of the use of the change fund. The fund appears to be the main lever to accelerating change and the Committee will continue to scrutinise its use. It will enquire how the pilot schemes funded are to be evaluated and how easily they can be accepted for mainstream funding.

Data availability

135. An on-going issue for the Committee is obtaining the evidence to answer these questions.

136. Giving evidence to the Committee in 2011, the Cabinet Secretary for Health, Wellbeing and Cities Strategy said—

"...the overarching responsibility on health boards, beyond meeting particular yearly targets for efficiency savings, is to be as efficient in the delivery of healthcare services as possible. That is an on-going requirement, and my officials and I will scrutinise carefully health boards' performance against it. We will ensure that the Committee has any information that it needs to perform that scrutiny role, too."51

137. The national draft budget documents published in the autumn of each year provide a starting point and set out—

  • The allocation by Scottish Government to portfolios
  • The allocation within portfolios to broad headings
  • The allocation within Health to NHS boards and to other programmes
  • For some other programmes, notably those run directly by SGHD, a further level of detail is generally available

138. The document also contains policy priorities. It serves the purpose of informing the Parliament of the Scottish Government’s financial allocation for the coming year. However, it was not designed to answer the sort of questions above and it should therefore be of no surprise that it can only provide basic answers (if any) to such questions.

139. For the Committee’s purposes, further evidence is required. This is why the Committee chose to survey NHS boards and take oral evidence at the start of the financial year.

140. While this has been helpful, the process can certainly be improved. For example—

  • It is clear that boards have interpreted some of the Committee’s survey questions in differently, making answers difficult to interpret and compare. Some boards were selected to give oral evidence on the basis of answers that turned out to have used a different definition of a cost to other boards. One response is for a future survey to be accompanied by guidance notes for completion.
  • The Committee is aware that answering survey questions poses additional time costs on boards. Ideally the evidence provided to the Committee would come from existing sources.
  • Oral evidence has value but it is limited when the subject area becomes very technical. There is also a concern that detail can be missed if answers become bland generalities.

141. Given the danger of becoming bogged down in technical issues about data quality, the Committee could explore other sources of evidence for future years as an alternative or a compliment to those used in compiling this report.

142. One option is to use the financial annexes of the Local Delivery Plans (“LDPs”) spread sheets from each board. These include—

  • Revenue allocations, including assumptions about cost increases
  • Savings plans
  • Assessments of risks
  • Service developments funded
  • Capital spending

143. Assembling these for the NHS boards would be very attractive in several ways. First, data available is in a standard format and with common definitions. Second, data is assembled already for the LDPs and the Committee would not impose any additional burden on boards. Third, the plans provide all the relevant details rather than the limited number of key indicators that can be collected through the survey.

144. There are drawbacks. First, while the plans would be extremely helpful, they do not answer all of the Committee’s questions. For example, while a line is included for shared budgets with local councils, the Committee may want a level of detail below that.

145. The second issue is when data will be available. Boards will be working on these documents from the stage where they receive notification of their revenue budget allocation. A version that is substantially complete may be available by mid-March. However, this may be subject to revisions and the final version may not be finalised for several weeks.

146. This would present the Committee with two options. Either it could request the version of the plans that is available in mid-to-late March and accept these will not be finalised at that stage – the broad picture they give may be adequate for the Committee’s purposes – or wait until final versions are available and scrutinise the board-level plans in the autumn at the same time as the national budget plans.

147. The latter may be less satisfactory – using the current year as an example, in October 2012 the Committee would be scrutinising national plans for 2013-14 and boards’ plans for 2012-13 (which will already be halfway over by that stage).

148. The Committee is minded therefore to continue with the survey approach used this year into the next but shifting the questions away from data collection and onto some of the issues highlighted in the preceding section. It can revisit drawing more on LDPs in the future.

CONCLUSION

149. NHS savings are inherently part of the current picture but quality and consistency of service must be maintained across all boards while allowing for flexibility to meet local needs. Budget scrutiny tends to focus on allocation of budgets and most of the data the Committee has seen relates to spending, budget plans, cost pressures, savings etc.

150. The Committee will explore with the boards comparable measures of quality, consistency and flexibility in greater depth in its next round of scrutiny.It reserves the right to be sceptical where guarantees of preserving these are not backed up by measure or audit.

151. The Committee will return to consideration of the input of the third sector in the change fund, evaluation of pilot schemes, and the transition from earmarked to mainstream funding in scrutinising budget plans for 2013-14.

152. The Committee intends to pursue a more systematic assessment of the balance of additional funding versus cost pressures across the whole system.

153. The Committee will delve more deeply into details of how savings were achieved in future scrutiny.

154. The Committee believes that it must be availed of the information necessary to answer such fundamental questions of health policy as:

  • Are we spending wisely?
  • How are we ensuring that services are efficient?
  • What are we doing to ensure that the quality of service regarding outcomes for patients is protected?
  • How are we planning for change?

155. The Committee very much welcomes the earlier assurance of the Cabinet Secretary for Health, Wellbeing and Cities Strategy that any information needed to perform its scrutiny role will be forthcoming.

156. Information provided in the Draft Budget documentserves a specific and very narrow purpose, however, and additional information that the Committee has sought from boards is useful but limited.

157. The Committee is aware that answering survey questions poses additional time costs on boards and ideally the evidence provided would come from existing sources such as the Local Delivery Plans.

158. The Committee is minded therefore to continue with the survey approach it has taken this year but shifting the focus away from data collection and onto those issues highlighted above.

ANNEXE A: EXTRACT FROM MINUTES OF THE HEALTH AND SPORT COMMITTEE

14th Meeting, 2012 (Session 4)
Tuesday 1 May 2012

In attendance: Dr Andrew Walker, adviser to the Committee

NHS Boards budget scrutiny:

The Committee took evidence from—

Mrs Laura Ace, Director of Finance, NHS Lanarkshire;

Marion Fordham, Director of Finance, NHS Western Isles;

Craig Marriot, Director of Finance, NHS Dumfries and Galloway;

Paul James, Executive Director and Director of Finance, NHS Greater

Glasgow and Clyde;

Derek Feeley, Director-General Health & Social Care;

John Matheson, Director of Health Finance and Information, NHS Scotland.

19th Meeting, 2012 (Session 4)
Tuesday 12 June 2012

Decision on taking business in private: The Committee agreed to take item 6 in private.

6. NHS Boards Budget Scrutiny: The Committee considered a draft report and agreed to consider a revised draft in private at its next meeting.

20th Meeting, 2012 (Session 4)
Tuesday 19 June 2012

NHS Boards Budget Scrutiny (in private): Various changes were agreed to and the report was agreed for publication.

ANNEXE B: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

14th Meeting, 2012 (Session 4) Tuesday 1 May 2012

Written Evidence

NHS Dumfries and Galloway
NHS Greater Glasgow and Clyde
NHS Lanarkshire
NHS Western Isles

Oral Evidence

NHS Dumfries and Galloway 
NHS Greater Glasgow and Clyde 
NHS Lanarkshire 
NHS Western Isles

Scottish Government

Supplementary Written Evidence

NHS Dumfries and Galloway
Questionnaire follow up NHS Dumfries and Galloway
NHS Greater Glasgow and Clyde
Questionnaire follow up NHS Greater Glasgow and Clyde
Questionnaire follow up NHS Lanarkshire
Questionnaire follow up NHS Western Isles
Scottish Government

ANNEXE C: LIST OF OTHER WRITTEN EVIDENCE

NHS Ayrshire and Arran
Questionnaire follow up NHS Ayrshire and Arran
NHS Borders
Questionnaire follow up NHS Borders
NHS Education for Scotland
NHS Fife
Questionnaire follow up NHS Fife
NHS Forth Valley
Questionnaire follow up NHS Forth Valley
NHS Grampian
Questionnaire follow up NHS Grampian
NHS Greater Glasgow and Clyde
Questionnaire follow up NHS Greater Glasgow and Clyde
NHS Health Scotland
Healthcare Improvement Scotland
Questionnaire follow up Healthcare Improvement Scotland
NHS Improvement Scotland
NHS Highland
Questionnaire follow up NHS Highland
NHS Lothian
Questionnaire follow up NHS Lothian
NHS National Services Scotland
NHS National Waiting Times
NHS Orkney
Questionnaire follow up NHS Orkney
NHS Shetland
Questionnaire follow up NHS Shetland
NHS Tayside
Questionnaire follow up NHS Tayside
NHS24
Scottish Ambulance Service
State Hospital

ANNEXE D: BUDGET ADVISER EVIDENCE

Dr Andrew Walker Paper analysing the responses received


Footnotes:

1 Scottish Parliament Health and Sport Committee. Official Report, 25 October 2011, Col 387.

2 Scottish Government. (2011) Scottish Spending Review 2011and Draft Budget 2012-13. Available at: http://www.scotland.gov.uk/Publications/2011/10/04153155/10 [Accessed June 2012]

3 Scottish Government. (2011) Scottish Spending Review 2011and Draft Budget 2012-13.

4 Scottish Parliament Finance Committee. 3rd Report, 2011 (Session 4). Report on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48). Annexe H – Report from the Health and Sport Committee. Available at: http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees.aspx#annh [Accessed June 2012]

5 Scottish Parliament Finance Committee. 3rd Report, 2011 (Session 4). Report on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48). Annexe H – Report from the Health and Sport Committee

6 Scottish Parliament Finance Committee. 3rd Report, 2011 (Session 4). Report on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48). Annexe H – Report from the Health and Sport Committee

7 Scottish Parliament Finance Committee. 3rd Report, 2011 (Session 4). Report on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48). Annexe H – Report from the Health and Sport Committee

8 Scottish Parliament Finance Committee. 3rd Report, 2011 (Session 4). Report on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48). Annexe H – Report from the Health and Sport Committee

9 Scottish Government (2012) Increased Funding For NHS Boards. Available at: http://www.scotland.gov.uk/News/Releases/2012/02/NHSfunding10022012 [Accessed June 2012]

10 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Cols 2145-46.

11 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2146.

12 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2127.

13 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2127.

14 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2128.

15 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2129.

16 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2130.

17 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2132.

18 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2134.

19 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2134.

20 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2154.

21 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2158.

22 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Cols 2158-59.

23 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2136.

24 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2137.

25 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2137.

26 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2126.

27 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2125.

28 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Cols 2149-50.

29 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Cols 2147-48.

30 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2151.

31 NHS Lothian. Supplementary written submission.

32 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2142.

33 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2142.

34 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2142.

35 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2143.

36 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2153.

37 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2153.

38 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2153.

39 Letter from Scottish Government 8 June 2012.

40 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2155.

41 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2156.

42 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2156.

43 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2138.

44 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2139.

45 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2140.

46 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2152.

47 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2126.

48 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2126.

49 Scottish Parliament Health and Sport Committee. Official Report, 1 May 2012, Col 2144.

50 NHS Lanarkshire. Written submission.

51 Scottish Parliament Health and Sport Committee. Official Report, 8 November 2011, Cols 500-01.

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