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Scottish Economic Report: March 2004

Remuneration of General Medical Services

David Notman
Health Department
Scottish Executive

Introduction

In June 2003, GPs throughout the whole of the UK voted to accept a new GMS contract. This new contract represents a very significant departure from the 1990 contract, and all other post 1948 arrangements. It will mean for the first time that GP practice remuneration will be linked to patient need through an allocation formula and to the quality of medical care through a quality and outcomes framework. This article deals with the first of these two main mechanisms for the remuneration of GP practices, an allocation formula based on patient need for GMS, denoted the Scottish Allocation Formula or SAF. Scotland has retained its own formula which is different from the rest of the UK. The requirement for the SAF is that it better reflects the pattern of need and the additional cost of providing primary health care services in the remote regions of Scotland.

This article summarises the work of economists in the Scottish Executive Health Department and NHS Information Services Directorate in providing a formula for GMS in Scotland. In the course of this article, we will discuss the individual components of the SAF and what they mean for the future of GMS in various parts of Scotland. Further to this, the implementation arrangements around the SAF, specifically the role of the Minimum Practice Income Guarantee (MPIG) and how the SAF fits into the wider financial framework of the new GMS contract in Scotland shall be discussed.

This paper will also take a look at the existing remuneration regime for GMS and why there was a need for reform. However, first of all we set out some of the basic facts and figures behind GP services in Scotland.

GP Services in Scotland

GP services are part of a wider set of family practitioner services, which are also made up of NHS dentists, community pharmacists and certain ophthalmic services. Unlike the other family practitioner services, GP services are free at the point of use for everyone, regardless of income and medical need. As well as providing immediate medical care, GPs also act as 'gatekeepers' to the hospital or acute services sector.

There were 3,768 GP principals or full-partners in Scotland providing unrestricted general medical services at 1 October 2002 ¹. This represents the vast majority of GPs, but it is important to note that GPs can also be associates or locums. The GMS clinical workforce is much larger again, as the vast majority of GP practices also employ nursing staff who provide a range of clinical care and procedures.

In Scotland there are about 1,050 practices, which range from very small practices in the Highlands and Islands where the doctor may be a single-hander, to large practices in urban conurbations with up to ten full-time equivalent GPs. That said, there is no set rule as to how many GPs will be in a particular practice; much depends on individual and local circumstances. For example, Glasgow NHS Board has the highest proportion of single-hander GP practices of any of the NHS Boards in Scotland.

The Red Book of 'Fees and Allowances'

GP principals (the GPs who run surgeries) are paid by the NHS as independent, self-employed professionals under a cost-plus principle. The payments they receive covers both their expenses (the cost) in providing GMS and a net income for doing so (the plus). This level of income is reviewed annually by the Doctors' and Dentists' Review Body (DDRB) which then makes recommendations for decision by the Government. Therefore, GPs do not receive a salary, but are paid through a system of payments designed to deliver a certain level of gross income for the average GP. This is known as Intended Average Gross Income (IAGI). IAGI is made up of the following components:

• Intended Average Net Income (IANI) - the amount of personal remuneration as recommended by DDRB (for decision by Government) for the average GP;
• Indirectly reimbursed expenses - comprising all of those practice expenses for which no specific provision is made in the Statement of Fees and Allowances (SFA) (such as fuel, postage etc); and the balance of any expenses which are partially reimbursed directly to the individual GP incurring the expense (practice staff);
• Prior year adjustments - for any under or overpayment relating to recommendations for IANI or indirectly reimbursed expenses relating to previous years.

The Intended Average Gross Income (IAGI) for 2002/03, the latest figure available, was set at 84,874. The income which a GP actually receives depends on the circumstances of the practice - e.g. the number and characteristics of patients; practice decisions on use of income; and partnership arrangements.

The bulk of payments made to GPs are covered by The Statement of Fees and Allowances, or "Red Book". There are around 60 different fees and allowances that are payable to GPs in the UK. Certain allowances are payable for carrying out their main responsibility of patient care to the patients registered with the GP. For example, the basic practice allowance and capitation payments are payable regardless of how many of their patients they see in a given period. Other payments are strictly linked to a particular service. GPs receive a fee for seeing a temporary resident, performing minor surgery and providing pre-natal maternity care. In addition, certain fees and allowances may reflect health initiative programmes such as flu immunisation and a cervical screening programme. These are all examples, and although the list of specific medical duties that a GP has to perform is fixed, it is important to be aware that the number and type of services is varied. For this reason, many GP practices specialise in certain areas of medical care.

The main drawback of the Red Book is its sheer complexity. The large number of fees and allowances means that any incentive for GPs to carry out a particular service is marginal. Over time, as more payments through UK health initiatives have been added, the Red Book has lost focus and becomes particularly difficult for GPs and the NHS to administer. In addition, there is very little connection between GP services and patient need. Although some payments are linked to deprived and remote and rural areas, they are fairly small and tend to maintain existing services rather than meet patient demand. For these reasons, the new GMS contract introduces wholesale change to the remuneration of GPs.

The Scottish Allocation Formula (SAF)

The Scottish Allocation Formula or SAF will be used in Scotland (England, Wales and Northern Ireland will use another formula) to allocate a 'global sum' of resources directly to GP practices. Around thirty fees and allowances will now be allocated through the SAF in the form of a single payment, not only reducing the administrative burden on GPs but importantly linking GP remuneration explicitly to the needs of their patients.

The SAF is a weighted-capitation formula. It allocates resources on the basis of notional or weighted list size of the GP practice. By notional or weighted, we imply that although a GP practice will receive an amount per patient, that amount will vary depending on the particular circumstances of the patient and their health needs. The SAF incorporates weightings for the following:

• The age and sex (demographic) structure of the population
• The socio-economic circumstances of the population
• Remoteness and rurality

These are the 'big three' in terms of weightings, but the SAF also incorporates adjustments for staff wages, care home patients and new patients. For age and sex and socio-economic circumstances, the SAF makes an adjustment to reflect the greater health needs of an older more deprived population. For remoteness and rurality, the SAF recognises the greater unit costs of providing a service in a rural area.

In the following sections, we examine each of these three main adjustments in greater detail and specifically what they mean for each NHS Board area. First of all we look more closely at the population base for the SAF.

The GP Practice Population and List Inflation

In order to apply a series of weights to the population, we first need to know the number of patients in each practice in Scotland. For this we use the registered practice population. One of the interesting characteristics about registered practice populations is that in aggregate it is greater than the ONS measure for the population of Scotland. This is because of a phenomenon known as list inflation, which at a Scotland-level is approximately 6 per cent, but varies considerably between different areas of Scotland. Table 4.3.1 compares the ONS population with the registered list population for each NHS Board area in Scotland.

List inflation arises because of double registrations, where one person is registered with two or possibly more practices and because in some circumstances, patients that have died are not always removed from a GP list. Unsurprisingly, we find list inflation highest in urban areas such as Greater Glasgow and Lothian where there is more movement in the population between GP practices. It was a fine judgement whether to use registered population or ONS for the base population. Registered population data has one fundamental advantage, as this is the basis on how GPs are currently paid for their existing capitation payments. Therefore a move to the SAF with ONS as the base population would create additional instability between the existing and new payment regime.

The Age and Sex Structure (Demography) of the GP Practice Population

The SAF includes a weighting for differences in the age and sex of practice population. Table 4.3.2 shows the age and sex weights in the SAF, which are based on actual consultation data from a sample of nearly 80 practices in Scotland.

There are sixteen age and sex weights, with males aged between five and fourteen years of age (the age and sex group that uses GP services the least) equal to one. Typically, young women and older people, both male and female, are the most intensive users of GP services. Very young children are also relatively high users of GP services because of the extensive child immunisation programme.

Chart 4.3.1 shows the age and sex weightings at NHS Board level. Note that Scotland is given a weighting equal to one. Those NHS Boards with older populations than the Scottish average receive a weighting greater then one. NHS Borders and Dumfries and Galloway both receive a substantial age-sex weighting.

The Socio-Economic Circumstances of the GP Practice Population.

The SAF also includes a weighting for variations in the socio-economic circumstances of patients between different GP practices. There is a great deal of evidence that poorer more deprived communities will also have poorer health outcomes than more affluent areas. It would be inherently unfair then not to include some adjustment for socio-economic circumstances in any allocation formula for GMS.

The socio-economic adjustment in the SAF is actually an index of four factors, where each factor is given an equal weighting:

• The unemployment rate of the GP practice population.
• The proportion of elderly people (aged more than sixty-five years of age) in the GP practice population.
• The standardised mortality rate of the GP practice population (for people aged sixty-five years of age and less).
• Two or more indicators of deprivation from the Census, for example is the head of the household on income support or a single parent?

These indicators were chosen, based on the analysis of a series of econometric regressions. Initially a large number of variables (over 50) were tested to determine to what extent they explained variations in age-sex weighted GP practice consultation rates in Scotland. These four variables emerged from the process as the most consistent and reliable set of variables that explain the link between the need for health care, in this case GMS and socio-economic circumstances. Chart 4.3.2 shows the adjustment in the SAF for socio-economic circumstances at NHS Board level, with Scotland again equal to a weighting of one.

Unsurprisingly, we see that NHS Greater Glasgow and Lanarkshire score strongly on this adjustment, whereas more affluent regions of Scotland, Lothian and Grampian (Grampian) receive a weighting of less than one. NHS Western Isles also shows a significant deprivation score, relative to the Scottish average.

Remoteness and Rurality

One of the main reasons why Scotland has retained its own GMS allocation formula is because any formula must reflect the unique geographical nature of Scotland, compared with the rest of the UK. The majority of the population of Scotland live in a fairly narrow central belt, with the remainder (outside of a few population centres) living in principally remote and rural locations. At present a number of remuneration schemes exist to ensure the provision of GMS in the most remote locations of Scotland. For example, around seventy practices in Scotland are referred to as inducement practices. The inducement scheme is designed to provide a guaranteed minimum income to GPs in order to maintain their practice's financial viability. This covers areas where their presence has been deemed essential but there are not enough patients to provide the doctor with an adequate income under the existing fees and allowances mechanism. The SAF therefore needs to incorporate a significant weighting for remote and rural practices. It does this by weighting GP practices according to:

• The population density of the GP practice population, measured by the number of hectares per resident.
• The population sparsity of the GP practice population, measured by the proportion of the GP practice population in communities of less than two hundred.
• The proportion of people in the GP practice population that qualify the GP to claim rural practice payments.

The first two variables are included in the UK formula. However, the SAF also includes as part of the weighting for remote and rural practices, the proportion of people registered with the GP that live in a rural area. For each person, their GP is entitled to claim for rural practice payments. Rural practice payments are part of the current system of remuneration and attempt to compensate rural GPs in providing care to a geographically disparate population. Retaining these payments as part of the remote and rural adjustment in the SAF means that the allocation of resources is much more favourable to remote and rural locations than would have been the case under the UK formula.

Chart 4.3.3 shows the remote and rural weightings at NHS Board level for the SAF. The results are fairly intuitive with the Highlands and Islands receiving a substantial remote and rural weighting, and the urban centres receiving a weighting of less than one. Urban centres such as Greater Glasgow and Lothian receive weightings significantly less than one.

Overall Adjustments for the Scottish Allocation Formula

Chart 4.3.4 shows the overall adjustments for the SAF by NHS Board. Note that the combined adjustment includes the adjustments for age and sex, socio-economic circumstances, remote and rural and staff salaries. The adjustments for care home and new patients have not been included.

There is evidence of the strong remote and rural adjustment in the SAF. For example, of the top five NHS Board areas, in terms of weightings, NHS Western Isles, Highland, Orkney, Shetland and Dumfries and Galloway are all in the main rural areas. NHS Western Isles receives a particularly high weighting because it is also relatively deprived. At the other end of scale, NHS Lothian receives the smallest weighting because of its relatively young, affluent and urban population.

The SAF and GMS Contract - Implementation Arrangements

As we highlighted at the beginning of this paper, the SAF is one of two main methods of remuneration for GP practices under the new GMS contract. The SAF itself will be the method of allocating approximately 50 per cent of all funds that will go to GPs under the new contract, around 280 million in Scotland. The remaining funds will be distributed according to a quality outcomes framework; while there will be dedicated resources for enhanced services, premises and IT expenditure.

The implementation arrangements around the SAF have now been finalised for 2004/05 and 2005/06. The SAF results in a significant redistribution of resources when one compares the global sum allocations with existing income through fees and allowances at practice level. An element of protection is therefore required to ensure that the sector can adjust to a complete change in remuneration regime. The protection scheme is referred to as the Minimum Practice Income Guarantee or MPIG. This ensures that any practice which loses as a result of the SAF will receive a minimum income guarantee that protects their existing income level. The MPIG will be reviewed at the end of 2005/06.

The components of the SAF itself will be reviewed from October 2004, but the principle of an evidence-based allocation formula remains fundamental to the new GMS contract.

Conclusions

The following conclusions represent two of the key points to draw from this paper:

• The SAF represents a major change in the remuneration of GMS. The formula will ensure that, over time, resources for primary care will be directed on the basis of patient need.
• The SAF will ensure that, for the first time, resources for GMS are allocated in a similar manner to resources for hospital and community services and drug costs in Scotland.

Footnote

1 3,529 full-time equivalents.

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