DESIGNED TO CARE

Renewing the National Health Service in Scotland

99. This section describes the mechanisms which will replace contracts so as to ensure more equitable and effective use of resources. This section also describes how a single stream of funds will operate, and, among a range of other financial issues, the ways in which the NHS in Scotland can use its resources to provide better health care.

The Consequences of Abolishing Contracts

100. An essential requirement is to move away from wasteful competition and secrecy to open discussions between Health Boards and Trusts to allow them to share relevant information and agree service strategies. More openness is one of the key changes which is required to drive change. Mutually supportive objectives and actions must be agreed by each organisation over the coming period to deliver health services and improve the health of the population. The extent to which the programmes serve the greater good of the population and secure health gain will be the key criterion by which Boards and Trusts will be held accountable. The principal agenda for Trusts will be the implementation of relevant Health Improvement Programmes and the subsequent Trust Implementation Plans. This will be reflected in funding mechanisms. The emphasis is on the need to focus on health gain and improved outcomes for local populations. Health Improvement Programmes may propose changes in the health bodies which provide services. Under the internal market loss of services could threaten the viability of a Trust. There must now be collective ownership of any such problems and a plan for dealing with them before the change is made.

101. When issuing the Priorities and Planning Guidance, the Government anticipated the abolition of contracts. Mechanisms must be put in place which will ensure that high quality patient services are delivered. Health bodies must be properly accountable to the public for their actions.

Equitable Distribution of Resources

102. The Government have already announced a review of the arrangements for distributing resources to Health Boards for hospital and community health services (HCHS) and Family Health Services (FHS) to ensure the distribution reflects local population needs and operates as fairly as possible. The review is wide ranging and covers not only the distribution of Health Board general allocations (which currently enable Boards to secure health services for their resident population) but also how funds for FHS, including the drugs bill, are distributed. The review will, therefore, examine the methods for allocating the resources available to the NHS in Scotland including both primary and secondary care. We will move towards a distribution of funds in the future which is more objective and needs based with the aim of promoting equitable access to health care. This will ensure equal access to resources for people with equal needs. It will also seek to incorporate a range of allocations for special purposes which are currently issued separately.

103. The programme of work to be carried out will be drawn up by the end of 1997. Elements of the work will be completed over the coming year and the NHS in Scotland will be fully involved in the review and will be consulted about the various elements of the programme of work as the results become available.

Flow of Hospital and Community Health Services

104. At the moment Health Boards are given annual allocations to meet the cost of HCHS based on the weighted capitation formula, commonly known as the SHARE (Scottish Health Authorities Revenue Equalisation) formula, which was introduced in the 1970s. Most parts of Scotland now get their fair share of resources based on the existing formula. The Review of the SHARE formula will inevitably lead to a need to redistribute funds and this will, as in the past, be done on the basis of an equitable redistribution over the coming years with the key aim of avoiding turbulence.

105. The Government are committed to improving further the arrangements for funding Health Boards for both primary and secondary care, so as to better reflect relative health needs of the population served. There are clear advantages in enabling local flexibility across drugs budgets and HCHS funds, both for more cost-effective care and to promote better overall value within the total resources available for health care. The Government have decided it is right to create a single stream of funds covering both HCHS and GP prescribing to be allocated to Health Boards and through them to Primary Care Trusts. This new arrangement will take effect from 1 April 1999.

106. The Health Improvement Programme and the Trust Implementation Plan will set out the range and quality of services that each Trust is to provide and the funds to be allocated to do so. The signing off of the Trust Implementation Plan by the Health Board will represent its agreement to allocate the funds required, and for the immediately following year will determine the Trust's budget. As is normal for any organisation, the budget may be reviewed later in the year, informed by higher or lower activity levels than expected, but this will not be in any sense a financial reward or penalty on a Trust. The performance of senior staff in a Trust will be judged by their success in providing patients with the agreed range and quality of services within the agreed budget. If Trusts secure savings from their management efforts, they will be permitted to retain them for re-investment in the development of services within the Trust, consistent with the Health Improvement Programme.

107. Acute Hospital Trusts and Primary Care Trusts will set up joint planning and budgeting arrangements to cover the interfaces between primary, secondary and tertiary care. As well as the direct budgets for the Acute Hospital and Primary Care Trusts, the Health Board will establish a Joint Investment Fund for these interface plans. Discussions about the use of this Fund will be led by the Primary Care Trust. The intention behind these proposals is to ensure that the design of services across primary and secondary care reflects appropriately the contribution the sectors can make, and that care is effectively planned, managed, and resourced at the operational level, consistent with the strategy agreed in the Health Improvement Programme.

108. Where a Trust delivers services for two or more Health Boards, its host Health Board will lead in planning the service requirements, involving the other Boards who will contribute to the Trust's budget according to the costs of treating their patients. There will always be some patients who fall outside the plans and budgets which support them, typically where a small number of patients require very expensive treatment or where a patient is taken ill away from home. Most of these treatments should be taken into account in Trust Implementation Plans rather than through individual patient invoices. Health Boards will introduce a simplified system of funding to meet the costs of patients given treatment away from their home area.

Capital

109. The demand for capital investment in the NHS takes a number of forms, including the building of new hospitals, the redevelopment of existing facilities, investment in equipment to keep pace with medical developments and improve service quality, and investment in existing estate to ensure it is maintained to a high standard. The Private Finance Initiative will continue to play an important role in providing new hospitals for Scotland, but attempts to apply it to all capital projects, whether appropriate or not, were misguided. Both private and public sector capital have a role to play.

110. The majority of public capital is allocated by The Scottish Office for particular projects. Such allocation in the future must be set in the context of a clear capital plan for the NHS in Scotland. In formulating this strategic capital plan, the merits of all project proposals emerging from the HIP process will be measured against clear criteria, the most important being benefits for patients. This approach is not intended to second guess Health Improvement Programmes, but is simply a means of prioritising public capital resources across Scotland as a whole. In addition, financial viability and appropriateness for private finance will be taken into account.

111. The remainder of public capital is presently allocated to NHS Trusts on a formula basis, to cover areas such as property improvement and equipment replacement. NHS Trusts presently make their own decisions on priorities within their allocation. There is some evidence that competition between NHS Trusts has led to this capital not always being used in a way that is to the overall benefit of the NHS. This will stop in the future. All capital spending must be in line with HIPs. Further, the formula used to allocate this proportion of capital has reflected the existing NHS estate rather than any assessment of patient needs.

112. In future, a formula will be used to allocate this capital to Health Board areas on the basis of need. Health Boards will then allocate capital to Trusts before the start of the financial year. The role of Health Boards is strategic rather than becoming involved in the detail. Individual investments by Trusts of a significant size must be cleared by the Health Board to ensure consistency with the Health Improvement Programme.

113. With the increasing shift to community care, many large institutions are becoming empty. The NHS in Scotland must be more vigorous in disposing of surplus estate and re-investing the proceeds towards improving patient care. While such receipts will normally be re-invested in the Health Board area in which they arise, this may not necessarily be within the same Trust.

Capital Charges

114. The present system of capital charges brings out the use made of fixed assets when costing services. This will be reviewed to ensure greater consistency with the system of resource accounting and budgeting which is being introduced across Government.

Benchmarking and Performance Management

115. Health services should be provided efficiently and effectively. Benchmarking and performance measures have a key role to play in achieving this goal and will help:

• inform the process of setting priorities, objectives and targets;
• enable monitoring of progress against objectives and targets;
• promote the use of best practice; and
• improve the accountability of the service to patients and to the wider public.

116. The Government believe the main areas in which performance measures are relevant are:

• the clinical effectiveness of services: for instance, the extent to which services achieve reductions in mortality, morbidity and disability;
• the quality of services: for example, waiting times for outpatient appointments and for diagnosis and treatment;
• the efficiency of services: the costs incurred in delivering services, and the use made of staffing, beds and other resources;
• access to services: the availability of services in different areas of the country;
• inequalities in health: differences in morbidity and mortality between socio-economic groups; and
• the appropriateness of services: the type of services provided for patients - for example, the use made of day cases.

117. Significant progress has been made in recent years in improving the range and quality of information available for assessing comparative performance. The Government see continuing progress in this area as central to their aim of achieving improvements in services for patients and intend to review the information currently available for benchmarking and performance management in the NHS in Scotland. We will consult on proposals for improving the range of information which can be used to make comparisons between the quality and efficiency of services provided in different Health Boards and Trusts, who will be required to publish them and account for their performance.