NHS Boards Budget Scrutiny
Agenda item 5 is consideration of our approach to NHS boards budget scrutiny. We welcome Dr Andrew Walker, our trusted adviser. Members will recall that the committee agreed to seek responses from all 14 territorial health boards and eight special health boards to a series of questions regarding budget allocations. The responses are helpfully laid out in a good briefing paper that we have all received—the report on the NHS boards’ responses to survey on budget plans 2012-13, which is paper HS/S4/12/13/12. I invite Dr Andrew Walker to comment on the paper. Before he does so, he wishes to make a brief declaration of interests.
Dr Andrew Walker (Committee Adviser)
The paper mentions prescribing cost pressures. As committee members know from when I was appointed, I have had an on-going involvement with the Scottish Medicines Consortium; I also do consultancy work for some pharmaceutical companies. I do not think that those interests have influenced my opinion, but I prefer to flag them up to the committee before I advise members on lines of questioning rather than the issue coming up afterwards.
We appreciate that.
Roughly how long do I have to brief the committee, convener, in order of magnitude?
Proceed.
Okay, the rest of the day it is then. That is not a problem.
You have done this before, but I do not want you to be caught short. We have scheduled about half an hour for this, but we are running a bit behind.
That is no problem at all. I will aim for a maximum of 10 minutes.
That would be great.
First of all, thank you to everyone who helped me with this work behind the scenes—especially to Nicola Hudson from the Parliament’s financial scrutiny unit, who gave me considerable help.
The context is that there has been on-going concern from this committee and from predecessor committees about the level of scrutiny we can get to with the national draft budget that we see, in terms of how we can scrutinise things at the health board level—the £8 billion or £9 billion out of the £11 billion allocation—and how we can tell what the health boards are doing with that money.
Two years ago, the predecessor committee agreed that a survey should go out to Scottish health boards. The current survey is really a repeat of that survey, with some added questions that are relevant to the current committee’s discussions. The details of how the survey was carried out are covered in the paper. Suitable caveats are given, which we will come to as we go through the paper.
The first question, on page 2 of the paper, is about earmarked funding. When the Government earmarks funding before it hands it down to local boards, it directs where the spending will go. There are quite legitimate reasons for earmarked funding—the aim of the question was to find out the extent to which it was happening and how it was changing over time.
The key finding is that about 12 per cent of NHS revenue allocation is earmarked for particular purposes. If anything, earmarked funding is falling slightly over time as things move from being earmarked to the mainstream of allocation. Personally, I was quite surprised by that. If I had been asked to guess what proportion of the allocation was earmarked, I probably would have gone for about half that figure. We tried to keep the survey brief in order not to impose big burdens on health boards in terms of filling it in, so we did not ask what exactly boards meant by earmarked allocations. We can ask boards to define that before we hear oral evidence from them. To summarise, 12 per cent of the allocation—or around £1 out of every £8—is allocated to Scottish health boards for an earmarked purpose and that percentage is falling slightly over time.
The second part of question 1 was about the level of non-recurring funding. Of course, there can be legitimate reasons for handing out money on a non-recurring basis, but members might recall that in the middle of the previous decade Audit Scotland found that some boards seemed to be relying on non-recurring funding to keep going. Therefore we were looking for danger indicators, as it were. Are boards getting hooked on non-recurring funding? The table on page 4 indicates that NHS Dumfries and Galloway seems to have quite a high level of non-recurring funding, as do NHS Lanarkshire and NHS Fife.
We did not ask specifically what the funding was for. NHS Fife helpfully supplied the information that the funding was intended to help the board while it had a major capital scheme on the go. The committee might think that that is quite legitimate; it would be nice to know why other health boards had a high level of non-recurring funding, because we do not want boards to depend on such funding to achieve financial balance from year to year.
Question 2 was about the balance between spend on acute services, primary care and community services and other services—the heading “other” was poorly defined, and boards did not interpret it in the same way. I did not present the information by board, because the results in the category “other” went from 1 per cent in some boards to 30 per cent in others, which implies that boards interpreted the question in different ways. The broad picture seems to show a balance of about 48 per cent of spending on acute care, 45 per cent on primary and community care and about 7 per cent on other services.
A key issue for the committee will be to monitor the balance and look for signs of change. We probably would not expect big changes year on year, but we might hope for progress in the shift to primary and community care over five years. I guess that question 2 was an attempt to put down a marker—it might or might not have worked. We can perhaps talk about that after my presentation.
Question 3 was a key question about inflationary pressures and where boards see cost pressures coming from. Boards were asked about their planning assumptions on pay increases, increases in the cost of supplies—a big element is energy costs—general practitioner prescribing and hospital prescribing. We can see that the assumed pay increases are relatively modest. Some boards seem to have included the incremental change year on year as people become more senior and move up the pay scale; others might not have included that—again, that flags up that boards might have interpreted the question in different ways. There are therefore all sorts of issues to do with comparability, but the responses give us a broad-brush picture.
Another thing for the committee to bear in mind is that given the proportion of the NHS budget that goes on pay compared with the proportion that goes on prescribing, a 1 per cent increase in pay is roughly equivalent in cash terms to a 5 per cent increase in prescribing. Although the big numbers are on the right-hand side of the table on page 6, they are percentages and do not necessarily mean that that is where the cash is going. However, from my conversations with people in health boards, I think that prescribing is the most volatile and unpredictable issue, which causes boards the most concern year on year. I know that the committee has been considering petitions on access to specialist medicines, which I guess is relevant in that regard.
Question 3 was about where cost pressures are coming from; question 4 looked at the other side of the equation and asked how boards are planning to make savings. We asked what levels of savings boards will make, under what headings. Members will correct me if I am wrong in saying that the Scottish Government has not issued a national target for savings at health board level in 2012-13 and boards have been left to a greater extent to make local decisions.
The table on pages 7 and 8, on planned savings, shows some diversity. The highest figure is from NHS Shetland, which is targeting 6.6 per cent of its revenue allocation for savings; the lowest is from NHS Grampian, at 1.7 per cent. There is a big variation there, but most boards are planning savings in the range of 2.5 to 3 per cent, which is a fairly standard picture and is in line with the situation during the past couple of years. Boards appear to have achieved their savings—they are always concerned that they will not do so, but somehow or other they always manage.
In general, this presentation focuses on the territorial boards, because they control the majority of the budget, but we must not forget the special health boards. The table on pages 7 and 8 includes the special health boards, which generally have higher savings targets than the territorial boards have—the exception is NHS Education for Scotland, which is the biggest of the specials and pulls the average down a little. That is just a snapshot of what is going on. As far as we know, there is comparability on that question, so you are free to run your eye down the columns in the table and look at the differences. In the oral evidence sessions, we could ask whether the targets are achievable and whether the savings are recurring savings or one-off savings.
The second part of the question asked health boards to name their three main areas of savings. We used the tactic of asking about the three main areas because, two years ago, some boards provided us with whole Excel spreadsheets with 200 savings schemes in them; that was interesting but also hard to digest, so we asked for the headline savings.
The boards had a variety of things to say. I have tried to group the responses as sensibly as I can under four headings. Prescribing was mentioned by almost all the boards, so those issues were easy to group. I tried to group a bunch of things that seemed to relate to front-line services and were described using terms such as redesign, clinical services and clinical productivity. Another group of issues seemed to be about support services and included things such as laboratories, administration and management.
There was an issue for smaller boards—especially rural boards—about money following the patient. Members will be aware that when a patient from one health board goes to another health board for treatment, the board for the area in which the patient is resident is billed for that care, so if smaller boards can keep their patients in their local hospitals, they do not have to pay the bills that boards with teaching hospitals will send them.
Roughly speaking, all the boards seem to have something under most of the headings. When there is a blank in the table, it should not be assumed that that board is doing nothing under that heading. I remind the committee that we asked boards to name only their three main areas of savings. I would be very surprised if, for example, NHS Tayside, NHS Highland and NHS Borders were doing nothing on prescribing; they just did not mention it in their top three areas.
We must therefore be a little bit careful about how we interpret the information. However, bearing that in mind, about 40 per cent of the savings seem to come through prescribing, about 40 per cent seem to come from support services and about 20 per cent seem to be about the redesign of front-line services to achieve efficiencies. That is a broad-brush picture, but it is the sort of thing that the survey was meant to look at. There are issues about how we ensure that quality is maintained while the savings are made.
Question 5 asked about what we call service developments—ideas for new services, new staffing and so on—and whether those were being funded to any extent this year. The first part of the question asked for three examples of things that were funded by health boards. A wide variety of things is listed in the table. A strong theme among the boards in the north of Scotland is the regional secure unit—the forensic psychiatry service. Other than that, the examples that are given relate mainly to acute services or to medicines. There is very little about health promotion or primary care. Although some examples relate to those areas, they are mainly about acute services and medicines.
We also asked the corollary, about things that the boards regarded as priorities that were not funded. The responses included an equally wide range of services. Five boards said that there was nothing that they regarded as a priority that they could not fund, which might raise an issue about what they term a priority. It is interesting that, although we are into the fourth or fifth year of a financial crunch, some boards still feel that they can fund everything that they regard as a priority.
Some boards perhaps entered into the spirit of the question slightly more than others. NHS Lothian and NHS Lanarkshire both gave interesting answers. They listed some fairly important services that they could not afford to fund. None of the services was in areas that might really worry us such as cancer or heart disease, but I imagine that they are all important to certain patient groups.
Question 6 picked up on preventative programmes, which the committee discussed in autumn last year, and on what potential there is for longer-term savings when those are funded. I remember that the committee took oral evidence on a variety of health promotion programmes.
We asked the boards what they were funding, but we did not present that evidence in the paper because a rich variety of programmes was funded. The more interesting question for the committee’s purpose was whether the financial planning included savings that would stem from the preventative programmes. All the boards agreed that there was the potential to make savings, but none stated that it included in its financial planning cash-releasing efficiency savings from preventative services, which was quite interesting. They gave various reasons for that, the first of which was the time horizon involved, especially with health-promotion-type preventative spending, from which it might take decades for savings to accrue. Boards made the point that financial planning in the NHS is usually a three to five-year exercise, and 30-year to 40-year savings might be involved. As the paper says, the second reason that was given was that it is
“Difficult to obtain evidence for cost savings because they are in the long-term”.
The third reason was to do with uncertainty
“about the method for determining long-term savings”,
and the fourth, catch-all reason was that
“Prudence requires not including savings in the financial plan.”
12:15
I reproduced in full quite a good quote from NHS Lanarkshire, which is to do with the fragile nature of savings in the view of NHS managers, especially when they can easily be swamped by other pressures in a service in the medium to long term. All that can be said at the end is, “We are under financial pressure, but things could have been worse if we had not made preventative service investments several years before.” That was interesting, and it perhaps had more resonance with me than the timeframe issues that boards talked about.
Members will know that the use of the change fund could also be described as preventative, and we do not have timeframe issues there. If services for older people are invested in now, we should really see pay-offs in two to three years, but boards said that they do not include those savings either. I suspect that the true reason for that is to do with what boards see as the fragile nature of those savings. With another trend coming in the opposite direction, they can simply be swamped by an increase in demand from another area of the service. To put things differently, a built bed is a filled bed. If a bed in a hospital is lying empty, a doctor will find somebody else who is in need to put into it.
Two boards—NHS Orkney and NHS Shetland, which, as we all know, are smaller boards—said that they were planning to estimate financial savings in the future. It will be interesting to see whether that comes to pass.
That is probably enough on that matter.
Question 7 was the central question of what boards saw as the main risks in their financial plans. I think that those factors are fairly stable over time—I remember them from two years ago. Prescribing costs are seen as a factor, mainly because of their volatility, I suspect. There are formularies or approved lists of medicines, but there is also a lot of scope for doctors to make prescribing decisions. Guidelines can be produced, and quite a lot of volatility is involved.
As the paper says,
“almost all boards stated that the achievement of their efficiency savings plan was a risk”
because the plans are getting very big and complicated, and more medium to high-risk areas have to be taken in to try to make the savings happen. NHS Lanarkshire made the point that there was no reserve, so if the savings plan does not work, it will be looking at a deficit.
Several boards mentioned capital issues, including capital cuts, and volatile demand, referral patterns and a variety of board-specific factors were mentioned. It is interesting that pay is not regarded as an issue. It seems to be not as volatile, and boards possibly feel better able to keep control of it.
The committee may wish to question boards on how they go about mitigating those risks and what they are doing to try to bring prescribing costs back into a more controlled situation.
Questions 8 and 9, which were both a different type of question, were to do with issues around change funds and resource transfer. They were essentially about things developing. We talked about that last autumn and thought that things would have moved on by the spring. Sure enough, boards are starting to make their allocations. Essentially, information about that was asked for, and it is tabulated. The headings in the table did not quite work, but there is enough for members to be able to see roughly what is going on.
The information in the table is about the change fund for older people and how it is being allocated. The central part of the table shows the contributions from local authorities and the right-hand part shows transfers from the change fund to the third sector. We can see that there are some quite big variations in the contributions from local authorities. I am not clear whether some transfers are still to be agreed. There are also some big variations in the transfers from the change fund to the third sector, at least in proportion terms. Those are obvious areas in which the committee might wish to ask witnesses for more detail, to get behind the figures.
Question 9 was about resource transfer. One of the witnesses suggested that we ask about that, and it seemed a good point as the committee had not asked about it before. It turns out that the amount that is being resource transferred from health services to local government is more than three times the amount in the change fund. The possible issues there include the extent to which the money is ring fenced for particular patients, because this was originally brought in when people were being resettled from long-stay hospitals into the community; to what extent it is still providing services for those particular patients; and to what extent it can start to be seen as an extension of the change fund, assuming that the committee believes that the change fund represents the right way in which to go forward. We do not have answers to those things, but at least we have some magnitudes to talk about. Finding out that the amount is three times the size of the change fund was new information, at least for me.
Going back to the change fund and thinking about the way in which it is being spent, I note that there is a real emphasis on preventative spending. If we can judge anything from the headings under which money is being spent, little of it is going directly into or supporting hospital-type care, so it seems to be following the spirit of the change fund. It is notable that, in marked contrast to the service development things that we looked at earlier, where a lot of the money is going into hospitals, the change fund seems to be going into keeping people out of hospitals. That is an interesting contrast.
I am nearly there. Question 10 was about another of the committee’s interests from the inquiries that it held in the autumn—the switching of services from ring-fenced funding to mainstream revenue funding, and whether things ever made it or whether they were lost. The wording of the question did not quite work; some boards appeared to believe that we were asking about switching earmarked national funding streams to the local level, which is not quite what we were interested in. A few boards managed to work out what we were asking about, and I think that NHS Borders came closest to the spirit of the question with its answer about its healthy living network, which was a pilot but is now being switched across. The board described the monitoring that it plans to keep in place to ensure that the network continues to do the job that it was intended to do.
The range of answers to question 10 was a little disappointing, but there are interesting questions about whether such work is going to pan out, how much it will cost and so on.
Question 11 was about provision for equalities groups and the monitoring of outcomes. I do not claim to have any special expertise in that area. As a white man with no obvious disability etc, I feel underqualified to talk about it. All that I would note is the wide variety of answers that came back from the boards and the considerable variation between them, which members might wish to inquire into.
I remind members that we have an oral evidence session reserved on—I believe—1 May. There are no definite plans for how to arrange that. The previous committee arranged the session into two halves and had two panels of boards, although I think that there was some overlap between them. Members might wish to arrange the meeting in that way and have a panel of urban boards first and a panel of rural boards second, or they might wish to have territorial boards on the first panel and special boards on the second. I have said little today about the special boards as the survey was not really designed for them.
A third possibility is to have a selection of boards in the first half of the meeting and the Scottish Government health directorate in the second half, so that the committee can ask the people who are overseeing the financial monitoring of the system some of the broader questions that are coming out. That is for discussion, as are the lines of questioning. I hand back to the convener.
Thank you, Andrew. The paper raises a number of questions and we might come back to consider some of the gaps. Do members have any questions or comments?
Under question 2, on “Planned spending on acute services versus primary care and community services”, you finish by saying:
“The data reported by boards is not reported in table form pending clarification.”
It is really important that we get that clarification. I hope that the data can be put into a table.
That is very helpful. One of the boards said that 30 per cent of its spend went on other services and that it ended up with only about 30 per cent of its spend going on acute services. That looked very odd and I did not want to put that board in the position of being in a table and looking like a total outlier. If we can clarify that all boards were using the same interpretation, we will do that.
Anyone else?
I am quite interested in prisoners’ health, funding for which was transferred from the Scottish Prison Service to the health boards in November. It has now been mainstreamed and moved from earmarked to non-earmarked funding—so there has been a double transfer within a couple of years. I am slightly concerned that some of the health boards—including Forth Valley NHS Board, in my constituency—did not mention it at all while others did. Can we get some further information on that? As we know, that population has specific health problems and it would be useful to know whether the money that was earmarked and then transferred is proving to be adequate. I wonder whether you could ask some further questions on that.
The question is whether, although the money is not officially earmarked, boards are looking to protect the spending.
Yes. What are they spending at the moment and are they going to protect it, or do they see pressures that require an increase in that area? I suspect that the report from Dame Elish Angiolini that we will read as soon as we leave this room will be very interesting in that regard.
Apart from the inconsistencies—the clarity of the report has been picked up on and questions have been raised as we have gone through—should we write to the boards on anything else? The document is a public document and it should be possible to deduce what our initial questions are. We will make a decision in a moment about which groups to invite along to the committee, but it may be useful to get some clarification from the boards that may not be coming along.
My pet issue is the outstanding maintenance backlogs, of which NHS Greater Glasgow and Clyde, in my constituency, has the largest, at about £175 million. I understand that painting the toilets and having nice new carpets or whatever in public areas are included, but there is a risk register and a significant amount of money is involved. Only one health board—NHS Lanarkshire, I think—mentioned the cost of maintenance, although it has been a big issue right across Scotland and it amounts to a big number in my local health board. I am surprised that none of the other health boards mentioned it.
I think that a few boards mentioned it under things that they would like to fund but could not, and I put that under the general heading of capital. However, you are right to say that the information was inconsistent. NHS Greater Glasgow and Clyde was one of the boards that said that they did not feel that there were any priorities that they could not fund at the moment.
I know that the board is setting its budgets now, so there may be money to tackle the backlog, but it is a big number.
If everybody is content with the report and the issues that it raises, we will move on to the proposed oral evidence session. We need witnesses from three or four health boards. There could be a mix on one panel, as Andrew Walker has suggested. We could have health department people along as another panel. Would that be useful? I see Richard Lyle nodding.
I think that it would be useful to have the health boards and the officials before us.
12:30
So we are agreed that we will take evidence from two panels. One panel will be the health department representatives, so we need to decide on a mix of three to four health boards.
In looking at all the tables in Dr Walker’s paper, the health board that jumped out at me was NHS Orkney, which tended to be at either end of the spectrum in each case. It might be useful to have its representatives before the committee.
I disagree. NHS Orkney is so small that its problems are really peculiar and its performance can vary hugely. The smallest board that we should invite is NHS Dumfries and Galloway. Under question 2, on non-recurring funding, it appears as an outlier with 14 per cent, and it has no developments that are high on its list but not funded. Those two things are very interesting.
It was just that NHS Orkney went from 13 per cent to 3 per cent on non-recurring funding, and I thought that it would be interesting to understand how it had achieved that huge change.
Is there an issue there, Fiona? Do you accept the point that NHS Orkney is really tiny?
Yes, but sometimes it is at the top of the list and sometimes it is at the bottom. It might be easier for NHS Orkney, because it is so small, to explain the pressures and how it can overcome some but not others. It was just a thought.
We need to make some progress—we have had two bids so far.
I am not putting in a bid, but in one of our evidence sessions it came out that the chief executive of social care and the chief executive of the NHS are the same person in Orkney.
We have had two bids. I am not sure that we can have both of those if we want to go for four boards. If that is what members want, we only need another couple of boards. If we get to five, we will need to eliminate one.
I would be touting for NHS Lanarkshire, but I should not do that. We have to go for NHS Greater Glasgow and Clyde.
I would support NHS Lanarkshire.
I always support Lanarkshire, but it would be wrong of me to say that we should have that one. We have NHS Greater Glasgow and Clyde, and Richard Simpson made the point about NHS Dumfries and Galloway. I am down to A N Other.
Right, so we have NHS Greater Glasgow and Clyde and NHS Dumfries and Galloway—and NHS Orkney as well? I am not convinced about the need to see it.
I would not mind hearing Andrew Walker’s suggestions.
I had a list of four.
That might have been helpful at the start. Go on.
I have NHS Greater Glasgow and Clyde on my list, just because it has a budget of £2 billion, which is bigger than some departments, so it feels like a natural.
Yes, absolutely.
I would support NHS Lanarkshire, because it has non-recurring funding issues. It also gave some good, measured answers that I put in the report, so it can perhaps offer us some insights.
I was going to suggest NHS Highland, because it has high savings targets and an integration agenda, and there is the issue of whether the mix with social care helps or hinders it in achieving those savings targets.
We covered all that in a previous evidence session.
That may be so. My other suggestion was NHS Western Isles, as a true rural board, because it has a high level of earmarked services and linked services with NHS Greater Glasgow and Clyde, and it has had some financial difficulties in the past.
Those were my four best bets.
Okay. I think that we are all agreed on NHS Greater Glasgow and Clyde. Are we agreed on NHS Lanarkshire?
I vote for that.
Okay. That leaves us with NHS Dumfries and Galloway, which was mentioned earlier, NHS Highland or NHS Western Isles. I am not much bothered about which of those we choose. We have NHS Greater Glasgow and Clyde and NHS Lanarkshire, and we have to pick from NHS Borders, NHS Highland and NHS Western Isles. We could have four, which would be Glasgow, Dumfries, Lanarkshire, and either Highland—
There are specific challenges in NHS Lothian at the moment, but I do not know whether that is worthy—
NHS Lothian is interesting, because it has been using mechanisms to try to meet its targets that it will not have open to it next year.
We will have a big board in NHS Greater Glasgow and Clyde, we will have someone from the Borders and we will have Lanarkshire. Will we have NHS Western Isles or NHS Highland? I ask that Fiona McLeod concedes NHS Orkney; NHS Western Isles or NHS Highland could cover the remoteness aspect. Is NHS Western Isles okay?
Members indicated agreement.
Right. Let us check what we have: NHS Greater Glasgow and Clyde, NHS Lanarkshire, NHS Dumfries and Galloway and NHS Western Isles, by special invitation.
I thank you all for your help, and I thank Dr Walker.
We now move into private session, as previously agreed.
12:36
Meeting continued in private until 12:51.