We now move to agenda item 2. I welcome our witnesses—Mr Eric Harper Gow, the former acting chief executive of the Common Services Agency; Mr Tony Ranzetta, the chief executive of Fife NHS Board; Mr George Brechin, the chief executive of Fife Primary Care NHS Trust; and Mr Frank Owens, the chairman of the Scottish Pharmaceutical General Council. You are all very welcome. I believe that Mr Owens wishes to make a preliminary statement.
Thank you, convener. The Scottish Pharmaceutical General Council represents all Scottish community pharmacy contractors, be they high street chains or independent pharmacies. We negotiate their NHS remuneration and terms of service. To avoid confusion, I should say that we do not represent the pharmaceutical industry.
As none of the other witnesses want to make introductory statements we will continue with questions.
I am sorry, convener. What was the last part of your question?
I was asking about the lack of transparency in the system. You pointed to major problems. Do you think that suppliers are being treated fairly by the department?
Hopefully, we have managed to overcome many of those problems. The lack of transparency centred on the paperwork that we received about estimated payments. Little information was provided about how the estimated payments had been calculated. We had to take the estimated payments at face value.
Very large sums of money are involved so there must be some risks. Do you believe that the monitoring information is too complex or too difficult to understand? Is there proper monitoring of what goes on?
The pricing of NHS prescriptions is a complex procedure. There are 22,000 items in our own drug database and I believe that the pricing rules that are employed by the PSD currently run to something like several hundred manuscript pages. The magnitude of complexity is very great. However, we recognise those problems and we have tried to work with the PSD to overcome them.
Do you have a clear view of how the system could be improved?
Our biggest problem is the lack of transparency. Even in a normal payment schedule, there is very little information. The figures comprise reimbursement of drug costs together with professional fees. There is no breakdown of how those figures are arrived at, so we have to take them on good faith. However, you might argue that if you go into a supermarket, for example, to buy a bag of messages, you would receive an itemised receipt. A community pharmacy does not get that and therefore there is a lack of transparency in the system.
Thank you for that general look at the system.
As members might expect, in 2000-01 we were faced with a range of problems. In the middle of 2000, when we introduced the new system, we were already four to six weeks behind the normal, historic pattern of pricing and payment. That was the result of a shortage of generic drugs, which meant that branded drugs were dispensed. Each prescription that involved the replacement of a generic drug by a branded drug had to be endorsed. We took action to engage additional staff, but we were not able to address the backlog fully. We started from the situation of being four to six weeks behind.
We will consider that matter in more detail shortly. How much more must be done to the system? Are you satisfied that the system is being adequately improved?
As it stands, the system is pricing prescriptions, enabling payments to be made to contractors and delivering the management information that we received previously and some additional management information that we wanted—although not all of it. We are now engaged in a programme that is designed to implement the further improvements to the system that were put on hold when we started the catch-up programme. We are also taking a number of other steps that will enable us to move forward. I would be happy to discuss those with the committee.
How much more is to be done? How close are you to getting a system with which you would be satisfied?
We have a system that works and that does the job that we are required to do just now, but it has not introduced some of the benefits that we envisaged when we set out on this path in 1997-98, when the original specifications were drawn up.
Mr Harper Gow, you said that at one stage you got into a three to four-month delay. How long did you run the dual system—that is, the old system alongside the new? What made you change suddenly to the new system? When you had a problem, why did not you continue with the dual system until the new system was robust?
We introduced the new system when we were four to six weeks behind. That was in the middle of 2000. We did not do any dual running. In other words, we did not run the same prescription through the old system and then through the new system because we had reached a situation where the 16-year-old system was no longer supportable and we believed that the new system could do the job. However, the new system had a number of teething problems and we fell behind over the winter of 2000-01 by a maximum of three to four months. Have I answered your question?
Yes. You mentioned dualling in your opening remarks and I wondered how long you had run that for because you did not define it.
No, I am sorry. I meant to say that we did not dual run. We tested the system fully before it was implemented—or we thought we had—but there was no period of running the old system in parallel with the new one. We had to switch off the old system. We did not have staff who were capable of running both.
You are saying that you could not run a dual system.
We could not run a dual system.
Scott Barrie has a question that considers the problems of implementing a new computerised system for processing payments to pharmacists.
Thank you, convener.
I am sorry, I did not quite catch the middle part of your question.
Are there any overpayments outstanding because of the way in which you had to make estimated payments when the system was not working?
Members might be aware that the concept of an estimated payment is not out of the ordinary in the way that pharmacists are paid by the NHS. I indicated that we have now resumed the normal timetable. That allows for prescriptions dispensed in January, for example, to be priced by the CSA during the latter part of the January and into February. An estimated payment equivalent to 90 per cent of what is thought to be due is made at the end of February on 30-day payment terms.
Forgive me if I have not fully understood your explanation, Mr Harper Gow, but was the requirement to change the formula, which you undertook with the pharmacists, directly related to the problems that you were encountering with the delay in your new system, or was it due to an additional difficulty?
No. The formula was changed because we found that the historic method of calculating the 90 per cent estimate was not as accurate as we had previously believed it to be. Arguably, it was okay for calculating a 90 per cent estimate that you were going to catch up with the following month, but when the catch-up adjustment to actual figures took several months—three to four months, as I said earlier—it was felt by the contractors and the service to be unsatisfactory.
So are you saying that the difficulty had been around, but it had previously not been known about?
Yes.
My next question is for George Brechin. Clearly, the problems that Mr Harper Gow has mentioned impacted directly on primary care trusts. When did you become aware of the problems, and was there adequate consultation between your trust and other primary care trusts and the Common Services Agency on the decision to make estimated payments to pharmacists?
We became aware of the issue during the course of the financial year. There was fairly quick reporting back through the financial chain as the problems began to emerge. It was an issue that trusts throughout Scotland took seriously, and on which there were a number of meetings. Primary care trust chief executives meet regularly, and on a number of those occasions we invited one of Mr Harper Gow's colleagues, Richard Copland, the acting director of practitioner services, to come and talk to us about the issues that were raised.
How significant a financial risk did the decision to pay on an estimated basis pose for the trusts?
The trouble that I have in answering that question is that one would normally assess a risk by past experience, but we did not have a lot of past experience of the new system to go by.
I can imagine.
I will happily supply you with a detailed figure, if required. From memory, we were significantly less than £100,000 out in our estimates. In the accounts of the trust, the deviation was not material.
So your estimate was almost bang on—£100,000 in a budget of many millions of pounds.
As some of my colleagues know, I tend to translate figures into time. For a trust the size of the one that I am responsible for, £100,000 equates to about five hours' expenditure.
How did consultation take place between yourselves and the CSA?
There are regular meetings of primary care trust chief executives and of primary care trust finance directors across Scotland. There are also meetings of people in the second line of the finance departments across Scotland. The issues that we have been discussing today were a topic at virtually every meeting. I think that finance directors meet monthly; chief executives tend to meet bi-monthly. The acting director of the practitioner services division attended meetings with chief executives, as I have said, on two if not three occasions, and attended virtually every meeting of the finance directors.
I would like to turn to Mr Owens, whom I thank for his opening statement. From my experience—I am a former practitioner—I would have added that pharmacies have to pay their bills before they know what they are getting reimbursed for. You strayed away from that point.
We became aware in April 2000 that the PSD's pricing timetable was beginning to slip. During April 2000, a number of contractors in the larger health board areas began to receive estimated payments.
If the estimated payments went up, that, in theory, would improve your cash flow.
I understand what you are saying. However, although some contractors may have received overly generous estimated payments, others received underestimated payments. It was difficult for people to determine their cash flow and to make financial forecasts.
Did many of the contractors whom you represent raise individual issues with the general council?
Many did. We debated the issue at length in our organisation and we had a considerable number of meetings with the PSD. We decided that the best way in which to overcome the difficulty was to work as closely as possible with the PSD.
Did you feel that the consultation between you, as pharmacists and pharmacists' representatives, and the department and the primary care trust was adequate?
The PSD was quite receptive. When we initially moved forward with the estimated payments, none of us had ever been in such a situation before. As Mr Brechin said, it was new territory for us.
Were there any particular problems for individual pharmacy contractors? I am referring not simply to contractors who could not pay their bills because they had been underpaid by the department, but to contractors who accumulated overpayments that they did not realise were overpayments.
There were difficulties in that, although funding was coming in, pharmacists were unsure as to whether they were entitled to it or whether it was enough. Other difficulties have since transpired, for example with accountancy fees. Because of our difficulties in identifying the accountancy paper trail from when accounts were handed over at the end of the financial year, accountants had great difficulty in interpreting the data and in drawing up sets of accounts.
Did the tax authorities take a fair view of the situation?
The tax authorities?
The Inland Revenue.
I am unable to comment, to be perfectly honest.
Do you know whether any representation was made by the department? Mr Harper Gow, did you participate in easing the accountancy problems that apparently developed?
I cannot answer about any contacts with the tax authorities—I am simply not aware of that. Accountancy problems were brought to our attention and, through one of our regular meetings with the Scottish Pharmaceutical General Council, we said that if any contractors had problems that they felt it would be helpful to discuss with us—in particular with the financial controller of the practitioner services division, we would be very happy to meet them for that purpose. A handful of them took up the offer. I am afraid that I cannot give you any further information on that.
Mr Owens, is there anything in the new system that gives you confidence in how fluctuations in the availability of generic drugs are dealt with?
Fortunately, the situation with the supply of generic drugs has improved considerably over the past 12 months. As for the recovery, we are now back on the normal timetable.
Would you, on behalf of pharmacy contractors, like to make any further recommendations to the department as to how the system could be further improved?
We have on-going concerns about the flexibility of the new system. There appear to be difficulties with regard to accommodating change. I am sure that members are aware that we are trying to develop new, better models of pharmaceutical care so as to improve the range of services that we offer our patients. Much of that work is established within the Executive's new strategy for pharmaceutical care. If we are to deliver on that strategy, we need to ensure that the existing infrastructure is capable of dealing with new methods of payment.
I take it that you have made recommendations to the department to that end.
We have.
Mr Harper Gow has already partly answered this question, but I wish to put it to Mr Owens. You raised the issue of increased accountancy fees, and Mr Harper Gow basically said that the number of contractors who appealed was negligible. Is it correct to say that a relatively small amount was involved?
Sorry, could you—
You raised a point about increased accountancy fees as a result of the delays and so on, and individual pharmacy contractors were involved in that. Mr Harper Gow said that very few of them actually raised that with the Common Services Agency as an issue, presumably asking for help with those fees; therefore, the amount involved must have been negligible. You raised the matter and made it sound like a major thing, while Mr Harper Gow basically indicated that it was not.
I know of one contractor who, unfortunately, had to pay an additional £800 to have his books finalised for the past financial year. Personally, I have spent considerable time trying to put down on paper exactly what happened to allow my accountant to make sense of the audit trail.
Therefore, increased accountancy fees were quite a burden to some individual contractors.
Yes.
You also said that some contractors had to go back to the banks, presumably to negotiate loans. I assume that such loans would have involved interest payments. Did those payments also amount to considerable sums?
I cannot answer that. I am sure that my support staff who are here today would be able to give me that information, as a number of contractors contacted the offices of SPGC to seek advice.
The nature and volume of primary care payments make it impractical for them to be authorised in advance. Given that there are 60 million transactions with a value of £1.3 billion, it is essential that a robust and consistent verification system should be in place. Margaret Jamieson will ask questions about the delay in implementing robust and consistent payment verification arrangements.
I have some questions for Mr Harper Gow. Last year, the committee considered the issue and recommended that payment verification arrangements should be developed as a matter of urgency. Will Mr Harper Gow update the committee on that? Why was no formal agreement in place in 2000-01 between the CSA and primary care trusts detailing responsibility for payment verification?
I am happy to try to answer those questions. First, I will deal with the formal agreement between the CSA practitioner services division and the primary care trusts and island health boards. We were all on a learning curve with the new system. You will recall that in April 1999, when the CSA became responsible for primary care administration, the primary care trusts were formed as part of trust reconfiguration. We were therefore very much on a learning curve.
To which area does the outstanding agreement relate?
The Western Isles.
We will deal with that shortly. First, Keith Raffan has a question.
Mr Harper Gow, you mentioned that visits in Fife and Tayside were discontinued. Why? Will you elaborate on that?
You may recall discussions that we had about a year ago. At one time, there was a considerable difference of opinion between various parties as to the value of such visits, particularly if they were made on a random as opposed to a targeted basis. If any contractor attracted attention through, for example, outlier analysis, we would follow that up, but not necessarily with a practice visit. Transferring records into our offices, for example, is obviously a more efficient way of dealing with such issues or carrying out an investigation. From our point of view, we would not have to send staff around the countryside. Equally, there would not be a lot of foreign bodies such as auditors tramping around the various practices asking questions when the staff were trying to do their business.
I do not find that satisfactory. I would like to ask Mr Brechin and Mr Ranzetta about that, but I think that we will have an opportunity to do that in a few minutes' time.
Mr Harper Gow, you mentioned that you set up a fraud investigation unit. That sounds impressive, but what exactly is it? What staff does it have? Have you any early results? What triggers an investigation and how does the unit investigate?
The unit was set up as a separate unit within the practitioner services division in summer 2000 as part of the development of primary care administration. In other words, it was part of the original project to centralise primary care administration in the agency.
You can confirm the number of staff later. How many investigations has the unit undertaken?
I cannot answer that, as I do not have that information. A report was produced for the unit's first year in summer 2001 and was, I think, made available to MSPs. It was certainly published. It is my understanding that it was made available to MSPs.
It would be handy for the committee to have a copy.
We dealt last year with the transfer of staff from all the health boards and other aspects of the setting-up of the new authority, but there has been a considerable settling-down period and people are now much more familiar with the one-view approach rather than 15 individual views. However, there seems to be a lack of information at a local level about how members of the public can make complaints and about the service input into that. Individual trusts will obviously still have views on the prescribing nature of certain general practices and individual GPs. How does all that fit together? I have yet to see any evidence of cases having been instigated since 2000 whereas we previously saw court cases mentioned on occasion in reports to the individual professional bodies, such as the case of the orthodontist who covered the west of Scotland in which a number of health board areas were involved.
I am sorry. I do not have details of the level of activity of the fraud investigation unit, but it has a number of on-going cases. I am pretty certain that its activity has led to some disciplinary actions, if not prosecutions. Discipline is a matter for the primary care trusts. The last time that I saw figures, there were 20 or 30 cases under investigation, some of which will have been closed.
Paragraph 18 of the Auditor General's report indicates that the payment verification protocol that was recently agreed by the CSA and primary care trusts proposes targeted practice visits and a small random sample of visits. You alluded to that when you talked about the four levels of checks. Does that happen across the board? Is every health board area treated the same or do you make more sample checks or targeted checks in certain health board areas? Do you have a service level agreement with each of the primary care trusts?
We call it a partnership agreement but it is the same as a service level agreement or a service level contract.
Could you supply us with the specific number of visits that will have taken place across Scotland this financial year?
The total number planned for this financial year—which has around four weeks left to run—is 80. That covers 16 of the 17 areas, the exception being Orkney, which is conducting its own random visit.
How many contractors does that cover?
I cannot answer that question, because there will be different numbers of individual practitioners in each practice. Some will be single-doctor practices and some will be multi-doctor practices. I am sorry that I do not have the information.
It would be helpful if you could provide it.
What triggers an investigation into a practitioner, regardless of specialty? What is the area of greatest concern? Is it patient fraud with prescription claims, contractor fraud, mismanagement or carelessness?
In general medical services, the area in which practice visits take place, the area of greatest concern is contractor fraud, not patient fraud, although there could be collusion in some cases. I have heard of instances of collusion, with payments being made for night visits that did not take place, for example, but the aim of our investigation is to uncover contractor fraud.
Are you thinking of examining other health service contractors in the same way?
Payment verification covers all four contractor streams, but practice visits are currently permitted only for general medical services. We do not visit ophthalmic or dental practices, for example, but we do meet patients. On occasion, we invite dental patients to our centre in Glasgow to have work that has been done—or, pre-payment, the need for work to be done—inspected. We also now have an ophthalmic adviser who does the same for ophthalmic services.
When you talked about discontinuation of services in Fife and Tayside, were you referring to 2000-01?
The two areas had their own programmes until the end of 1998-99. We became responsible in 1999-2000 and 2000-01, and we did not do practice visits during those two years.
How many visits have there been in those areas in the current financial year? Did you say that there had been 80 overall in Scotland?
Yes. I think that, in Fife—
You could let us have the figures later. I do not want to delay proceedings now.
I have them in my office; I shall send them to you.
What you said earlier worries me slightly. You said, "What's the point in tramping across the countryside and disturbing practitioners at work?" There are obviously non-surgery hours when you could gain access to a surgery and get a transfer of the records. Is that right?
Yes.
How reliable is that? If somebody is on the spot to get records and they want additional information, they can ask for it there and then. Getting that information transferred could take a day or two. Who knows how reliable that information would be or what might happen to it? Somebody who is on the spot can presumably undertake a speedier and more reliable investigation.
For payment verification, where one is looking to confirm one's understanding of something, investigation in the office is probably more effective, but we could spend a long time debating that point. There will certainly be occasions when it is necessary to do an investigation on a contractor's premises. I am making a distinction between payment verification and fraud investigation. In fraud investigations, we definitely attempt to arrive at about 5.30 pm on a Friday evening and do what we have to do by 9 o'clock on the Monday morning, so that the business can open again with minimum disruption.
After the protocol agreement that you have reached has cleared the various hurdles and the strict guidance of the audit community—you referred to "foreign bodies"—has been met, how will you ensure that the protocol is working and that it meets various criteria?
The protocol is subject to monthly monitoring and reporting. However, we are not as far ahead as we hoped we would be when we drew it up about 12 months ago. It took longer than expected for all the parties to agree to the protocol and for us to recruit the staff. It is fair to say that we took our eye off the ball with pharmacy because we needed to catch up. With the benefit of hindsight, I think that we did not pay enough attention to payment verification in that particular stream. Although we are attempting to remedy the situation, it is unlikely that we will achieve all that we had hoped to achieve by 31 March.
Are you saying that the protocol is not working?
The protocol was to be implemented progressively. I have already mentioned that some regulations have to be changed, which is a matter for the Scottish Executive health department. I think that someone earlier confused the Common Services Agency with the health department in that respect; the CSA does not change regulations. There is a progressive plan to implement the full payment verification protocol over a particular period; however, we are further behind with that than we should be.
What steps are you taking to speed up the process? As the convener indicated, we are talking about £1.3 billion of public funds.
As I have mentioned, apart from three outstanding vacancies, our team is now in place. We are introducing new systems. For example, we have had much discussion this afternoon about the data capture validation and pricing system for pharmacy. We are also introducing new systems for ophthalmics, and are enhancing the management information and dental accounting system, or MIDAS. However, all those steps take time. We have a programme—which I do not have in front of me—to roll out the full PV protocol over a particular period.
It would be interesting if you could provide us with the programme, as it is part and parcel of our overview.
When will the PV protocol be fully implemented?
I would prefer to come back to the committee with a firm date. I do not have that information in mind at the moment.
A representative of one of the contracting groups is present this afternoon. Perhaps he would care to comment on the consultations on and the roll-out of the protocol, and highlight any suggestions that his group has made about the protocol.
I am not sure that I can comment on that matter at this stage. We have no information on the protocol. We have not discussed with the PSD or the department how it will roll out.
I presume from Mr Harper Gow's comments that you will look out for and comment on such a proposal if it is rolled out in pharmacy, for example.
We have not considered the matter, so it would be inappropriate for me to comment.
Fair enough.
You might wish to make a written submission when you have had time to think about the question.
The primary care trusts and the department have been consulted extensively. I understand that discussions were held with contractor groups. I said that pharmacy was further behind, as a result of our concentrating on the catch-up. If it is said that no discussions have been held with the Scottish Pharmaceutical General Council, I accept that. I am certain that discussions are intended to be held.
Perhaps I can assist. We have had informal talks with Neil Billings of the fraud investigation unit, but there has been no discussion, formal or otherwise, between the department or the CSA and the Scottish Pharmaceutical General Council.
It would be useful for the committee to have a note of what consultation took place and when. I ask Mr Harper Gow or his successor to supply that information to us.
Perhaps Mr Brechin can answer my question. Mr Harper Gow said that primary care trusts had been consulted extensively. Did Fife Primary Care NHS Trust, for example, consult local pharmacists or other local contractor groups?
The short answer is that I do not know. Trusts were consulted Scotland-wide and negotiated a partnership agreement that gives us confidence about the sampling and checking levels. I have just looked behind me for a smile of help from my colleagues, but I saw none. Discussions may well have been held with my local professional committees. I do not know.
Perhaps you could let us know.
I would prefer to rephrase that question to include the words "better codification and more thorough arrangements". Arrangements were in place before responsibility was transferred to the CSA. We have worked with our colleagues to improve those arrangements. As Mr Harper Gow said, in Fife we said fairly early on that we wanted post-verification visits to GPs. Other parts of Scotland were not working in the same way. However, such visits are only part of the spectrum of visits to contractors and of other changes that have improved the system. One change in the past couple of years is the requirement on contractors to check claims for exemption. That has made a significant difference.
Do you mean the protocol?
Yes. That determines the basis of the checking. We do take the issue seriously.
Are you happy with the protocol?
I do not think that one is ever happy but it is a lot better than it was. Yes, I am confident that it enables me to discharge my responsibilities to the committee and as the accountable officer.
What would it take to make you happier, or are you just being your normal gloomy self?
Do I have to answer that question? I would like to have some experience of the new system before I say that I am satisfied that we should stop there.
Is there an agreement to review the protocol after a period of time?
We should automatically do a review before we sign the next year's version. On the other hand, we are getting much better. A system called PRIME—practice information management evaluator—considers a raft of items of service or recorded claims and relates them to the per capita population. From that, we can pick outliers, which enables us to target our activity using fairly sophisticated statistical sampling as well as the 100 per cent checks that Mr Harper Gow talked about. As we get better at that, I am becoming happier.
Are you happy with the number of practice visits?
With the help of our colleagues in the PSD, we completed the Fife programme of 100 per cent visits to general medical services by March 2001. We had done about two thirds of the programme before 1999. We completed the remaining third and have done just under 10 visits under the new system.
I turn now to Mr Ranzetta. In the same way as most health boards, Fife Health Board's accounts for the year 2000-01 were qualified because of the absence of a comprehensive framework for payment verification. Are you now satisfied with the protocol and what has been achieved?
I find myself in the same situation as Mr Brechin. I agree that significant strides have been taken in the past 12 months. In 2000-01, 25 practice visits were conducted. A further nine targeted visits have been conducted in 2001-02. That satisfies me in a way in which I was not satisfied previously.
Since the creation of unified health boards following the health plan, accountability lies more with the health board and you are more directly accountable for primary care payments. Do you believe that that will expose you to greater risk?
Accountability for that area was only devolved to the primary care trust. I have never lost that accountability.
Arguably, it is greater now.
It would be better to say that it is more clearly stated.
Until you disappear to Suffolk.
Do I think that we are more exposed? In Fife, we felt exposed in 2000-01, because we were working together to ensure that our collective financial performance came up to the standards that the committee expected. We did not apportion those responsibilities to particular organisations, as we felt that it was in the interests of the NHS to work collectively. The creation of a unified health board has merely reinforced that message.
Thank you. That completes our evidence taking. Would any of the witnesses care to make a final statement?
I would like to make a statement about the computerised information that we have. One of the problems that we encounter in the NHS is the timeliness of the management information that we receive. I do not believe that we can speed up the information coming back from the existing system, because the system was designed, first and foremost, to remunerate people on the basis of the amount of prescriptions. We need to consider seriously a parallel system that provides decent management information in a timely fashion for those who administer the budgets, so that they can see whether there are differences in prescribing trends within weeks rather than months, as is the case now. The system carries a significant risk, so we need to consider the development of new systems that divorce remuneration from management information.
Are you saying that it is a far greater priority for the boards and trusts to consider clinical effectiveness and patient risk than it is to consider the financial risks? I appreciate that we are talking today about the financial aspects, but that seemed to be your drift.
That was not my intention. I meant to say that good management information also needs to be timely. If there is a time lag in providing the information on prescribing costs, it prevents the link between management action and its consequences from being described accurately. A system that describes expenditure on the basis of prescriptions, using a system of payment verification, is extraordinarily helpful in providing reliable processes for auditing the payments made, but it does not necessarily meet the standard of timeliness of information that management needs.
So, you are looking to the management structure to help prescribing advisers, for example, in using practice formulae.
Absolutely.
Do you feel that the department is giving that work enough support?
The department is not considering the issue at the moment. It is looking at the verification of payments and using that system to provide management information. However, those elements sit very uncomfortably together.
I thank all our witnesses and their staff for their evidence, which will help the committee.
Meeting continued in private.
Meeting suspended.
Meeting continued in public.