Money money money

Next week we begin the engagement roadshows around the locality about the future of paediatric and maternity services at the Friarage. Over the last few weeks I have had many conversations with lots of people : county councillors, patients, friends, relatives,  people in shops about these issues and one issue that comes up over and over again is that this is all about money.

How money moves round the system though is a mystery to most of the people I have talked to, so I thought it might be helpful to blog about money: how the NHS is funded and how the bills are paid. It is complicated and has taken me some time to understand it. I will do my best to keep it simple but bear with me! I will also do it in several bits so it doesn’t get too boring….

Firstly our money comes via the Strategic Health Authority from the Department of Health. The amount we get each year is decided using a national formula. The formula works around the concept of “weighted populations” and that weighting is affected mainly by deprivation. The logic behind that being that people who live in deprived areas of England have higher health needs than those living in affluent areas.

Our budget comes to North Yorkshire as a whole and is then divided between the 5 clinical commissioning groups using the same formula.  As North Yorkshire is a relatively affluent area we get low weighting. Within the Yorkshire and Humber SHA we receive the lowest per person funding and Barnsley PCT receive the highest. The figures for 2012/13 are: North Yorkshire receives £1477 per person per year compared with Barnsley PCT, which receives £1903 per person per year.

There is no weighting for “rurality” so we don’t get any extra money to help us with the issues which face us around delivering services to remote rural areas. The PCT has raised this issue many times in the past. The answer has always been that there is no evidence that delivering services to rural areas is more expensive. However as hospital services are pulled into larger centres by issues of safety and working practices I think it is likely to become a bigger issue.

So as a health community we have to manage on the money we have. We have a duty not to overspend. With that money we (the CCG) have to buy all the health services people use.

Hospitals are paid using a system called “Payment by Results”- each time a patient goes to see them, either as an outpatient, for planned surgery or as an emergency. Each “episode” of care is documented and costed according to a national tariff (like a menu) and the bill each month is sent to us for payment. We check the bill and pay them the money.

Each year we produce plans which estimate how much care we will have to buy in the coming year. We base this on what happened last year and doing our best to guess what other things might affect how many people need hospital services.  It is hard to foresee everything that might affect how many people go into hospital. There are new treatments which are developed all the time which mean there is more we can do for people. This is great but it costs more money!!  Also the percentage of people who are over 65 goes up each year and we know older people tend to use hospitals more than younger people because we all tend to develop more illnesses as we get older.

We also plan how we are going to save money each year by improving the efficiency of services, making it simpler and easier for people to get good care etc.

We set a “contract” with each hospital. Obviously all our contracts can’t add up to more than we have to spend for the year.

However we all know about the best-laid plans!!!! Whatever we predict we are going to spend we have to pay for each person who goes to the hospital even if more people use the hospital services than we planned.

Okay.. enough for this week I think. I will continue next week .. explaining where we are with finances year on year and our plans going forward!