Agenda item

David Meikle, Director of Finance will be in attendance for this item.

(Mr S Phoenix, Chief Executive of the PCT, was in attendance for this item at the invitation of the Committee.)

            (1)       The Chairman introduced Mr Phoenix and thanked him for attending.  He said that, although the HOSC had not yet been able to have any information on the PCT’s budget for 2008/09, he felt it was still very helpful for the Committee to have a discussion with each PCT about the budget-setting process.

            (2)       Mr Phoenix gave a brief introduction on the PCT’s current financial position.  The four PCTs that had preceded West Kent PCT had had widely differing financial performances and overall the outcome had not been good.  In October 2006, when he had taken up his current post, the PCT had had a £30 million financial recovery plan and by March 2007 it had moved to a £15 million overspend.  This and previous debts meant that the PCT had had to pay back £20 million in the 2007/08 financial year, leaving its budget very tight.  In addition, the PCT had experienced unexpected expenditure in several areas, including specialist tertiary treatment outside the area and high drugs charges.  However, the PCT expected to end the year in balance.

            (3)       Last year, the Local Delivery Plan had set out financial priorities for the three years ahead – but the PCT had not received its funding allocation until mid- to late- December 2007, preventing it from doing any effective financial planning before then.  The allocation given had been for one year only, not the expected three years.  The next two years’ allocations from the DoH were expected in spring 2008. The allocation formula was to change and the PCT was nervous that it would be disadvantaged by the new formula.  The PCT was required to meet the national targets and priorities for the NHS, set out in the 2008/09 Operating Framework and the “Vital Signs” indicators, which were a suite of national requirements and local priorities (identified through discussions with PPIFs, the ‘Fit for the Future’ process and work with PbC clusters).

            (4)       Three priority strands had been identified, which resonated with discussions that the PCT had had with the HOSC:

(a)          to reduce levels of Healthcare-associated Infections;

(b)          to improve access to healthcare;

(c)           to improve the health of the population and reduce health inequalities.

            (5)       In answering questions from Members and PPIF representatives, Mr Phoenix explained the following:-

(a)              The PCT was able to forecast its future demand reasonably well by looking at past patterns and emerging trends.  Patient choices were difficult to predict, however. Choose and Book offered patients choice at referral and, under PbR, the money followed the patient. Movement here so far was slow, but the exercise of choice was expected to become more prevalent in the years ahead.

(b)              PbC was already shaping this year’s one year plan and all PbC clusters had produced business plans for the coming year.  PbC had been slow to get going but it had speeded up in the last six months to a level comparable to that achieved in other PCT areas.

(c)               Mr Phoenix thought that the issue of tariff splitting (or unbundling) was something of a “red herring” as regards making more use of community hospital services.  Not a lot of work had been done on tariff unbundling but it was not a magic formula for community hospitals; there were other issues too. The starting point should be what the best place to treat people was, not financial processes. Tariff unbundling was a means to an end not an end in itself.

(d)              There was nothing the PCT could do to influence private dentists who chose not to accept NHS patients.  A tendering process to increase capacity in the Tonbridge area and address the gap in provision would be underway by late spring 2008.

(e)              The PCT’s financial turnaround plan to address its past overspends and go from a £20 million debt to break-even meant that, inevitably, it had had £20 million less to spend on healthcare than otherwise would have been the case.  Repayment of the £20 million had been helped by: making efficiency savings; reducing posts; paying only for work undertaken; delaying investment in IT; holding vacancies for longer than usual; making more efficient use of the drugs budget; and cutting training courses.  Since the PCT’s budget had grown overall, the £20 million recovery had been achieved by containing spending rather than by making actual cuts. 

(f)                 Replying to a question about the impact of Private Finance Initiative (PFI) contracts on the local health economy, Mr Phoenix said that the Darent Valley Hospital PFI contract accounted for some 21% of Dartford and Gravesham Trust’s annual budget.  The Trust was doing well financially, but the cost of the PFI contract was a factor in its finances.  The planned Pembury Hospital PFI contract would account for 15% of Maidstone and Tunbridge Wells Trust’s annual budget.  However, the cost of PFI projects for the Trusts was a financial issue for them rather than for the PCT.

(g)              Waiting times for some procedures had been reduced, but West Kent had not performed as well as East Kent, the latter having been a “pathfinder” for achieving the 18-week maximum referral-to-treatment target.  The 2007/08 financial year had not seen as much progress as had been achieved in 2006/07, so there was a lot of catching up to do in 2008/09.  Darent Valley Hospital was “on a knife-edge” to achieve the milestone target of 85% of referrals being treated with 18 weeks by March 2008.  Maidstone and Tunbridge Wells Trust’s hospitals had no realistic chance of meeting this target but would still try to achieve a decrease in waiting times.

(h)               Money saved on the PCT drugs budget, as reported in the media, would return to the PCT.  Savings had been achieved by the use of more generic drugs and had been helped by management teams working with GPs’ practices. However, the most expensive area of drugs expenditure was in secondary care.

(i)                 Addressing health inequalities and unequal access to services would require investing in new schemes to ‘add years to life and life to years’.  West Kent was fortunate in having less variance than East Kent in the health levels of its population.  Two particular priorities were campaigns on sexual health and smoking cessation. These campaigns needed to be targeted, as otherwise they tended to have most effect among those sections of the population that least needed them – thereby actually widening health inequalities.

(j)                 The operation of Free Choice and the entry of new providers into the NHS market did have the potential to make the job of PCTs as commissioners much more difficult.

(k)               The PCT had negotiated to vary its contract with the Independent Sector Treatment Centre in Maidstone to ensure that referrals to the service were maximised (given that the PCT was obliged to pay for the full value of the contract regardless of the amount of work actually undertaken).

(l)                 Funding for Diabeta 3 software and specialist dieticians, for diabetes patients, was not currently on the priority list – but discussions on this had not yet been concluded.

(m)            There was no real alternative to opting for PFI arrangements when building large-scale capital projects, as this was government policy. Mr Phoenix said that the Treasury metric showed PFI to be more cost-effective than traditional public-sector procurement.  Annual PFI contract charges were more a pressure on the Trusts operating from the PFI buildings than on the PCTs commissioning services from them.  The planned Pembury PFI scheme was predicated on the assumption that it would be cost-neutral to the local health economy overall (although transition costs would be borne locally). PCTs paid for most services on a tariff that was uniform across the country and so could not be affected by local PFI costs. If the PFI at Pembury did go ahead, West Kent would have among the best hospital stock in the country.

(n)               Making more cost-effective use of the drugs budget (as part of the measures to recoup the £20 million debt) had not prevented patients from having access to high cost drugs where these were genuinely needed.  Changes to drugs used had not been made purely for financial reasons, but only if the efficacy of the drug was in doubt.  However, newer, higher-cost drugs would present PCTs with a challenge in the future, as prescribing them for one patient would raise the expectations of others.

(o)              Involving clinicians in the management of the NHS was a challenge. PbC was partly about this, making GPs financial, as well as clinical, ‘gatekeepers’. This had been attempted before, with GP fundholding; it remained to be seen whether PbC could do it. Clinicians tended to find finance and management boring compared to medicine. But an increasing number of managers came from a clinical background.

(6)       The Chairman then asked Mr Phoenix for his views on the process of budget-setting and performance-management and the timetable for sharing this with the HOSC and allowing the HOSC Members a constructive role.  Mr Phoenix said that the 2008/09 budget process had come too late to allow the HOSC any influence, but the process would start earlier for 2009/10.  It was easy to have an abstract dialogue earlier in the year; the difficult bit was aligning this to hard financial numbers.  He was confident that the PCT would be able to have a discussion with the HOSC in the autumn around the broad shape of the budget, even if no detail was available at that time.  Mr Phoenix suggested a workshop format to help Members understand issues and express views.  The Chairman welcomed the opportunity for the HOSC to have earlier involvement and a more constructive role in the PCT’s budget setting process as the statutory role of the HOSC included the receipt of good information in good time.

(7)       RESOLVED that the information given by Mr Phoenix in his presentation, and in his responses to questions from Members and PPIF representatives, be noted, with thanks.