Briefing note 6
Financing the Health Economy
Practice based commissioning (PbC)
Two relatively short and clear documents on this topic are:
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Practice Based commissioning – promoting clinical engagement – Department of
Health
Practice-led Commissioning: Harnessing the power of the primary care frontline –
the King’s Fund
1. The origins of Practice based commissioning
1.1. The Department of Health introduces Practice-level commissioning as being:
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Consistent with the principle of greater devolution of responsibility
The Department recognises the important role that GP practices play in
commissioning services for their patients and local populations.
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Practice level commissioning models may include:
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profiling and peer review,
indicative budgets,
real budgets with PCT-facilitated collaboration between practices,
partial real budgets or
Fully-devolved practice budgets.
The Department is continuing to develop appropriate models of practice-based
incentives in partnership with strategic health authorities, PCTs and GPs
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From April 2005, GP practices that wish to do so will be given indicative
commissioning budgets, providing GPs with further incentives to manage referrals
effectively with any savings being reinvested in NHS services.
1.2. As outlined in briefing paper 5, it is in the commissioning function that PCTs
have appeared to struggle, and early enthusiasm for collaboration between PCTs
and GPs has foundered.
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The idea of giving general practitioners a budget with which to commission
care directly has resurfaced.
One aspect not mentioned in the papers, but a common sense factor that
must be mentioned, is the affect on the budget.
One of the prime rules of budget management is to group the budget ‘spender’
as near as possible to the budget holder – to give GPs financial incentive to
make cost effective referrals should save money.
The cost of GP referrals has been one of the hardest budgets for PCTs to
control.
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2. GP fund holding & PbC – the differences
2.1. GP fund holding aroused enormous tension within the NHS, and divided the
general practitioner community.
Its impact was mixed:
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Fund holding practices encouraged general practitioners to use their
purchasing function to improve the quality of care for their patients.
Transaction costs were high, and differences in access between fund holding
and non-fund holding practices developed.
Significant benefits were apparent in other forms of commissioning, such as
GP commissioning groups.
2.2. Differences between GP fund holding and practice based commissioning
(As interpreted by the King’s Fund)
Policy environment (1991–1997)
Current policy environment
GPFH legally autonomous health
care purchasers
Practice-led commissioning exists
within broader PCT strategic
framework
National minimum standards of
choice of
provider for all patients
Local variability in services
constrained by national standards
(national service frameworks,
National Institute for Clinical
Excellence) and new mechanisms for
national inspection and regulation (eg
Healthcare Commission)
Standard tariff of NHS prices based
on Health Resource Groups
Disparity in choice of provider
between GPFH/TP patients and nonGPFH/TP patients
Significant local variability in services
Price-sensitive purchasing of health
care (often at marginal cost)
2.3. Practice-led commissioning is described by the Department of Health as being
able to:
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empower primary care teams to construct care packages that reflect the
needs of individual patients in a precise and highly responsive way
offer scope for defining individual preferences in partnership with patients,
together with the power to express those preferences through the
commissioning process
provide incentives that may shift the emphasis from treatment to disease
prevention and health promotion.
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3. How will Practice Based Commissioning work?
3.1. The Department of Health has set out the following table showing how GPs will
be given financial incentives for becoming part of PbC:
What can practices that claim a right to hold an indicative budget expect?
If they have a surplus?
Use of reinvestment of 100% of
Development and provision of patient
resources released through cost
services only; agreed by PEC and
effective commissioning
approved by the PCT board
If they Overspend?
If practices or localities fail to break even
over a three year period the
practice/locality forfeits the right to hold a
budget for three years
What will be the scope of the
Budget?
Initially by agreement , in longer term to
cover most health costs
How will the Budget be set?
Initially on a historical activity basis and
moving time to a fair shares based division
of the PCT‘s allocation PEC and approved
by the PCT board
Who will fund Resource
management costs?
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and Reasonable resource requirements funded
from the resources released through the
clinical changes plan (PEC to oversee)
Practice-led commissioning may also act as a tool to increase the standing of
PCTs
It may also serve to increase the wider accountability of primary care
clinicians, at least in regard to their responsibilities as gatekeepers to NHS
care
Practices meeting qualifying criteria cannot expect an automatic and legal
right to adopt practice-led commissioning status (Department of Health
presentation 2004).
3.2. Although more formal guidance is expected, it is not yet clear how far the risk of
commissioning will be delegated to GPs.
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Practices and PCTs face a potentially bewildering array of choices.
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The lack of detailed and prescriptive guidance from the Department of Health
means that many variants of practice-led commissioning will be possible.
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This diversity may well prove beneficial; but it implies that clear decisionmaking frameworks will need to be negotiated locally.
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The prospect of PCTs relinquishing all strategic control over commissioning is
unlikely as they are publicly accountable for national and local practices.
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4. Risk/benefit analysis of practice-led commissioning
4.1. The risks and benefits of practice-led commissioning will vary, according to the
services commissioned, their costs and the providers involved. Obviously it will be
simpler to commission straightforward treatment at the local hospital provider than
complex treatment at a London foundation hospital. The King’s fund has presented
the risks in this table:
(As perceived by the King’s Fund)
Likely outcome (risk/benefit)of
practice based commissioning
Practice level incentives to
be applied
Few benefits anticipated as
None
practices have little discretion
over patient management and
few credible alternative provider
options.
Autonomous practice-led
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I ndicative budgets
commissioning may result in poor
and/or quality indicators
strategic coherence and failure to
linked to referrals.
achieve major and complex
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Multi-practice
service redesign.
commissioning with real
budgets (within clear
PCT strategy).
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PCT to commission
additional GMS/PMS
services.
Low
Autonomous practice-led
Real practice-level budgets
strategic risk commissioning may provide
with transfer of risk from
services
dynamic service improvement,
PCT to practice level.
particularly where services:
Highly autonomous
practice-led
• are ‘referral sensitive’
commissioning
• are contestable (range of
providers)
• involve trade-offs between
primary care prevention and
secondary care treatments
(e.g. chronic disease).
Highly
specialised
services
(e.g. regional
specialties)
High
strategic risk
services
4.2. The King’s fund has also perceived risks in the system:
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There are financial incentives for primary care practitioners to manage
demand and financial risk may conflict with their role as the patient’s agent.
Local freedoms for primary care teams to set their own agenda may be in
tension with the PCT role to ensure the coherent planning and delivery of
services.
Greater discretion for primary care teams in the use of NHS commissioning
resources reduces the degree of formal public accountability exercised
through PC
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5. Next steps
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Strategic Health Authorities have been asked to produce an annual report of
the state of Practice Based Commissioning in their area. These will be
collated and fed back to the NHS.
The Department of Health says:
Payment by Results is already a reality for foundation trusts and begins to cover
other acute trusts from April 2005. Patient choice is increasing and record
investment in the NHS means that the scope for innovation is enormous. PCTs and
practices should start a dialogue now. SHAs should be facilitating those discussions,
helping the sharing of best practice across the health authority area.
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The King’s fund believes that it is more likely that PCTs will develop a mixed
approach and will be able to pilot different approaches within their own patch.
In the absence of a single model sponsored by the Department of Health, they
envisage ‘organic growth’
The relative merits of different approaches should be assessed and shared.
Neither paper mentions what will happen if GP practices themselves take on
the role of provider of health care services from PCTs, and how this would
work. PCTs must find other providers for their directly provided services by
2008/9.
6. Practice based commissioning in Kent and Medway
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So far I have found no note of pilot examples in Kent and Medway areas, but
perhaps the witnesses will reveal some.
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The latest bulletin for PCTs (October 2005) on Practice based commissioning
has the following key points:
• The PbC National Timetable has been brought forward with the expectation PCTs
will have 100% coverage of PbC by the end of 2006.
• In general, 2005/6 has been used by most PCTs as a preparatory year.
• Different PCTs generally have the same goal but use different approaches,
starting from different positions depending on skills/expertise and make up of the
local environment.
• Information requirements such as GP referral and hospital activity data validation,
understanding Public Health data, and use of data warehouse system support have
been established.
• Determining and informing practices of their PbC budgets, including exactly
what’s in and what’s out, has been a key task.
• Practice engagement has been a focus with key debate on PbC rationale and
vision, necessary processes, development of alternative pathways, and
understanding benefits and risks.
• Development of local PCT/practice infrastructure has already begun in some PCTs.
• Local networks have been utilised at all levels, for example SHA, LMC, and PCT
GP forum.
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