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To: Mr Paul Williams OBE OStJ DL Chief Executives - Health Boards Director General, Health & Social Services Chief Executive - NHS Trusts Chief Executive, NHS Wales Cyfarwyddwr Cyffredinol, Iechyd a Gwasanaethau Cymdeithasol, Prif Weithredwr, GIG Cymru Eich cyf/ Your ref: 5th March 2010 Ein cyf / Our ref: SF/EH/0076/10 and EH/ML/004/10 Dear Colleague, HEALTH BOARD 2010-11 REVENUE ALLOCATIONS Please find attached the Minister’s letter ML/EH/004/10 to NHS Chairs formally issuing the 2010-11 Revenue Allocations. This letter should be considered in conjunction with the Annual Operating Framework for 2010-11, issued as Minister’s letter ML/EH/042/09. The requirements set out in the AOF are the Minister’s priorities for the year ahead, and as such I expect your organisation to deliver these within the funding set out in this allocation without exception. Yours sincerely Mr Paul Williams Director General, Health & Social Services Chief Executive, NHS Wales Cyfarwyddwr Cyffredinol, Iechyd a Gwasanaethau Cymdeithasol Prif Weithredwr, GIG Cymru Parc Cathays Cathays Park Caerdydd Cardiff CF10 3NQ Ffôn Tel: 029 2080 1182 GTN: 1208 1182 Ffacs Fax: 029 2080 1160 E-bost E-mail: firstname.lastname@example.org Health Board Revenue Allocation 2010-11 INTRODUCTION 1. This document details the Health Boards revenue allocations for 2010-11. 2. The allocation reflects the Minister for Health and Social Service’s decisions about the distribution of resources to Health Boards. 3. This document is complimentary to the NHS Annual Operating Framework, which sets out the priorities for 2010-11. 4. This allocation is made under: Section 174 of the National Health Service Act 2006 and the amounts payable to the Assembly in respect of capital charges under section 174(10). The powers are conferred directly on Welsh Ministers. Section 70 of the Government of Wales Act 2006 ACTION 5. Health Boards and NHS Trusts are expected to achieve and deliver the annual priorities for 2010-11, as outlined in the Annual Operating Framework, from within this allocation. The exceptions to this are: As in previous years, the Assembly will meet the costs of the Welsh Risk Pool in 2010-11. Funding for the following issues is being held centrally until the amounts required for 2010-11 are confirmed: The staff grade and associate specialist doctor’s contract. Approved continuing care bids The costs of first eye treatment for Wet AMD will be allocated again in 2010-11 as set out in Derek Fishwick’s letter of 9th December 2008. GMS and GDS contractor allocations are issued at this stage at 2009-10 levels with adjustments for completed primary care premises for GMS and a redistribution of PCR target shares for GDS. 2010-11 Cash increases 6. Health Board allocations have been increased overall by 0.4% in 2010-11 from the 2009-10 published allocation tables, taking account of transfer of funding out of the allocation for services provided by the Public Health Wales NHS Trust. Health Boards receive a cash increase of £21 million on revenue allocations. GENERAL POLICY FRAMEWORK Unified budgets 7. Health Boards are responsible for managing the totality of their budget, and making the best use of all available resources. The only restrictions to virement between different allocations relate to ring-fenced HCHS services (see Table B) and the totality of both the GMS contract and the Dental Contract (see Table C and F and the explanatory notes enclosed). 8. Whilst all funding is now allocated to the seven Health Boards, for 2010-11 the detailed tables show allocations, where appropriate, at the level of the former 22 local health boards. This is to allow reconciliation with previous allocations. From 2011-12 onwards, the amounts will only be shown at Health Board level. 9. Following work undertaken through the Health Reform Programme, the HCHS and Primary Care Prescribing Allocations will be combined in 2010-11. 2010-11 will be the last year in which these allocations are shown separately. 10. The 2010-11 allocation comprises: Summary Hospital and community Health Service (HCHS) revenue discretionary allocation (tables A1 and A2) HCHS protected and ring-fenced Services (table B1) HCHS Directed Expenditure Allocations (table B2) New General Medical Services Contract Allocation (table C) Revenue Allocation for Drug Prescribing (table D) Revenue Allocation for Community Pharmacy Contract (table E) Revenue Allocation for Dental Contract (table F) Memorandum Tables (tables 1 to 3) 11. For Hospital and Community Health Services (HCHS) costs, Health Boards are responsible for commissioning services for their resident population, with the exception of some cross border flows, referred to in paragraph 37. The GMS and prescribing allocations are issued on the basis of registered populations, and the Community Pharmacy allocation is issued primarily on the basis of numbers of scripts dispensed within Health Board areas. HOSPITAL AND COMMUNITY HEALTH SERVICES (HCHS) REVENUE Recurrent discretionary allocation (Table A) 12. This provides the total discretionary funding available to Health Boards to commission hospital and community healthcare services. The distribution of the allocation is derived from the 2009-10 baseline, adjusted for new funding issued and funding top- sliced. 12. Discretionary allocations have received a 0.75% funding uplift overall to 2009-10 baselines. Ring-Fenced Services (Table B) 13. The second component of the HCHS allocation is the funding allocated for ring-fenced allocations. Following work undertaken as part of the Healthcare Reform Programme, the number of ring-fenced services has been significantly reduced. With the remaining ring-fenced services, Health Boards must ensure that this funding is directed for the purpose intended. There is no flexibility about the use of this funding, although Health Boards are free to invest additional funding in these services to meet national priorities. Health Boards are reminded that ring-fenced funding can not be deferred into future financial years. 14. Ring-fenced funding has been uplifted by 0.75% on the 2009-10 baseline. National Finance Agreement 15. The 2010-11 revenue allocation will not include a National Finance Agreement, as has been the custom in previous years. The Agreement was primarily designed to ensure that there was a reasonable allocation of financial risk between commissioners and providers under the previous financial regime. It set out estimates for unavoidable cost increases for pay, non-pay, NICE and new drugs and statutory and policy compliance that would primarily be incurred by the former NHS Trusts as providers. The new financial regime is such that Health Boards must meet these costs as providers of services from within their revenue allocations, and thus there is no benefit in the Welsh Assembly Government issuing any formal guidance. 16. The exception to this situation is where Health Boards continue to fund services provided by the remaining NHS Trusts, and for services provided by one board for the residents of another, including services funded through the Welsh Health Specialised Services Committee (WHSSC). Finance Directors have established a task and finish group to agree collectively the principles and operation of Healthcare Agreements between NHS organisations for 2010-11. PRIMARY CARE REVENUE GMS Contract and Dental Contract (Tables C and F) 17. Contract negotiations have not been finalised for 2010-11 in time for this document. These allocations have therefore been issued based on 2009-10 final allocations for general medical and dental services, with adjustments for known 2010-11 changes. 18. These allocations will be re-issued for 2010-11 when contract negotiations have been concluded (allocations to be contained within the available funding envelope). 19. An adjustment has been made to the 2009-10 net dental contract allocation for the redistribution of the patient charge revenue target shares, as per the correspondence from Andrew Powell-Chandler (Dental Policy lead). Contact points for this area are Julie Broughton (029 2082 5747) Finance, Derek Fishwick (029 2082 6761) for GMS Policy and Andrew Powell-Chandler for Dental Contract Policy (029 2082 1689). Revenue Allocations for Drugs Prescribing (Table D) 20. The Assembly Government will continue to hold a budget for the difference between the cost of prescribing and the cost of dispensing (and any risk on that budget will be borne centrally). There is no income budget relating to prescription charges. 21. The Health Board Drugs prescribing has received no uplift for 2010-11. Outturn for the past few years has been static, therefore the uplifts applied by the Welsh Assembly Government have not been used for costs and volume increases on the budget, as any volume increases have balanced out with savings made to drug prices 22. There will be no reduction made to the 2010-11 allocations for: Further 1.9% PPRS price reductions for branded drugs that will take plac e from January 2010; Any further in year Category M price reductions; Savings as a result of loss of exclusivity ((LOE) – drugs coming off patent). The Association of British Pharmaceutical Industry (ABPI) has indicated significant savings in the region of £165m of primary care drugs over the next 5 years for this area 23. In October 2009, Paul Williams wrote to Health Boards informing of the Pharmacy Services Task and Finish Group’s recommendations and the need for support the implementation of these. In 2010-11 the recommendations will be implemented, including: 4 Community Pharmacy Directed Enhanced Services (Smoking Cessation, Sexual Health (Emergency Contraception), Supervised Consumption and Syringe and Needle Exchange) will be rolled out by Health Boards using national specifications and agreed remuneration rates. These will be open to any pharmacy that reaches the necessary accreditation requirements and maintains preset quality assurance commitments; Increasing the levels of Repeat Dispensing, 28 day prescribing and MURs; Developing Medicines Waste Reduction schemes including running a nationally coordinated awareness campaign. Developing Medicines Reconciliation services across Primary and Secondary Care Training and support for each of the above. 24. Health Boards must ensure that they make adequate provision within the funding set out in this allocation to support these initiatives. Revenue allocation for Community Pharmacy Contract (Table E) 25. The Community Pharmacy contract allocation has been recalculated based on the most recent 2008-09 HSW dispensing and Health Board LFR accounts data, to reflect current dispensing volumes and actual Health Board expenditure for some areas of the contract, across the localities. 26. In addition an uplift of 5% for volume related items has been applied, and a further 0.45% for any in year changes. This represents an increase of 7% to the overall 2009-10 total envelope of funding. 27. This is the final allocation for Pharmacy contract for 2010-11. No further funding will be made available. Contact points for this area are Russell Pope (029 2082 3014) - Policy lead for Community Pharmacy Contract or Julie Broughton (029 2082 5747) - Finance. OTHER ISSUES Health Commission Wales 29. The current allocation for Health Commission Wales (HCW) has been disaggregated to the Health Boards following the resource mapping exercise undertaken during 2009. The exercise was based on a distribution of recurrent contract values with Welsh and other providers. This approach has not been able to take account of in- year pressures on provider contracts that HCW managed through the use of slippage on other sources of funding and developments. 30. The development of an outline service and financial plan for specialised services for 2010-11 recognises that some of these in-year pressures will be unavoidable recurrent commitments to be met by the Health Boards through the Welsh Health Specialised Services Committee (WHSSC). As this plan is further developed and finalised, it is likely that the basis of the original distribution of funding through the resource mapping exercise will require review and redistribution. Health Boards should therefore avoid assuming fortuitous gains as a consequence of this current distribution in their 2010-11 financial plans. Mental Health 31. You are reminded that “One Wales” commits the Government to placing a new priority on providing for mental health, including child and adolescent mental health. In line with this commitment, the Minister has determined that she wishes to protect expenditure on mental health services. In 2010-11, the ring-fencing has been extended from core services to all mental health expenditure, as identified through the 2008-09 programme budget expenditure returns. Table 3 details the total amount of the mental health ring-fence, shown by relevant allocation stream. This funding forms a floor, below which expenditure on core mental health services must not fall. This does not exclude mental health services from making efficiencies, but these savings must be re-invested in these services to meet cost increases and new developments. Renal Services 32. The first phase of protecting investment in renal services, including the additional funding for since 2008/09, will apply from 2010-11 onwards. Funding for the following services is ring-fenced. a. Vascular access for renal patients b. Adult dialysis, including Patient Transport Services c. Adult transplantation d. Erythropoietin Stimulating Agents (ESAs) for renal patients 33. The funding will be managed collaboratively by the Renal Networks and health boards through the Welsh Health Specialised Services Committee (WHSCC). In particular, savings from the All-Wales contract for Erythropoietins (ESAs) will be reinvested into renal services under the direction of the Renal Networks. Further work will be undertaken during 2010-11 to extend the ring-fencing to cover other nephrology expenditure on renal services and to check the accuracy of the work in the first phase. Substance Misuse 32. In line with Jo Jordan’s letter of 21st August 2009 to the former Local Health Board Chief Executives and Chairs, decisions on the use of NHS funding for substance misuse services will now be taken by the Substance Misuse Area Planning Boards. The ring-fenced total has been increased to the 2008-09 expenditure levels as confirmed during the data collection exercise undertaken during 2009. The revised 2009-10 ring-fenced baseline is detailed in Table 2 and is uplifted by 0.75% in 2010- 11 in line with other NHS allocations. Public Health 33. Funding for services provided by the Public Health Wales NHS Trust, including All- Wales Screening Services, has been removed from Health Board allocations, and will be retained as a central budget by the Health and Social Services Directorate General. Capital Charge Funding 34. As a result of HM Treasury's Clear Line of Sight (Alignment) project, there will be significant changes to capital charges funding from 2010-11 onwards. This is due to the removal of the cost of capital from budgets and accounts. Depreciation is to remain, but will be ring-fenced in 2010-11 in line with Treasury guidance. Further information about the impact of Alignment will issue in due course. 35. Until this work is completed, capital charge funding has been allocated at this point as in previous years. There are two exceptions: a. Ring-fenced residual estate capital charge funding has been reallocated from Powys Health Board to other Health Boards based on revised asset ownership and on 2009-10 capital charge commitments provided by Powys Health Board b. Discretionary capital charge funding previously included within the HCW allocation has been apportioned to Health Boards pro-rata to their resource map totals for the relevant Welsh providers. 36. An adjustment will be made to allocations as early as possible in the new financial year to reflect the outcome of the capital charges changes. Cross Border Financial Flows 37. As in previous years, an in-year adjustment to allocations will be made to reflect cross border commissioning responsibility, where Health Boards in Wales have English residents registered with their GPs and vice versa. 38. As in 2009-10, an in-year adjustment to allocations will be made to reflect the increased costs to Health Boards incurred by paying for activity in English hospitals at Payment by Results mandatory tariff rates. The allocation will be based on agreed baseline activity, and is dependent on the outcome of discussions with the Department of Health, reflecting changes in the tariff structure in 2010-11. Wanless Reform Funding 39. Following the review of Primary and Community Care Services undertaken by Dr CV Jones there is still evidence of disparate and disjointed services across the system, as well as gaps in service provision, particularly by those with increasing vulnerability and frailty. The ring fenced Wanless resources will need to be clearly focussed to ensure that primary and community services are strengthened, ensuring better integration and coordination of services meeting the needs of individuals. They will need to demonstrate more effective use of resources to achieve proactively managed, streamlined and efficient services for people in the community. This should build on developments to date addressing better chronic conditions management and support the key actions identified in 'Setting the Direction'. The Direct Needs Allocation Formula 40. The Welsh Assembly Government remains committed to the implementation of the (Townsend) Direct Needs Formula when a differential distribution of growth funding allows. QUERIES 41. If you have any queries about this Circular please contact Steve Elliot (029 2082 3245) or Julie Broughton (029 2080 5747). 42. Further information surrounding specific policy issues and contact details are provided in the explanatory notes.
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