TO NOTE


                                                               AGENDA ITEM:   12
                          AIREDALE PRIMARY CARE TRUST

                REVENUE RESOURCE ALLOCATIONS 2003/2006

1.   Introduction

     The document Improvement, expansion and reform the next 3 years planning and priorities
     framework 2003/2006 sets out government’s commitments under the NHS Plan. To support this
     framework HSC 2002/012 notifies Primary Care Trusts of their initial revenue resource limits for
     the financial years 2003/04, 2004/05 and 2005/06.

     This is the first time in the NHS that allocations have been made direct to PCTs and the first time
     that allocations have been made over a three-year period. There have been significant changes
     to the allocation formula.

     To facilitate local planning there is no ring fencing, earmarking or hypothecation of funding.

2.   Weighted Capitation Formula

     The approach to resource allocation follows the same principles as previous years. The weighted
     capitation formula is used to set target levels of allocations. These are compared with baselines,
     which represent the current allocations that PCTs are receiving. The resultant difference is the
     Distance from Target. PCTs who are deemed to be above target can expect over time to receive
     less funding than an under target PCT in order for under target PCTs to move closer to their
     capitation targets.

     The speed at which PCTs are moved to target is called “Pace of Change”.

     There are three main changes to the resource allocation formula from 2003/04 onwards:

     1)     population changes are based on the 2001 census;

     2)     a new needs element for Hospital and Community Health Services and GP Prescribing
            components of the formula;

     3)     a revised staff market forces factor.

     The impact of these changes on Airedale PCT is to move the PCT from its previous position of
     £3.3 million over target to a 2003/04 position of £6.7m over target (7.04%) and a 2005/06
     position of £6.9m over target (5.61%).

     The revised needs element of the formula now uses Indices of Multiple Deprivation as the proxy
     for need as opposed to the data from the 1991 census which was used previously. There is a
     weighting for unmet need applied to certain population groups that do not receive healthcare
     services to the same level as others e.g. ethnic minorities and socio-economically deprived
     groups. Within the category of HCHS spending there are separate needs indices for acute,
     psychiatric, community psychiatric and community needs.
3.   Baseline Allocations

     A number of changes have been built into the baseline allocation some of which will have a
     financial effect on the PCT.

     Health inequalities' funding has now been added recurrently to the PCT allocation.

     An allocation in respect of drug costs previously met centrally has been included. The PCT may
     have to manage the risk of overspending against this allocation.

     The StBOP transitional levy now appears to have been made recurrent.

     A further reduction in Old Long Stay funding has been made.

     The Health Protection Agency Levy for Bradford as a whole exceeds the realisable funds by
     around £129k.

     Health action Zone funding (incl. Smoking Cessation) is confirmed for the next three years.
     These allocations, dealt with on a District wide basis to date have been placed into PCT
     allocations on a capitation shares basis.

     Allocations for Funded Nursing Care, Personal Medical Services and Out of Area Treatment
     adjustments are still outstanding.

4.   Recurrent Resource Increase

     Against an average (compounded) increase over the three years of 30.8% Airedale PCT has
     been given an increase of 28.08%. The difference in allocations reflects a modest Pace of
     Change adjustment in moving towards target allocations.

     In resource terms the uplifts for the PCT including taking account of inflation is:
     2003/04                        £7907k         8.30%
     2004/05                        £9234k         8.95%
     2005/06                        £9611k         8.55%

     Total increase                 £26752         28.08% (compound)

5.   Distribution Policy

     The PCT is working with other stakeholders to develop a Local Delivery Plan that will meet NHS
     plan targets over the next three years. In doing this work and determining how resources are to
     be deployed there is an overriding statutory requirement to maintain a position of financial
     balance. The PCT is working to minimise the 2002/03 in year financial position that at one point
     threatened an overspend of £1.6m and its progress is being monitored on a monthly basis by the
     West Yorkshire Strategic Health Authority.

     Accordingly the manner in which funds are deployed next year need to reflect the underlying
     position on financial balance. Stabilising the financial position in 2003/04 will enable growth
     funding in the next two years to be used to develop services.

     The Management Team recommend that the following order of resource deployment be adopted.

     1)     There is no planned overcommitment of resources.

     2)     Overspending budgets in 2002/03 are made good unless viable recovery plans are in

            This will include GP Prescribing, Secondary to Primary Care service agreements and
            possibly some acute provision.

     3)      PCT pre-commitments are honoured

             A number of service developments have commenced in 2002/03 and the full year effect
             of these will need to be met from the 2003/04 allocations. Examples here will include
             secondary to primary shift activity, Specialist Regional Service commitments, Airedale
             Trust developments in Stroke and Audiology, GP appraisal costs, LIFT and any other
             adjustments “deemed” by the centre to be in the baseline/or uplift.

     4)      Inflation

             Discussions are taking place with all providers to determine a reasonable level of inflation
             uplift. Prescribing will need to be increased in line with central guidance and local
             initiatives. Other areas will at minimum need to allow for the impact of the Agenda for
             Change proposals.

     5)      Any funding remaining after these categories can be used to develop services and/or
             facilitate service re-engineering.

     It is already apparent that the LDP proposals will exceed resources available to the PCT and a
     two-day event has been planned with Airedale Trust to determine what targets within the NHS
     plan can be achieved within the funds available.

     The PCT Management team have agreed with the Professional Executive Committee that this
     approach be taken in order to deploy funding under the LDP process.

6.   Recommendation

     The PCT Board is asked to

         note the additional funding available to the PCT and the basis on which it is being deployed
          under the LDP process.

DIRECTOR OF FINANCE                                                                       January 2003


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