We were proud to host member Sharon Osterfield for last week's Lunch&Learn: Meet the NHS Manager. Sharon has 25 years of experience of the healthcare system both in acute and community settings and now also runs her own health tech startup, Erza Health which is trying to deflect patients from urgent care by helping them manage their own conditions.
Sharon got down to the nitty-gritty of the structure of the NHS, to help us understand how and what an NHS Manager does, where the money comes from and how it’s distributed.
How is the NHS Structured?
She led by explaining that commissioners, such as CCGs, NHS England and local authorities hold the purse strings who then distribute it to the providers such as GPs, Trusts and private companies. These, in turn, are then regulated by the Care Quality Commission (CQC) and NHS Improvement who brought a number of organisations together along with NHS Digital to regulate finance, performance and governance of NHS Trusts under one body. The last pieces in the puzzle are the 44 sustainability and transformation plans (STPs) which since 2015 have the responsibility for planning and coordinating health care and the new accountable care organisations (ACOs) of which there are now eight in the pipeline. STOP PRESS: this long read from The King’s Fund explains that ACOs are now changing to integrated care systems.
Who has the money?
Sharon then spoke about different players in the healthcare system and how their payments worked. Acute Trusts have an activity-based contract; ie the more activity they do, the more funding they receive. Payments are classified through Healthcare Resource Groups (HRGs) and payments are made by results. She shared the insight that Trusts know they can attract more funding by getting activity from other Trusts. They are also subject to what is called the Commissioning for Quality and Innovation framework (CQUIN) which supports improvements in the quality of services that providers offer. Sharon’s tip was to research the national and relevant local indicators to see if your innovation would help achieve them.
Community care covers district nurses, old persons’ mental health, occupational therapy and physiotherapy services. Community services are funded through a block contract so any additional action is not funded. They have also been stuck in a static funding position but demand has been growing.
Mental health has a very similar issue with block contracts, as do ambulance services. GP contracts are based on the population that the practice services but they also have the ability to get additional payments to the practice via the Quality and Outcomes Framework (QOF).
Sharon then shared her expertise on different financial terms, to help us understand the financial chain better. She explained startups would need to know these terms and processes in order to frame their business case.
HRG4 is the grouping of similar conditions or treatments that are used for the payment by results contracts in secondary care. Conditions and treatments are “coded” so, for example, CA60A is a tonsillectomy, 19 years and over which gets the Trust £1,101 for ordinary day case or £1,671 for non-elective.
The Market Forces Factor (MFF) is an index used in tariff payment and commissioner allocations to make up for the regional cost differences of providing healthcare eg staffing costs so a Trust in London would get more funding than a Trust in Hull.
Best practice tariffs (BPTs) are a national scheme that designed to incentivise quality and cost-effective care in Trusts, rather than just charging the maximum amount on an activity basis. If your digital health solution can help achieve a BPT, general managers will be interested.
A finished consultant episode (FCE) is a method of counting. It is a completed period of care for a patient requiring a hospital bed, under the care of one consultant within one provider. If a patient is transferred from one consultant to another, even within the same provider, the episode ends and another begins so a patient can have multiple FCEs.
We have already discussed CQUINs above. You can find out more information about the national ones on NHS Digital. For local ones, NHS Managers or CCGs will have a list. Sharon’s top tip was to or do a Freedom of Information request to which they have to reply within 20 days but it usually only takes a week.
Cost improvement plans (CIPs) are specific to each NHS provider and set out the savings that the provider plans to achieve over a period of time.
Pathway payments are single payments that cover a bundle of services that may be provided by a number of providers covering a whole pathway of care for a patient eg maternity services.
A Spell is a period from the date that a patient is admitted to the hospital until the date they are discharged, which may contain one or more episodes of treatment.
Outpatient attendance national prices are based on Treatment Function Codes (TFCs) Main Specialty codes represent the speciality within which a consultant is recognised or contracted to the organisation. Outpatient activity is generally organised around clinics based on TFC specialities and they are used to report outpatient activity.
Sharon insightfully explained the issue with the financial incentives and community care. The NHS is trying to push services from secondary care to the community but until they sort out the payments and incentives this won’t happen as Trusts attract the cash and community care has static funding. She gave the example of a cancer team who worked with their NHS manager to raise money for a £5,000 piece of kit to help the patient quickly and reduce recovery time, yet this was overruled because the money made by revisits to the hospital were lucrative for the Trust.
What’s in a title?
The next part of Sharon’s presentation covered how to engage with managers in the NHS. Some of the titles you might come across are:
- General Manager
Director of Planned Care
Director of Operations
Chief Operating Officer
The point she was making was that they all do the same thing. What’s important to gauge is the banding price range they’re set in - if you can work out their banding, you can figure out their budget responsibilities and if they can sign things off.
Sharon gave the top tip of only bothering talking to the band 8s. As a digital health founder, you are most likely to be wanting to talk to the Band 8As who will be Service or Operational Managers or the Band 8B/C/Ds who might be described as Directors / Divisional Directors / Directorate Managers. These managers are very hard to get hold of and many might work on multisite. Most have PAs so you can get through them so it is a good idea to invite them to networking events and to get to know them. Managers like receiving things in the post.
Sharon then broke down what an NHS Manager does day to day and went over the definition: an NHS Manager is responsible for the strategic, financial and day-to-day running of health services.
Sharon then went through the general structure of the executive roles in a Trust such as the Board, CEO, CFO, COO, CMO and Director Of Nursing, so people could familiarise themselves with what every role took care of. Getting buy-in from an executive at a Trust can really help with getting your innovation implemented. It’s quite easy to find the executive structure of most Trusts on their website. See the slide below for an example from East Kent Hospitals University NHS Foundation Trust.
Next up Sharon explained budget structures in the NHS and how they’re split into a pay budget (workforce costs/pay) and non-pay budget (equipment, drugs, services). NHS budgets are a very different language to the one's business world so it’s good to know the terminology used. It’s hard to save money on pay budget such as staff but savings can be made on the non-pay budget. Budgets are also split into recurring that tracks ongoing revenues and expenses that occur on a regular basis (pay costs, rental agreements) and non-recurring (short-term spend or revenue). Sharon’s top tip was that if you are able to show an ongoing saving within the recurring budget, an NHS Manager will be more interested.
A contract value up to £10,000 can be done with a Purchase Order and doesn’t require going to tender. Above that, some sort of tendering process is needed. Trusts are always mandated to get three quotes when tendering for a product or service. However, it may be that a pilot or evaluation can be implemented and a waiver signed by the CFO prior to the formal tender process. The sign off always depends on the Trust’s scheme of delegation within the Standing Financial Instructions’.
Sharon finished the Lunch&Learn by explaining how to present your business case to the NHS.
Firstly, know your audience. Do they have a block contract like Community or do they have a flexible one like GPs and Acute care?
Secondly, frame the landscape. How does your business case tie in with changes in policy such as the Five Year Forward View. For Sharon’s own business case for Erza Health, she picked the four key policies around urgent care, looked at the CQUINs at her local Trust and made her business case on that.
Thirdly, how can you demonstrate the financial benefits? Think about short-term versus the long-term cost savings and direct versus indirect saving can you show cost improvements or income generation.
Fourthly, don’t forget about patient safety and clinical governance/quality. Make sure your show how your innovation has considered these aspects.
Lastly, workforce considerations are key. Will your innovation require staff to undergo training? Who is going to provide this and how long will it take. Sharon stated that training on new innovations is always hard to do as people are too busy but if you can prove in-year savings on a recurrent basis you’re onto a winner.
A massive thank you to our member Sharon on this insightful Lunch&Learn.
Do join us for our next Lunch&Learn member Julie Bretland, founder and CEO of Our Mobile Health will cover mobile health apps and how to stand out from the crowd.