Change at the helm; Change still needed with the formula

Nigel Williams, 2 April 2014

David Nicholson ceases to be Chief Executive of the NHS Commissioning Board, more usually termed NHS England, while calling for a transformation of the service. As Paul Corrigan observed in ‘Inside Commissioning’ it is odd to expect his successor to bring about changes he himself has not achieved in eight years.

One aspect that has changed too little in that time is the formula for allocating funds. Although certain parts of the calculation have been adjusted or renamed, practices that stand between the money and public comprehension survive repeated attempts by Civitas author Mervyn Stone to expose them.

One of the practices concerns ‘unmet need’. It is a problem because patients with unmet need fall ill but no expenses for treatment show up in GP or hospital expenditure. A formula can attempt to provide for unmet need but, since the reason for the need remaining unmet was that resources were not being deployed to start with, extra resources stand just as much chance of failing to be correctly deployed. The simple method would begin with a survey of people’s health needs, then allocate money to follow the need. Instead, an unbelievably complicated formula attempts to identify every last local aspect in need of special treatment.

A tenth of the funds available for Clinical Commissioning Groups is earmarked for reducing the inequalities in public health. Once again, the selected mechanism involves complicated calculations but we might hope that the theory is reasonable. Instead, the formula introduces a statistic, the Standardised Mortality Rate, from a different area of research.

Much of the debate has centred around whether increased funds should be directed towards poor people or old people. In general, people’s healthcare is most expensive when nearest death, which is more frequent among people who are old, poor or both. A person with many poor or aged neighbours will have to share funding for healthcare with them . The old will continue to have expensive needs even if the formula prefers to award the money to poorer areas. The result is that a poor person living in an affluent and elderly area will see the budget spread very thinly between many people with high needs but very few attracting extra funding. For all its appearance of fairness and careful adjustment, a Standardised Mortality Rate is less equitable than a crude death rate.

One of the happier consequences of devolution is that several teams are looking at questions such as the measurement of deprivation. Whereas the Department for Communities and Local Government supplies English Indices of Deprivation, the Scottish Government provides the Scottish Indices of Deprivation north of the border. In place of the Standardised Mortality Rate, they use a related statistic, the Comparative Mortality Factor. In a new analysis for Civitas, Professor Stone argues that adopting the Scottish version could reduce some of the silliness in the English method of allocation. When Simon Stevens takes up his new post at NHS England, it may be a good opportunity to show he can learn lessons from north of the border.

‘Breaking the SMR grip…’ is available to download from here.