WHAT’S FAIR FUNDING FOR THE NHS IN CORNWALL?
20 June 2007
Additamentum 20 June 2007
The Healthcare Commission has announced the results of the self-assessments of the 394 NHS trusts against 44 standards. The RCHT did not meet 31 of the 44 standards. The Western Morning News on 19 June 2007 called it the “Worst NHS trust in the country.” See here and here.
Is this performance because of its debts? The effects of the market forces factor? A management not up to scratch? What caused the debts and does the operation of a similar market forces factor in other hospitals lead to similar poor performance?
A recital of financial and healthcare difficulties is not enough. We need to know their causes then we can make longterm changes that improve things.
Original post 10 June 2007
The Royal Cornwall Hospitals Trust (RCHT) ended 2006-2007 £36.5 million in debt. This puts the RCHT among the financially worst performing NHS trusts in England. How and why the deficit was run up is still not clear to me.
At the same time the question is once more raised of whether the NHS organisations in Cornwall are unfairly treated financially and receive less money than they should.
Is this Victim Cornwall syndrome again? Education, water and sewerage, housing, health: do we really believe that someone is sitting in London gleefully doing down the people of Cornwall, deliberately singling Cornwall out for unfair funding?
Let’s look at the way the health service is funded and the question of fairness.
The present arrangements are often presented as giving the NHS in Cornwall money based on lowish local wages though the NHS staff has to be paid at national rates. This is described as unfair and it sounds convincing.
The question of unfairness centres on the market forces factor. This is a mechanism for allocating NHS funds to different geographic parts of England taking into account the different costs of providing health care in the areas. For example, costs associated with land and buildings vary in different places. Importantly, staffing costs also differ. Although there are national pay scales (for example, nurses doing the same NHS job being paid the same wages everywhere in England, with some weighting for London), the costs associated with staffing differ from place to place.
This is how.
Local pay in the private sector influences people’s behaviour. Where the local private sector pays more than the NHS, staff turnover and the consequent recruitment costs will be higher than in areas where NHS pay exceeds or matches private sector pay and productivity may also be lower. These are the indirect but real costs of staffing, influenced by pay in the local private sector.
The market forces factor aims to take in account the different local costs in allocating funds to the NHS in different parts of England. This is not a casual mechanism. Read here about work undertaken to assess it.
In Cornwall pay in the local private sector tends to be lower than in comparable NHS work. The indirect staffing costs are less than in more prosperous areas. The market forces factor is significantly lower. See here for department of health data for the market forces factor for 2007/2008 which shows the three Cornwall NHS trusts in the bottom five of 384 NHS organisations, that is Cornwall with lowest private sector pay and consequent NHS funding. On this basis, which strikes me as fair and rational, Cornwall has proportionately less NHS money than other areas with higher market forces factor costs.
However, it is not as straightforward as that as Neil Turner, the Labour MP for Wigan, showed in a recent debate in the Commons (Hansard 6 June 2007, column WH133 onwards). The market forces factor takes money from areas with relatively lowish private sector pay like Cornwall and gives it to already more prosperous areas. Its comparative geographic isolation protects Treliske hospital from the possible dire effects of this allocation that others may suffer: a hospital in a deprived area gets less money, this means poorer facilities, and in turn patients choose a richer hospital, and this reduction in patient numbers in turn means still less money. This strikes me as neither fair nor rational.
Back to the initial question. Does Cornwall get an unfairly low allocation of NHS money? The simplistic way this is often presented in Cornwall is unconvincing as we should ensure that hospitals in prosperous areas receive funds for actual extra costs thrust on them. Nevertheless redistibution from deprivation to prosperity is unjust. Is there a formula that can satisfactorily cover both points?
PS 1 November 2007
See Hansard 29 October 2007 column 1042W for the ongoing review of the market forces factor.
See this later post on the market forces factor and rurality issues in NHS funding in Cornwall