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The grand plan: David Nicholson’s letter to NHS leaders

Dear Colleagues,

Earlier this year, we published a landmark document: The NHS belongs to the people – a call to action. This document sets out the challenges facing the NHS and makes the case for developing bold and ambitious plans for the future.

Commissioners have embraced the call to action and are leading discussions locally about how the NHS needs to change. Commissioners now face the task of crystallising the conclusions of these discussions into comprehensive plans.

We heard from the NHS Commissioning Assembly last month about the importance of giving early advice to commissioners, so I am writing to set out my assessment of the challenges facing us as commissioners and the key actions that need to be taken. We will be issuing planning guidance later in the year, but I thought it would be helpful to highlight ten key points at this stage:

1. Improving outcomes – commissioners need to place improving outcomes for patients at the heart of their work. For that reason, commissioners should prioritise an approach to planning which combines transparency with detailed patient and public participation. We need to construct, from the bottom up, quantifiable ambitions for each domain of the NHS Outcomes Framework. We will, therefore, be asking CCGs and NHS England Area Teams to work together to determine local levels of ambition, based on evidence of local patient and public benefit, against a common set of indicators that place our duty to tackle health inequalities front and centre stage. This will ensure that we can clearly articulate the improvements we are aiming to deliver for patients across seven key areas:

– Reducing the number of years of life lost by the people of England from treatable conditions (e.g. including cancer, stroke, heart disease, respiratory disease, liver disease);

– Improving the health related quality of life of the 15 million+ people with one or more long-term conditions;

– Reducing the amount of time people spend avoidably in hospital through better and more integrated care in the community, outside of hospital;

– Increasing the proportion of older people living independently at home following discharge from hospital;

– Reducing the proportion of people reporting a very poor experience of inpatient care;

– Reducing the proportion of people reporting a very poor experience of primary care;

– Making significant progress towards eliminating avoidable deaths in our hospitals.

2. Strategic and operational plans – given the scale of the challenges we are facing, we are asking commissioners (CCGs and NHS England commissioners) to develop ambitious plans that look forward to the next five years, with the first two years mapped out in the form of detailed operating plans. Taking a five year perspective is crucial, as commissioners need to develop bold and ambitious plans rather than edging forward on an incremental basis one year at a time. It will be essential for commissioners to work closely with providers and social care partners as they develop these plans, and we are in dialogue with the relevant national bodies to define fully aligned planning processes to facilitate this.

3. Allocations for CCGs– we want to provide certainty to commissioners. To this end, we intend to notify CCGs of their financial allocations for both 14/15 and 15/16 to help them plan more effectively. We are currently working with a subgroup of the Commissioning Assembly to finalise proposals for future allocation formulae for CCGs and direct commissioning, but stability is a key consideration and the pace of change is likely to be slow, given that we are operating with very limited financial growth overall.

4. The tariff – we recognise the importance of stability of tariff as well as its accuracy and responsiveness to the needs of patients. Together with Monitor, we intend to minimise changes to the structure of the tariff for 14/15. By December we plan to jointly publish our priorities for tariff in 15/16, giving commissioners and providers the maximum amount of time to assess any impact on the financial position of their services and respond systematically to tariff signals.

5. The integration transformation fund – the financial settlement for 15/16 includes the creation of an integration transformation fund (ITF). This will see the establishment of a pooled budget of £3.8bn, which will be committed at local level with the agreement of Health & Wellbeing Boards. (Locally, CCGs can decide to place additional resources into the ITF if they wish). The ITF is a ‘game changer’: it creates a substantial ring-fenced budget for investment in out-of-hospital care. However, it will also require us to make savings of over £2bn in existing spending on acute care. This implies an extra productivity gain of 2-3% across the NHS as a whole in 15/16. We will work with Monitor to determine how this is reflected in the expectations placed on commissioners (in the form of QIPP savings from demand management, pathway change, etc) and providers (in the form of the efficiency deflator incorporated in tariff). We are currently exploring the feasibility of bringing forward an element of the 15/16 saving requirement into 14/15 to avoid a financial ‘cliff edge’ in 15/16.

6. Developing integration plans – the NHS will only be sustainable in 15/16 if we put the ITF to the best possible use and reduce significantly the demand for hospital services. It is my view that investment should be targeted at a range of initiatives to develop out of hospital care, including early intervention, admission avoidance and early hospital discharge – taking advantage, for example, of new collaborative technologies to give patients more control of their care and transform the cost effectiveness of local services. This will require investment in social care and other Local Authority services, primary care services and community health services. We are currently exploring how an accountable clinician can be identified to coordinate the out-of-hospital care of vulnerable older people and the ITF might be used to accelerate this initiative.

7. Working together – a critical ingredient of success for the transformation fund will be the quality of partnership working at local level. Health & Wellbeing Boards will need to have strong governance arrangements for making transparent and evidence-based decisions about the use of the ITF.

The Chief Executive of NHS England will remain the accounting officer for the ITF, accountable to parliament for its use, and in that context I am asking NHS England Area Directors to take a close interest in the effectiveness of local arrangements for governance and implementation.

8. Competition – there has been considerable discussion about the impact of competition rules on commissioners over recent months. The key requirement for commissioners is to determine how to improve services for patients including how to use integrated care, competition and choice. Commissioners should adopt transparent decision making processes which use competition as a tool for improving quality, rather than as an end in itself. NHS England and Monitor will support commissioners who adopt this approach to competition.

9. Local innovation – while we will set a national framework for planning we want to encourage local innovation and don’t want to be overly prescriptive. Within the scope of the new tariff rules for 14/15 agreed with Monitor, we will welcome innovative local approaches that enable change to happen on the ground. For example, commissioners could add additional resources to the transformation fund or they could agree local variations to the national tariff in line with the recently published 14/15 national tariff system rules, where they can demonstrate that it is in the interests of patients to do so.

Commissioners could explore new contracting models, such as giving acute providers responsibility for patients 30-100 days following discharge from hospital and introducing prime contractor arrangements for integrated care.

10. Immediate actions – I would encourage commissioners to focus on three immediate tasks. First, you should progress the development of five year plans and engage local people in this work. Second, you should strengthen your local partnership arrangements so that you are well placed to make decisions about the use of the ITF. Third, you should identify the things that will make the greatest difference to patients locally and maintain a relentless focus on putting them into action at pace.

Over the coming months we will be publishing further material to help commissioners navigate their way through the planning process. This will include detailed planning guidance, financial allocations and ‘commissioning for value’ packs for CCGs which will help each CCG to identify where there is the greatest opportunity.

We are committed to working in partnership with CCGs, and I would encourage feedback from CCGs via the Commissioning Assembly planning and finance working group chaired by Paul Baumann, NHS England’s Chief Financial Officer.

More immediately, however, I advise you to press ahead with development of your plans, and I hope the points I have highlighted in this letter will help you make early progress. The challenges facing both commissioners and providers are significant, and it is essential we start to address them without delay.

Yours faithfully

Sir David Nicholson

Chief Executive

NHS England

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