Annex A > Chapter 6 - Funding and Resources > The allocation of resources to the Regional Health Authority > The distribution of funds by the Region to district health authorities

The distribution of funds by the Region to district health authorities

18 Bill Healing [26] explained in his written evidence to the Inquiry the process of allocation from the RHA to the district health authorities (DHAs) in general terms. He explained that:

`The basis of funding to District Health Authorities is calculated as follows:-

`a) recurring Allocation from the previous year;

`b) +/- any technical adjustments to reflect changes in responsibility;

`c) + inflation (as determined by the Government);

`d) + growth (depending on whether an Authority is over/under-funded compared to a national formula);

`e) + any special or non-recurring allocations.' [27]

The supra regional and regional services: 1984-1990

19 The `top-slicing' of funding for neonatal and infant cardiac services, from 1985/86 onwards, imposed an obligation on the RHA to pass the centrally earmarked sums to the DHA. The sums allotted by the Supra Regional Services Advisory Group (SRSAG) to neonatal and infant cardiac services in Bristol are set out in the Table 7, at para 83.

20 In addition, the Region identified a number of regional specialties. These included cardiac surgery. Regional policy, in 1984/85, was to fund initial developments in such specialties for three years on a non-recurrent basis. After that they were to be financed by the districts, in proportion to the use made of the services by the population of each district. However, in practice there was continuing pressure to expand cardiac services at the BRI, since the level of provision of cardiac services was significantly below both national targets and provision in many other regions. As a result, Mr Bevan suggested that in practice `... regional protection of cardiac services at the BRI was not limited to the three years as stated as the regional policy.' [28] Further details of regional funding for expansion for cardiac services are to be found at Table 1, para 28 below.

21 The income derived from carrying out neonatal and infant cardiac surgery might be said to have formed a small part of the District's income. Mr Bevan wrote:

`The funding of supra-regional services accounted for 0.2% of total revenue funding of Bristol and Weston DHA in 1984-85. The introduction of funding for Neonatal and Infant Cardiac surgery in 1985-86 increased this to 1.2%, and thus presumably, offset the fall in funding in "real" terms for that year by about 1%. After 1985-86 supra-regional services accounted for 0.5%-0.8% of total revenue funding of the DHA (until 1990-91).' [29]

However, Mr Bevan nevertheless makes the point that adjustments to the RAWP allocations in respect of supra regional services were important for the District, since

`The funding of supra-regional services accounted for between 1.1% and 1.8% of revenue spending on acute services in Bristol.' [30]

22 Full details of the amount of NICS funding received by the Bristol hospitals from 1984-1995, and the processes by which those sums were allocated, are set out in a later section of this chapter.

23 As regards the allocation of SIFT funding to the DHA, as a teaching hospital, the BRI received a large share. Mr Bevan wrote:

`Bristol's teaching hospitals received nearly 70% of SIFT allocated to the RHA, and the BRI nearly 50%. SIFT accounted for about 8% of the total revenue budget of the DHA.' [31]

Revenue allocations

24 The revenue allocations by the SWRHA to the B&WDHA were determined each year according to the SWRHA's own version of the Department's RAWP formula. The SWRHA's approach was designed to make the national model sensitive to local pressures. [32] The formula was subject to change from year to year. [33] In essence, the RHA used the national formula to distribute funds to the districts within its boundaries. [34] Mr Bevan commented:

`What comes across as the driving force of the RHA is a commitment to achieving equity between DHAs.' [35]

25 The allocations took into account the previous year's baseline figure, the predicted rates of inflation in pay and prices, a share of any growth funds received from the DoH and an adjustment for efficiency improvement. [36]

26 The formula also took into account the complexities arising from the flow of patients across district boundaries. Notional financial allowances were made for patients from one district who were treated in another. Equally, notional charges were made for a district's patients who were treated elsewhere. [37] These adjustments affected the distance financially between the B&WDHA and the RAWP target, as defined by the SWRHA.

27 In 1988 the SWRHA developed new policies to remove these cross-boundary adjustments; the policies anticipated the changes made in 1991/92 with the introduction of the `internal market'. Under the new system, adjustments to cross-boundary flows within targets would be replaced by planning agreements, with payments being made directly by the purchasing districts to the supplying districts. The policy was introduced on a pilot basis in 1989/90. From 1990/91 (the year before the `internal market' was introduced), payments were made by purchasing districts to supplying districts for the estimated actual costs of treating cross-boundary flow. [38]

28 The B&WDHA's funding was 8.8% above the target set by the Region as part of the sub-Regional resource allocation formula in the financial year beginning 1984/85. This meant that in that year it was better funded than other health authorities within the South Western Region, to the extent of £5.3 million. [39] As a result, the B&WDHA received a proportionally smaller share of growth monies in subsequent years, as can be seen from Table 1 below. [40] In his paper, Mr Bevan set out the changes in total revenue funding received by the District between 1983/84 and 1989/90. [41] He commented that:

`This shows a grim position for the DHA, wholly consistent with its being an over-target district in a RHA receiving no "real" growth.' [42]

Further, during the 1980s, the NHS's planning system required DHAs to consider `priority' services: services which required particular development. These included the care for the elderly, mental illness and psychogeriatrics. Mr Bevan observed:

`These developments took place within the constrained budget of the DHA and hence imply that acute services would have been subject to even greater financial pressure than the DHA.' [43]

29 Attempts were made to expand cardiac services. As can be seen from the Budget Book, in 1984 the RHA allocated £383, 000 to the B&WDHA for the expansion of adult cardiac surgery by 100 cases to 375, with effect from April 1984. This money was held in reserve by the SWRHA and allocated to the appropriate budgets as the costs were incurred. [44] Further details of the sum allocated to fund growth in this field are to be found in the last column of Table 1, above. Mr Bevan noted that:

`Regional Allocations 1986-87... shows significant funding of cardiac surgery from regional reserves from 1986-87 to 1988-90 (to 490 cases) and for an increase from 480 cases to 600/700 from 1986-87 to 1990-91. Financial Allocations and Policies (1988 edition) shows significant funding for an increase to 675 cases from 1988-89 to 1990-91:

He continued:

`Funding over three calendar years may naturally span four financial years. There may also be slippage so that funding indicated in, for example, 1986-87 might not take place that year. Nevertheless, these figures suggest that regional protection of cardiac services at the BRI was not limited to the three years as stated as the regional policy.' [45]

30 The attempts to expand cardiac services continued after the NHS reforms of 1991, through contracts placed by purchasers. [46]

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Footnotes

[26] Finance Director, Avon Health Authority, formerly Finance Director of the B&WDHA

[27] WIT 0092 0004 Mr Healing

[28] INQ 0047 0053; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[29] INQ 0047 0060; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B. After 1990/91, the sums in respect of NICS were paid directly to the UBHT by the DoH, as the purchaser, until
1994/95, when `de-designation'meant that districts, and subsequently areas, assumed responsibility for the purchasing of these services

[30] INQ 0047 0069; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[31] INQ 0047 0069; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[32] UBHT 0266 0075; NHS Resource Allocation - South Western Region Issues

[33] UBHT 0266 0290; SWRHA, Regional Resource Allocation Working Party

[34] INQ 0047 0054; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[35] INQ 0047 0057; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B. This commitment was reflected, for instance, in the proximity of the DHAs within the SWRHA to their target allocations, by 1983/84; all were relatively close to their targets, compared to those in many other regions

[36] UBHT 0339 0058; B&WDHA Budget

[37] UBHT 0266 0073; SWRHA RAWP

[38] INQ 0047 0054;`National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[39] UBHT 0339 0059; B&WDHA Budget 1984/85. See also INQ 0047 0059

[40] The table has been produced by the Inquiry from information contained in B&WDHA's Budget Books

[41] INQ 0047 0061; Figure 4. `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[42] INQ 0047 0059; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[43] INQ 0047 0062; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[44] UBHT 0339 0045; B&WDHA Budget 1984/85

[45] INQ 0047 0053;`National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B

[46] Further details of this continued policy are set out at para 70