Proposed Dispensing Feescales for GMS Contractors, England and Wales - 2020, October release

Introduction

NHS Employers, the GPC and the DDA met to discuss a revised methodology for calculating the dispensing feescale for 2012/13 and future years. They also discussed how the underspend of £8.5m in 2010/11 and the anticipated underspend in 2011/12 (estimated to be c. £7m) might be treated. This paper sets out the proposed way forward for England and Wales.

Revised Methodology

The dispensing doctors “envelope” will in future be uplifted each year by reference to:

• Cost and Profit Elements

The envelope will be split (60:40) into two elements, cost and profit, and each element will be separately uplifted.

• Profit Element

The profit element (40%) will continue to be uplifted by the net pay uplift (either the figure agreed in the GMS contract negotiations or the figure that flows from DDRB recommendations).

• Cost Element

The cost element (60%) will be uplifted each year using a 2 year average volume. This will be the average volume increase of dispensed items.

• Under/Over-Spends

After the end of each financial year the actual spend data (available approx June), will be compared to the envelope.

If there has been an underspend for that year then the cost element (60% of the underspend) will be owed to the dispensing doctors. In calculating the feescale this money will be added non-recurrently to the envelope.  Such an approach assumes that dispensing doctor costs are all fixed and require funding.

The corollary to the above is that where there is an overspend then the cost element (60% of the overspend) will be deducted non-recurrently from the envelope. 

In either circumstance, there will be no adjustment for that part of the under or overspend that relates to profit (40%). The profit figure will not be made good if there is an underspend.  Dispensing doctors will retain the profit element if there is an overspend.

Calculation of Envelope

In summary the elements involved in calculating the dispensing envelope are:

• Adjusted outturn brought forward from previous (or baseline) year (split 60:40 between cost and profit elements) – this is the outturn +/- any adjustment made in the previous year for over/underspends
• Plus (exceptionally minus) Volume and Net Pay Uplifts to component parts
• Plus/Minus the cost element of any under or over-spend
• Equals Total Envelope

Mid-Year Calculation

To allow the envelope to be calculated using the actual outturn spend data of the previous year (normally available in June), changes to the feescale will continue to be made in the October of each year in order to deliver the calculated envelope. A new methodology will be introduced to ensure that the monies spent in the first half of each year are correctly taken into account on calculation of the 1 October feescale. This methodology is set out in Section 1.

If possible, GPC would like there to be a feescale change in April 2012 (with a change in October 2012 too if required). After this, feescale changes will take place in October of each year. 

Trigger for review

Should there be an annual over or underspend of 3% on the envelope for two concurrent years, then the methodology is suspended and referred back to negotiators for renegotiation.

Examples

A number of examples are set out in Section 2.

Efficiency

NHS Employers and GPC negotiators explored a number of approaches whereby efficiency could be formally recognised in the methodology including the current methodology used for the GMS contract and the DDRB formula.

As no agreement could be reached, no explicit efficiency savings are included in the new methodology. However, GPC believe that this methodology already delivers efficiency savings akin to those negotiated on the wider GMS contract as no increase is made to the envelope to take into account inflationary increases (see Section 3).

2012/13 Envelope

NHS Employers and GPC propose that the envelope for 2012/13 should be rebased to a starting figure of £170m. The new methodology would then be used to calculate the envelope for 2013/14 and future years.

2010/11 and 2011/12

As part of this agreement, £10m would be paid to GP Practices in England as a one off payment. This should be paid to all GP practices pro-rata on fees based on the 2010/11 outturn. A proportionate amount of funding would be repaid in Wales in the same manner.

Specials

There has been a change to the drugs tariff which means that dispensing GPs no longer receive additional payments for dispensing specials. NHS Employers and the GPC have agreed that Dispensing Doctors will receive £20 for each special they dispense.  GPC have requested that this payment be back dated to the date of the drugs tariff change (1 November 2011).

The methodology below uses 2012/13 as an example year:

1. Calculate envelope for year using new methodology (although this will be an agreed figure for 2012/13)

2. Calculate feescale change to be applied in October 2012

Estimate spend Apr-Oct 2012 [Y]

• • • Actual spend 1^st 6m of 11/12
    • Adjust for price change in Oct 11
    • Adjust for forecast volume increase for 12/13

Estimate spend Oct-Mar 2013 if no price change [Z]

• • • Actual spend 2nd 6m of 11/12
    • Adjust for forecast volume increase for 12/13

Calculate remaining envelope available for 2^nd 6 months of 12/13 [= E-Y]

• • • Proposed 12/13 envelope less Apr-Oct 2012 estimated spend

Calculate ‘adjustment factor’ [= (E-Y)/Z]

• • • Adjustment factor equals remaining envelope for 12/13 divided by estimated spend for 2^nd 6 months of 12/13

3. Adjust bandwidths to reflect forecast volume increases and apply adjustment factor to calculate new feescales and apply from October 2012.

Calculation of dispensing feescales from October

Maintaining existing doctor-based feescales

Step 1

Calculate the envelope (E) for 201B/1C in line with negotiated agreement, e.g. insert agreed

volume change and DDRB net uplift

E = £XXX in £ millions

Agreed volume uplift = XX%

Step 2

Calculate anticipated spend for first six months of 201B/1C (Y) based on current feescale.

1st 6 months actual spend 1A/1B                                                                            XX

Known change in feescale (prior year adjustment factor)                                                     1.0XX

Agreed volume uplift                                                                                                                           1.0XX

Estimated 1st 6 months spend in 1B/1C                                                                                            Y=XX

Step 3

Calculate new feescale by adjusting the fee in each banding such that the new fee will deliver the remaining envelope for 201B/1C

Remaining envelope                                                                                                               (E-Y) =            XX

2nd 6months spend 1A/1B                                                                                                                             XX

Agreed volume uplift                                                                                                                                       1.0XX

Estimated 2nd 6 months spend in 1B/1C                                                                                           Z=XX

Then (E - Y) / Z = xxx known as the "adjustment factor".

This adjustment factor is then multiplied by the existing figures in Part 2 and Part 3 of annex G

of the Statement of Financial Entitlement.

Step 4

Increased volumes may mean practitioners move bandings so adjust feescale to take account of volume changes.  E.g. increase each bandwidth by agreed volume increase in step 1.

Bandwidth changes by XX%

Example 1 - Spend is equal to the envelope in Year 1

Example 2 - Overspend in Year 1

Example 3 - Underspend in Year 1

Profit Element

The net income uplift (if any) should take account of efficiency through the negotiated settlement or DDRB recommendation.

Cost Element

Long term increases in average pay are conventionally calculated as 1.5% above the established measure of price inflation (currently CPI) being used in this role for example as the revaluation measure for public sector CARE pension arrangements. Historically (1988 to 2011) CPI inflation has run at an average of 2.8% per year. Dispensing costs net of drugs are split roughly 70:30 staff costs to other costs (according to the Dispensing Doctors COSI) so we can assume that in the absence of efficiency savings staff costs would inflate at 1.5% above CPI and other costs at CPI alone. On the basis of the long term trend pay and price inflation on costs would thus run at around 3.9% per year. If we used the medium term inflation forecast from the Treasury (2.6 % falling to 2.2%), it would be nearer 3.5%.

Any difference between the efficiency negotiated on the wider GMS contract and inflationary increases could be deemed to be met by the savings made through the reimbursement of drugs. GPC recognise that should there be a change to reimbursement arrangements in the future, that this might lead to a requirement to deliver further efficiencies through the feescale.