PCT Deficits

The way that most NHS care is funded is through Primary Care Trusts (PCTs). The Department of Health uses a magic formula based on the population covered by the PCT to determine the big pile of cash that the PCT will be given. And it is a big pile of cash, for example, my local PCT (by no means a large one, about 535,000 people) is handed around £800m a year (about £1500 per head of population). The PCT then has to pay GPs (about 9%), deliver mental health (10%), community services and continuing care (15%), pay dentists, opticians and pharmacists for their NHS work (10%) and pay for our prescriptions (10%). The bulk of their money (48%) goes to hospitals.

The remaining 3% goes to pay for managing this huge amount of money, but what do those managers do? Well they have to use their experience and knowledge to determine what the healthcare needs are for the following years and agree contracts with the suppliers of those services. They also have to manage things like performance benchmarking and risk assessments. If they do their job well then at the end of the financial year they will have kept within their budget. If they are doing very well they may even make a surplus.

Unfortunately the magic formula used by the Department of Health does not necessarily provide enough cash for the healthcare needs of an area. Or maybe there is an unexpectedly large number of people getting ill one year. Or maybe the PCT managers just got their sums wrong. The result is that some PCTs generate a deficit. Earlier this year the Guardian published some research that said that a third of PCTs had generated a deficit. The NHS Alliance go further and suggest that "as many as three quarters were hiding debts by borrowing money from other trusts".

Commissar Lansley wants to hand 80% of commissioning over to GP consortia. GPs are understandably wary about this. (There are a few loud mouthed GPs who think that this is the best thing since their last pay rise, but they are at the dimmer end of the spectrum since they have not yet even seen the fine print of the deal.) The problem is that the GP consortia will replace PCTs which leaves the tricky question of: what happens if the PCT has a deficit? Does the debt get split between the consortia in the area? (Remember that GP commissioning will be compulsory.)  The Department of Health is being very cagey about this issue.

Healthcare Republic reports:

GPC member Dr Nigel Watson said GP commissioning would be a 'non-starter' if consortia had to begin operating with large deficits. 'If you're going to be a consortium's accountable officer why would you take that on starting with a deficit?' he said. 'They have to resolve this.'

GPs clearly are not happy about taking over PCT deficits and so Commissar Lansley will have to come up with a solution. Most likely he will write off PCT debts so that consortia will be handed balanced accounts. If this happens it will be yet another addition to the ever growing costs of the most dimwitted and costly experiment in the history of the NHS.

However, even if PCT debts are written off one still has to question why a PCT went into deficit in the first place. It is not necessarily poor management. As I said above, the Department of Health has a magic formula which does not always get it right. The NHS White Paper says that the government will not bail out a consortium that goes into debt. If the magic formula is wrong then GP consortia starting with a balanced account will not avoid going into debt and there will be no public handout. GPs are rightly worried about this situation and if they feel that there is a serious financial risk (remember that GP practices are private businesses) then they could well send Lansley back to the drawing board to come up with a plan more palatable to them.

Perhaps the GPs will require that Lansley creates public organisations that insulates them from financial risk and also takes the blame for decreasing funding? Perhaps some kind of trust for funding primary care? Hmm.