General Practice

Unified budgets for primary care groups

BMJ 1999; 318 doi: https://doi.org/10.1136/bmj.318.7186.772 (Published 20 March 1999) Cite this as: BMJ 1999;318:772
  1. Azeem Majeed (a.majeed{at}ucl.ac.uk), senior lecturera,
  2. Laurence Malcolm, professor emeritusb
  1. aSchool of Public Policy, University College London, London WC1H 9EZ
  2. bAotearoa Health, Lyttelton RD1, New Zealand
  1. Correspondence to: Dr Majeed
  • Accepted 18 December 1998

In April 1999 major changes will start to take place in the organisation and delivery of health services in England. 1 2 For general practitioners, the most important changes will be the formation of primary care groups and the implementation of unified, cash limited budgets for health services. How will current methods of allocating NHS budgets in England change, and what can be learnt from experience in New Zealand and from total purchasing pilots?

Summary points

Implementation of unified, cash limited budgets for health services means that resource decisions taken by any one practice in a primary care group will impact directly on others

General practitioners will have to take responsibility for limiting the growth in prescribing costs and hospital budgets

To manage their unified budgets effectively, general practitioners will have to work collaboratively with other practices in their group

Primary care groups will have to establish integrated information systems that include utilisation and expenditure data for all practices

Experience from New Zealand shows that professional leadership and a minimum of bureaucratic control are the key factors in success

Health authority budgets

Health authority budgets are largely used to pay for hospital and community health services, community prescribing, and the services supplied by general practitioners (general medical services).3 Health authorities are unable to transfer money from one budget to another and cannot use one budget to make up for a shortfall in another. For example, they could not use an “underspend” on the community prescribing budget to cut hospital waiting lists. However, general practice fundholders have had limited ability to move funds between different budgets. Unified budgets for health services will increase this ability to transfer funds between budgets and will extend it to all general practitioners.

Unified budgets in the new NHS

The new primary care groups in England will comprise about 50 general practitioners from all practices in a locality of around 100 000 patients. Although primary care groups will have differing levels of responsibility, all groups will have a unified budget for hospital and community health services, community prescribing costs, and general medical services infrastructure costs (used to reimburse general practices for their practice staff, premises, and computing costs). There will be no immediate changes to the national general practitioner contract, and general practices will continue to receive directly the various fees and allowances for providing general medical services that make up the bulk of their earnings.

The New NHS, published at the end of 1997, did not discuss unified budgets in great detail (see box), and it took some time for general practitioners to become aware of the implications.1 The main factor behind the introduction of unified budgets is the belief that making general practitioners accountable for the cost as well as the quality of health care will prove to be an effective method of tackling many of the problems facing the NHS.

The New NHS and unified budgets

“Clinical and financial responsibility will be aligned. Primary Care Groups will take devolved responsibility for a single unified budget covering most aspects of care so that they can get the best fit between resources and need. It will provide local family doctors and community nurses with maximum freedom to use the resources available to the benefit of patients, with efficiency incentives at both primary care group and general practice level … Over time, the government expects that groups will extend indicative budgets to individual practices for the full range of services … It will be open to the group to agree practice-level incentive agreements associated with these budgets, approved by the health authority, where this helps promote the best use of resources.”1

Before a budget is allocated to a primary care group, some funds will be “top sliced” by the regional office from health authority allocations to pay for specialist services and other levies such as NHS research and development (see figure). Some funds will, in turn, be retained by the health authority to fund its own activities, to cover any overspending by primary care groups, and to act as a contingency reserve. The bulk of the remaining funds will then be allocated to primary care groups (figure). Primary care groups will have differing degrees of control over these funds depending on which of the four levels of responsibility they have achieved.

Figure1

Allocation of budgets in the new NHS

A striking feature of primary care is the wide variation between practices in the use of resources; and to many managers, these variations suggest that resources are being used inappropriately by some general practices.4 Undoubtedly, one of the key factors behind the introduction of unified budgets is a desire to reduce these variations. Hence, primary care groups will need to examine what factors influence variations in the use of resources and utilisation of services, and the extent to which these can be modified through feedback of data and through non-judgmental educational initiatives in general practice. 5 6

Protection of general medical services funds

The proposal to pool funds for general medical services infrastructure with prescribing and other health service budgets led to concern among general practitioners that resources earmarked for practice development might be used for other purposes—such as to cut hospital waiting lists. Many general practitioners were concerned that this might lead to a direct cut in their practice's income and hence in their own earnings. To alleviate these concerns, the Department of Health agreed that the general medical services infrastructure component of the unified budget will increase annually in line with inflation and cannot be used for other purposes without the agreement of the local medical committee. In effect, general practitioners can veto any decision to use general medical services funding for any other purpose. However, as the protected part of the unified budget will rise only in line with inflation, while the total NHS budget will increase more rapidly than this, the former will become an increasingly small proportion of the total NHS budget. General practitioners will be under pressure, therefore, to control their prescribing and hospital costs if they wish to invest a greater proportion of their group's budget in primary care services.

Implications of unified budgets

The formation of primary care groups and the introduction of unified budgets give general practitioners the opportunity to shape their local health services. At the same time, the alignment of clinical and financial responsibility means that primary care groups will have to monitor prescribing, referrals, and admissions more closely than at present. Although the Department of Health has stated that individual general practitioners will have the freedom to prescribe and refer as they see fit, primary care groups will inevitably have to introduce some curbs on general practitioners' clinical freedom. At first these are likely to be voluntary, but in the longer term primary care groups could use financial incentives such as extra investment in a practice to reward those practices which prescribe and refer in line with locally agreed formularies and protocols.7

Successful development and implementation of these policies will require greater collaboration between practices than occurs at present.8 Total purchasing pilots found that it was very difficult to ensure that practices stayed within budget and adhered to prescribing and referral protocols.9 Clinical governance will have a key role in ensuring that improving the quality of clinical care drives these changes and that primary care group meetings do not become dominated by financial issues alone.10

Monitoring the use of resources

Once primary care groups are in place they will need to set up systems for monitoring how their general practices use resources (box). 11 12 Whether low or high cost in any particular area of expenditure is associated with improved quality of care or better outcomes for patients is not well understood at present. There is some indication from New Zealand that general practitioners with low prescribing costs provide higher quality care than those with high prescribing costs.13 In the United Kingdom, however, the association between the use of resources and the quality of care provided by general practitioners is less clear, largely because this association has been little investigated.

Main areas of expenditure of primary care groups

  • Elective admissions to hospital

  • Emergency admissions to hospital

  • Referrals to outpatient clinics

  • Attendances at accident and emergency departments

  • General practitioners' prescribing costs

  • Cash limited general medical services

  • Community health services

  • Diagnostic investigations

Although it is often assumed that practices with high prescribing costs are poor quality prescribers, table 1 shows that this is not necessarily always the case. Some practices with high prescribing costs may be prescribing appropriately and some practices with low prescribing costs may be prescribing inappropriately. Similar differences in the use of other health services such as laboratory investigations and outpatient referrals are likely. Hence, the association between cost and appropriateness in the use of health services is not always clear.

Table 1

High and low cost prescribing—costs and quality

View this table:

Despite this, the boards of primary care groups will inevitably take more interest in practices with high costs to ensure that the group as a whole remains within its cash limited budget. To help achieve this, the group will require good comparative data from its main providers about the use of hospital and community services. As NHS information systems are largely geared towards meeting the requirements of health authorities and trusts, some major developments will be needed to meet this objective. 14 15

Implications of primary care groups for hospital specialists

  • Hospital specialists may be employed directly by primary care groups, on either a full time or a sessional basis

  • There will be primary care physicians with dual accreditation in general practice and another clinical specialty

  • There will be public-private partnerships between primary care groups, hospitals, and the private sector

  • Greater integration of hospital and community prescribing will develop through joint formularies and better methods of funding high cost drugs

  • Hospitals will be under pressure to cut lengths of stay for inpatients and increase day case treatment

  • Conflicts may arise between primary care groups (which will want to expand primary care services) and hospitals (which will want keep resources in secondary care)

  • Hospitals will face increased competition from primary care groups providing services traditionally seen as appropriate to secondary care

Implications for hospital sector

Since about 75% of the budget of a typical primary care group will be for hospital and community health services, unified budgets will also have important implications for hospital specialists (box).16 Demand for hospital care has risen steadily in recent years, and if primary care groups are unable to contain these pressures on hospital services their ability to stay within budget will be threatened. The total purchasing pilots were more successful in achieving the objectives they set for primary care services than for hospital services.17 Primary care groups may well find that this is also the case. Even if they can limit the growth in the demand for hospital services, the poor financial position of many hospital trusts will make it difficult to transfer funds to primary care without destabilising the hospital sector.

Improved prescribing

Some of the prescribing that goes on in primary care is the direct result of decisions taken by hospital specialists. Hence, where primary care groups develop prescribing formularies and guidelines, this will have to be done in collaboration with hospital specialists. Primary care groups can also use their unified budgets to end some aspects of hospital prescribing that many general practitioners find irritating. For example, patients could be discharged with 14 or 28 days' supply of medication rather than the usual seven days' supply. Unified budgets will also provide an opportunity to improve the arrangements for the prescribing of high cost drugs. The cost of prescribing these drugs can be top-sliced from primary care group budgets to ensure that practices who take on patients who require them are not penalised for doing this. Furthermore, if general practitioners do not wish to prescribe such drugs because they feel that the clinical responsibility lies with hospital specialists, unified budgets should allow hospital specialists to prescribe them instead.

Lessons from New Zealand

The new primary care groups have many similarities to New Zealand's independent practitioner associations (table 2). Formed in 1993, these associations now represent the interests of more than 70% of general practitioners in New Zealand. Like primary care groups, they involve formal contracts with the health authority or other funders of health services for collective professional accountability for both the quality of care and financial management.18 These contracts now include the monitoring and management of clinical activity with collective professional accountability for both quality of care and financial management in general practice.

Table 2

Independent practitioner associations and similar groups in New Zealand compared with English primary care groups

View this table:

At the outset, as in England, there was strong opposition from many general practitioners to any form of association or contract. Initial incentives included protecting the status of general practice and being a more effective contracting body. These incentives have now been broadened to encompass more positive goals such as improving quality of care and achieving better outcomes for patients within limited resources.19 Although there is a wide range of views about these goals and policies such as integrated capitation based budgets, especially within the membership, there is generally strong commitment from the leadership. Associations are now taking responsibility for advancing both the quality and status of general practice and developing more integrated relations with secondary care. The collective nature of the associations means that a wide range of collaborative activities can be organised including the development of guidelines, the development of information systems, education programmes, and the introduction of new services.

The New Zealand associations represented a radical change in the organisation and governance of general practice. As the name indicates, members are independent practitioners competing among themselves for patients. However the associations bring together a new form of leadership in general practice to achieve professional and public goals such as to improve quality of care, make better use of health resources, achieve better health outcomes for patients, and improve the health of the community. Accountability for quality and resource management lies with the board of the association and not at individual practice level. There is strong rejection on both ethical and professional grounds of individual practices retaining any part of the savings from budget management. This demonstrates a new form of governance of general practice that goes beyond the English concept of primary care groups, which is still practice based with some savings retained by practices.

Associations have been active in initiating a wide range of integration projects. These were originally motivated by a desire to achieve a better balance between primary and secondary care along total fundholding lines. More recent approaches have been based on primary-secondary collaboration. For example, in Christchurch, the Pegasus Medical Group, an association of 208 general practitioners, together with specialists in the medicine of old age, other specialists, and hospital management, is planning to provide for the comprehensive and integrated care of the whole elderly population.

The New Zealand experience also indicates the need for the progressive devolution of funding to associations in order to foster entrepreneurial and innovative developments. As in England, there has been conflict between the associations and funding authorities about the poor financial support given to associations, the level of budgets, how savings are to be distributed, and the extent of power sharing.20 While there seems to be political commitment to devolution in both countries, there is also grave concern in both countries about the scale of this commitment.

The key lesson from New Zealand is that professionally led development from within a group is much more likely to be successful than a bureaucratically imposed framework from above (box). Whether the opposition to primary care groups currently expressed by many general practitioners in England will wane, as happened in New Zealand, is unclear given the compulsory nature of membership of English primary care groups. Moreover, many general practitioners may find it difficult to balance the budgetary responsibilities of primary care groups with their role as patients' advocates. General practitioners will have to take some tough decisions about the prioritisation of services, which will make them responsible at a local level for rationing decisions that many of them feel should be decided nationally by central government.

The New Zealand experience

Achievements
  • Development of collective professional accountability in managing new internal and external relationships

  • Collaborative approaches to integration both of primary care (involving general practitioners and other professionals, such as nurses and midwives) and of primary and secondary care

  • Extensive development of information systems including merging and managing practice registers, analysing laboratory and pharmaceutical data, and providing personalised feedback to members

  • Formulation and monitoring of guidelines on pharmaceutical and laboratory services

  • Lessons

  • Thus far, only modest savings from budget holding, with wide variation in per capita utilisation and expenditure on services adjusted for age, sex, and deprivation indices

  • Success in collective/collaborative action to improve clinical decision making requires much more than simple dissemination of evidence based practice and guidelines

  • Emerging issues of identifying and achieving equity in association and practice budgets, especially with the low per capita utilisation adjusted for age, sex, and deprivation that is associated with poorer, less healthy populations

Conclusions

The introduction of unified budgets for primary care groups will have major implications for general practitioners. Key objectives for primary care groups will include greater interpractice working, improved financial and information systems, and methods of sharing data among practices. For many general practitioners, the most unpopular aspect of the changes will be that they will have to take much more responsibility for deciding about the prioritisation of services and for controlling prescribing costs and hospital budgets. General practitioners may find that these tasks do not fit well with their role as patients' advocates.

Acknowledgments

Contributors: AM and L M jointly planned and wrote the paper and are guarantors for the paper.

Competing interests: None declared.

Funding: None.

References

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