Health and social care integration - financial assurance: guidance

Annex A Lessons from Highland Partnership

NHS Highland and Highland Council established a lead agency arrangement in April 2012, in which adult social care services and resources were delegated to the health board; and children's community health services and resources were delegated to the local authority. The following note summarises the experience of the partners and the main lessons learnt in the first years of the partnership.

General

NHS Highland and Highland Council did not undertake 'due diligence' in the legal sense. It is important to recognise the fact that the two partners entered into a Partnership Agreement on a high-trust basis with buy-in from all key senior players. The general view expressed was that it would be impossible to remove all the risk from the process of entering into a Lead Agency arrangement and there had to be a balance between understanding the risks and 'just doing it'.

There was exchange of budgetary information in advance of the transfer and meetings with counterparts to understand the composition of the budgets. Clearly, it will always be the case that the 'transferring' organisation will inevitably have a much more detailed understanding of the budgets, pressures, risks etc than the 'receiving' organisation and in our view it is impossible for a transfer to take place without some degree of trust. Probably the key lessons learnt were:

Budgets

• There needs to be a mutual acceptance that the first year must be a transitional year. This allows the 'receiving' organisation to begin to get to grips with the budgets, service pressures etc.
• There needs to be clarity around risk sharing/risk transfer. Whilst this will never cover every scenario it is clear we did not set this out in sufficient detail in Highland. This caused some significant difficulties towards the end of the first year and towards the end of the second year.
• There needs to be clarity about the reporting arrangements and the responsibilities. For example - do we report every month? Every quarter? Do we just report variances or do we present action plans to address these. If so, which organisation takes the decisions around any actions that might be challenging? If there is a significant adverse variance does the 'host' reduce services unless the 'commissioner' provides more funding? Or does the host need to look for savings elsewhere in its portfolio. These scenarios were briefly addressed in the Partnership Agreement but in a fairly simplistic way (with the default being that the two Directors of Finance...and then the two Chief Executives...should resolve any differences). In effect this is what happened (although it required senior political and senior non-executive input, plus senior operational input as well as the Directors of Finance/Chief Executives).
• The cultures and terminology differ between the two organisations. In the context of budget setting perhaps the most significant difference is the definition of what represents a recurrently balanced budget.
• The financial regimes differ - most notably the ability of councils to carry reserves/have year-end variances versus the requirement on Health Boards to break-even each and every year. Although this was a known issue right from the start it still led to some misunderstandings during the first year and perhaps a mutual briefing on respective financial regimes might have been useful.

Efficiency Savings

Very similar issues to the budget issues above. Probably the only additional issue is the degree to which existing efficiency savings programmes already in train are explained/and 'owned' by the organisation delegating the functions. This issue probably gave rise to the most significant disagreement between the two organisations (i.e. the degree to which the savings programme 'inherited' by the other party was understood/owned and deliverable).

Financial Planning

Again - similar issues but in particular there needs to be clarity around the timescales and 'ground rules' for budget setting - particularly in relation to cost pressures and efficiency savings. We found that timelines differed. We also had to take a view as to whether NHS Highland ought to play into the Highland Council budget setting process in a traditional way (i.e. of submitting pressures and savings plans for agreement or otherwise) or whether we employed more of a 'commissioning' approach where the Highland Council agreed a quantum of funding and NHS Highland took the decisions as to what savings to make, pressures to fund etc. In practice we began with a model towards the 'commissioning' end of the spectrum but have moved back towards a more traditional approach, with NHS Highland being represented on the Highland Council senior management team as part of the budget setting process.

Service Planning

In theory this takes place in the Adult Strategic Commissioning Group. However - by definition - this is a high level Group setting high level principles. Therefore, the strategic approach to commissioning is therefore reasonably well defined. Less well defined is operational service planning - for example the extent to which the Council should be involved in redesigns. This brings into play the different governance regimes and in particular the role of local councillors.

Local councillors have a keen interest in Adult Social Care services provided in their locality and will often take up issues with NHS Highland as the provider. In theory they should take their issues to Highland Council officials (as 'commissioners') in order for them to take up issues with NHS Highland as provider, but in reality councillors will want a direct line of sight. They will also take a keen interest in any efficiency plans that may affect services in their area. Another difference in governance is the fact that NHS executive directors are full Board members with 'voting rights' whereas council officials can only make recommendations to Council. This is not an issue for the vast majority of business but potentially might be an issue for very significant matters.