House of Commons - Public Accounts

Select Committee on Public Accounts Forty-First Report

1 Negotiation and cost of the new contract for general practice services

1. By 2001, there was broad agreement between the Department and the representative body for General Practitioners (GPs), the British Medical Association (BMA), that the existing national contract was not satisfactory. Most GPs were not happy with their working conditions. There were funding inequalities between practices in different parts of England, and services were not flexible enough to meet local needs. At the same time, the Department considered that its strategy for improving primary care, for example, by providing more care close to home, was unlikely to be achieved through the existing contractual arrangements.[3]

2. The specific aims of the new contract for GPs were set out in a business case that the Department provided to the HM Treasury in 2002.[4] The Department expected the new contract to have benefits for the patient, the NHS and for doctors. Key objectives were: to increase productivity against a falling trend, extend patient services, improve access to services for patients, improve recruitment and retention, and to deliver better care by paying doctors based on the quality of services they provide.[5]

3. The new national General Medical Services (nGMS) contract was negotiated by the NHS Confederation, on behalf of the Department, with the BMA. The negotiations commenced in August 2001 and doctors voted to accept the negotiated deal nearly two years later in June 2003. The new contract was fully implemented in April 2004, and additional funds were released to finance preparations for the new contract in April 2003.[6]

4. The new contract has changed the way basic services provided by GP practices are funded. Whereas previously they were paid for specific items of service they provided, money is now allocated to each practice on the basis of its population needs.[7] The introduction of an allocation formula is intended to make funding for GP services more equitable by shifting more money to areas of greatest need and attracting more GPs to work in them. The effectiveness of the allocation funding system was, however, diminished by the Department's late concession to guarantee the existing income of some GP practices.[8] This was agreed when many doctors realised that their basic funding under the new contract would be lower than in previous years, although this conclusion failed to take into account new payments that were to be made available under the new pay for performance system, the Quality and Outcome Framework. The minimum income practice guarantee was only meant to provide transitional stability to general practice but it has remained part of the funding to general practice.[9]

Figure 1: Comparison of the terms of the old GMS contract and new nGMS contract

OLD GMS CONTRACT NEW GMS CONTRACT

CONTRACT

1966 to April 2004.
Contract between individual GP and Health Authority. Based on National terms and conditions.
April 2004 onwards
Funding for preparation released in April 2003 but fully implemented from April 2004. Contract between GP practice and Primary Care Trust. Based on national terms and conditions.

FUNDING FOR ESSENTIAL SERVICES

Fee per item of service and small capitation fee based on the number of patients registered per GP. Global sum is paid to each practice for essential services based on an allocation formula (adjusted to protect historic income).

ENHANCED SERVICES

Limited amount of money could be claimed by the individual GP for providing additional services. Primary Care Trusts are set a minimum amount of funding which has to be spent on providing new services. GP practices can opt to provide these for additional payment. Some nationally directed services but most negotiated locally based on patients' needs.

QUALITY PAYMENTS

Small amount of money available for quality schemes. A large proportion of funding is made available to pay for performance of the GP practice. The Quality and Outcome Framework rewards practices for achieving quality standards. Participation in the Framework is voluntary, but virtually all practices participate

HOURS OF WORK

GPs responsible for 24 hour care of patients which included seeing patients outside of core hours. In 1992, GPs worked an average of 43.1 hours per week. Practices can opt out of 24 hour, 7 days per week responsibility for patient care.
Core responsibility 8.00 a.m. to 6.30 p.m. Monday - Friday excluding bank holidays. In 2006, GPs worked an average of 36.3 hours per week.
Primary Care Trusts responsible for commissioning all other 'Out of Hours' service provision if practices choose to 'opt-out'

PATIENT LISTS

GPs maintain individual lists. Money follows the individual GP. Pooled list for practices.

Source: C&AG's Report, Figures 2 and 6

5. Before the new contract was implemented, funding for GP services was not cash limited, but was on a fee per service basis. In 2002-03, £4.9 billion was being spent on GP services. During the negotiation of the contract, the Department agreed to increase spending in this area and, in the "Gross Investment Guarantee", set what it estimated that the contract would cost. This agreement detailed the minimum expenditure on GP services in England for three years. The Gross Investment Guarantee committed the Government to spend £5.6 billion in 2003-04, £6.2 billion in 2004-05 and £6.9 billion in 2005-06 (a 41% increase from 2002-03).[10]

6. In April 2002, the Department estimated that the new contract would add £18.7 billion to the cost of primary care in the first three years. The Department had, however, to provide £20.5 billion to fund the new contract, £1.8 billion more than the Department had estimated (Figure 2), and £406 million more than funded.[11]

Figure 2: The difference from the estimate between the cost and funding of the new contract /b>

2003-04
£million
2004-05
£million
2005-06
£million
TOTAL
£million

1. Department's estimate of the additional cost of the new contract (Gross Investment Guarantee) £5,611 £6,211 £6,918 £18,740

2. Actual funding allocated to Primary Care Trusts N/A^a £6,802 £7,483 N/A

3. Actual spend by Primary Care Trusts £5,811 £6,957 £7,734 £20,502

Difference between estimated spend and actual spend (1-3) £200 £746 £816 £1,762

Difference between funding allocation and actual spend (2-3) N/A £155 £251 £406

KEY AREAS WHERE PRIMARY CARE TRUSTS SPENT MORE THAN THEY WERE ALLOCATED (£MILLION): ^a

Quality and Outcomes Framework N/A £155 £168 £323

Out of Hours N/A £104 £78 £182

GMS Contract (essential services) N/A £25 £121 £146

^aThere were some areas where Primary Care Trusts underspent their allocation, for example on Personal Medical Services contracts (these were piloted in 1998 and which 30% of practices have opted to use rather than GMS)[12]

Source: C&AG's Report, Figures 3, 12, 13 and 14

7. Following the first year of the contract, the Department realised that it had miscalculated the cost of the new contract and increased the amount of money it allocated to Primary Care Trusts.[13] In the first three years of the contract, despite raising the allocation to Primary Care Trusts by £1,156 million above the Gross Investment Guarantee, Trusts spent an additional £606 million more on GP services. The additional money for the new contract had to be found within the existing Primary Care Trusts' budgets. Whilst the contract might have placed financial pressures on some Primary Care Trusts, many managed their financial affairs adequately.[14]

8. The Department believes that the overspend for the new contract was only £406 million more than expected and that the additional costs were not attributable to the new contract but represent the Department's lack of understanding about what GP services were being paid for by Primary Care Trusts.[15] The two areas of greatest overspend were payments for the Quality and Outcome framework and out-of-hours, both of which are directly attributable to the new contract. The Department underestimated the cost of out-of-hours and also underestimated the level of achievement on the Quality and Outcome Framework.[16] It considers that the costs of the contract are now under control and reports that, by the end of 2008, the overspend will have been recovered through Primary Care Trusts spending less than their allocated funding.

9. In the first three years of the contract, GP partners have benefited from an average of 58% increase in pay, compared to the Department's expectation that it would increase by 15%.[17] The average pay of GP partners increased from £73,000 in 2002-03 to £114,000 in 2005-06.[18] Not all GPs have benefited to the same extent from the new contract. The average rise in salary for salaried GPs over the same period of time was closer to 3%.[19] Whilst pay has increased, the average number of hours worked by a GP has decreased by seven hours per week.[20] The BMA reports that morale of GPs has also decreased because of critical media coverage and because of the belief that their core values were undermined by the emphasis on cost cutting and quantity rather than quality of care.[21]

10. The pay of GP partners is based on the practice income once all the relevant expenses, such as practice nurse salaries, have been paid. In negotiating the new contract, the Department placed no cap on the proportion of income GPs could take as profit.[22] The Department believe that it was not appropriate to cap profit as GP practices are small independent businesses and that the amount that GPs take as profit is for practice partners to determine.[23]

3 Qq 2, 8, 12, 24, 163; C&AG's Report, paras 1.2-1.3 Back

4 C&AG's Report, paras 1.27, Figure 9 Back

5 Qq 8, 42; C&AG's Report, Figure 9 Back

6 C&AG's Report, paras 1.12-1.14 Back

7 Q 58; C&AG's Report, paras 1.5, 1.19 Back

8 Q 13 Back

9 Q 13 Back

10 C&AG's Report, para 1.28 Back

11 Qq 2, 56, 127 Back

12 C&AG's Report, paras 1.6-1.9, 2.2; Figures 13, 14 Back

13 Qq 128-134 Back

14 Qq 93-100 Back