The Provision of cross-border health services for Wales - Welsh Affairs Committee Contents

3  Funding and commissioning

42. As described above, health services in England and Wales are now subject to different funding and commissioning arrangements. Evidence given to this inquiry cited the co-existence of two different systems as a difficulty, particularly for hospitals close to the border, which serve both English and Welsh patients. We heard that this placed an additional administrative burden on providers, as well as suggestions that hospitals were paid more generously for treating English patients and were effectively subsidising Welsh patients from this income.[54] In this section of our Report, we examine current commissioning and funding arrangements and their effect on cross-border health services.

Commissioning arrangements

43. In England, Primary Care Trusts (PCTs) are legally responsible for commissioning health services for their resident population.[55] In Wales, Local Health Boards (LHBs) are currently responsible for commissioning all non-specialist medical services for patients usually resident in their area. In general, this means that LHBs are largely responsible for commissioning all primary and secondary care. Tertiary and highly specialist services are currently commissioned in Wales by Health Commission Wales (HCW) an executive agency of the Welsh Assembly Government. Current legislation does not define exactly which local NHS body is responsible for commissioning care for people who live on one side of the border but are registered with a GP on the other. As a result, an interim protocol between the Department of Health and the Welsh Assembly Government has been put in place, relating to patients living along the border in Flintshire, Wrexham, Powys, Monmouthshire, Denbighshire, Cheshire West, Shropshire County, Herefordshire, Wirral, and Gloucestershire.[56]

44. The interim protocol provides that the operational responsibility for commissioning services for a patient is determined by GP registration, rather than residence. The temporary protocol has been renewed annually since 2005 and is in place until April 2009. It is accompanied by an annual funding transfer between the Department of Health and the Welsh Assembly Government for the cost of commissioning services for patients resident on the other side of the border. The Government has stated its intention to replace the interim protocol with a permanent protocol on many occasions.[57] However, in its response to our Interim Report, the Department of Health has said that negotiations on a permanent protocol are still ongoing, and are unlikely to be finalised until the restructuring of the Welsh NHS is more clearly developed. The Department said: "it is proposed that it will be more appropriate to build on and extend the scope of the current interim protocol, until the impact of these changes is clearer, rather than to completely overhaul the current arrangements".[58]

Funding arrangements

45. Funding arrangements now differ between the NHS in England and in Wales. Since 2003-04, England has incrementally introduced a national tariff system called Payment by Results (PbR) where each individual treatment is billed to the NHS at a standard rate. Providers are paid according to each individual piece of clinical activity performed; hospitals code and count their clinical activity and are then paid according to tariff prices by Primary Care Trusts.[59] Individual activities, known as Healthcare Resource Groups (HRGs), each have tariff prices set by the Department of Health. There are hundreds of HRGs ranging from "Liver-complex procedures" (£5,956) to "Primary Hip Replacement" (£5,220) to a General Surgery outpatients appointment (£163). By 2006-07, Payment by Results had been extended to include not only elective, but also non-elective, accident and emergency, out-patient and emergency admissions for all trusts. The Department of Health is seeking to further extend the scope of Payment by Results.[60]

46. Payment by Results replaced a system of 'block contracts' in which hospitals were paid based on historical activity levels. Under the block contract system, providers charged different amounts for similar treatments. The Payment by Results system pays a single average cost for treatment activities. This means that some providers are 'gainers' and some are 'losers' under the new system. Where a provider previously offered an activity for a higher cost, it will suffer a loss under Payment by Results; where a provider has previously provided a treatment more cheaply, it will receive funding above the actual cost of providing the service. In theory, Payment by Results therefore means that hospitals are rewarded for quality services (which might attract more patients to choose to be treated there), for efficiency and for performing over and above prior levels of activity (by being paid the full tariff price for each extra procedure rather than a marginal rate).[61]

47. In Wales, health care funding is still based on block contracts between Welsh commissioners and the relevant providers. Funding to hospitals (both in England and Wales) from Welsh commissioners is therefore based on historical activity and funding levels as a guide for the expected number of treatments over the coming year. Clinical activities are not funded on the basis of actual activities provided. Instead, an overall figure of anticipated activity is agreed in advance between the commissioner and the provider. Unlike Payment by Results, funding for providers who deliver over the envisaged amount of activity is only at marginal rates, although it appears that some contract negotiations are beginning to include contingencies for over-performance.[62]

Interaction between the two regimes

48. As the direction of cross-border flow in secondary and tertiary care is largely, though not exclusively, from Wales to England, the majority of our evidence concerned the effects of working with two different funding regimes on English providers and on Welsh commissioners and patients. Our inquiry was prompted, in part, by reports of growing tensions and cross-border funding disputes between Welsh commissioners and English providers and we received a significant quantity of evidence on this subject.[63]


49. In the course of this inquiry, some witnesses argued that English provider hospitals were 'losing out' from the current situation, because they would be funded at a higher rate for the treatments they provided for Welsh commissioners, if they were commissioned under the English tariff system. Two factors were cited in support of this argument: firstly, in some instances the Payment by Results system has increased the price paid for services, where a provider previously charged less than the national average on which the tariff system is now based. Secondly, the block contracts negotiated with Welsh Commissioners do not accommodate additional payment for the provision of extra services ('over-performance' against the contract), so the English provider hospitals are left unfunded when they provide those extra services to Welsh commissioners whereas they would be rewarded under Payment by Results.

50. This situation means that some English providers have an apparent deficit in their budgets where funding from Welsh commissioners falls short of the amount they would charge in England to cover the costs of the treatments provided. The amount of this 'deficit' varies between providers. Shrewsbury and Telford Hospital NHS Trust told us that "the Trust receives £16 million from the Welsh Commissioners for the activity purchased. If this same activity had been purchased by English Commissioners under PbR tariff the Trust would have received £18 million".[64] Hereford Hospitals NHS Trust stated that its "contract with Powys LHB is £1 million lower than would be the case if the national tariff were applied",[65] and the Countess of Chester Hospital reported that "The Trust income relating to Welsh patients in 2007-08 comprised £18.2 million representing 15% of total income from health service commissioners, although Welsh patients represent 20% of the total patient workload of the Trust".[66] The Walton Centre for Neurology and Neurosurgery and the United Bristol Healthcare also reported shortfalls.[67] Hospitals also argued that the existence of two different commissioning and funding streams led to a greater administrative burden, which imposed its own additional costs.[68]

51. A related issue, raised in evidence by the Countess of Chester Hospital was the historical nature of contracts with Welsh commissioners, which it argued did not reflect current, higher costs. Its evidence stated that:

    …the funding for services is subject to negotiation between the provider and the commissioner based on a historic funding position established we believe in 1991. Flintshire Local Health Board insist that they are only prepared to meet the marginal costs of additional activity over and above the historic baseline and that this reflects the national cross-border policy.[69]

Hereford Hospital NHS Trust also suggested that block contracts did not include provision for costs which were historically funded separately, but now are only funded through the Payment by Results tariffs: "The tariff includes an element for service development, replacement of capital and cover for contingencies. As the tariff system has been expanded, NHS England Trusts increasingly have no access to other sources of income".[70]

52. In contrast, the Robert Jones and Agnes Hunt Orthopaedic and District Hospital NHS Trust at Gobowen, near Oswestry, told us that the operation of two separate funding regimes was not resulting in a deficit for the Trust because the Trust was a 'loser' from the English tariff system. In that case, the Trust appeared to receive a greater proportion of income comparative to the proportion of patient activity from Wales: 31% of patient activity was related to Welsh patients, while Welsh patients represented 40% of the Trust's income.[71] In addition, given the relatively high proportion of Welsh patients treated at the Trust, it did not regard the existence of two different commissioning and funding streams as problematic, stating that the hospital is used to the "different currencies and arrangements".[72] Equally, although his hospital receives less money overall from the Welsh commissioners than it would for similar activity commissioned by an English PCT, the Chief Executive of the Shrewsbury and Telford NHS Hospital Trust acknowledged that, for some specialist services, Welsh commissioners may actually be paying above the tariff price in their negotiated contract, saying "it is always going to be swings and roundabouts but…it should be the same across [the board]".[73]

53. As might be expected, the balance of the evidence we received was from Trusts who feel they are being disadvantaged under the present system. Both the Countess of Chester Hospital and Hereford Hospitals expressed the view that the 'deficit' should be interpreted as a case of the English NHS "subsidising" the Welsh Health Service.[74] The Countess of Chester Hospital's evidence argued:

    It is not unreasonable for a provider of services to expect the commissioner to pay a fair price for the services provided—it is clear that as our basic costs are not even being covered, the Trust is effectively subsidising the Welsh Health Service and thereby compromising its full potential to provide services to both English and Welsh residents alike.[75]

54. Other providers were less concerned about the funding differential. For example, at the time of giving evidence, the Walton Centre reported that, as a specialist centre supplying a narrow range of treatments, the difference in the two funding regimes was more manageable than for a provider delivering a broader range of lines. The Centre stated that its "deficit" was not a matter for concern:

    Obviously you have heard that there is half a million pound level of over performance that we are not currently being reimbursed for. I think you can form your own view about whether or not that constitutes subsidisation for the English commissioners. Whatever your view, it is not that significant for the Walton Centre.[76]

55. Since then, however, levels of over-performance at the Walton Centre have increased significantly and its Chairman has written to the Welsh Assembly Government Minister for Health and Social Services requesting that she "make funds available to bridge the gap" between the funding provided under their contract with Health Commission Wales and that which would be provided if the treatments were commissioned by English PCTs.[77] One factor in the escalation of this issue may be the Centre's application for Foundation Trust status. Several provider trusts told us that their deficits were more significant due to pending Foundation Trust applications. For example, the annual audit for Hereford Hospital Trust remarks that the outstanding payment from the Welsh commissioners is, in part, responsible for an overall debt of the Trust.[78] The letter written by the Chairman of the Walton Centre to the Welsh Assembly Government Minister for Health and Social Services goes on to state that: "As a candidate for Foundation Trust status we will find it difficult to convince the Regulator that the current situation is in the best interests of the Trust and our patients".

56. In his evidence, First Minister Rt Hon Rhodri Morgan AM agreed that the nature of Foundation Trusts as more independent entities having to prove themselves financially responsible, meant that concerns regarding gaps in funding were pursued more vigorously. He argued that this contradicted guidance from the Department of Health, which instructed NHS Trusts to continue existing commissioning arrangements with Welsh LHBs:

    I think probably when the Foundation Trusts, through their nature, were on the point of being formed, they wanted to try to maximise income and, therefore, they were under some pressure to ignore the Department of Health guidance about allowing Welsh LHBs just across the border to continue to purchase health care from them on the old basis.[79]


57. Much of the evidence we received from Welsh commissioners acknowledged that their contracts with English providers would be more expensive if they were calculated under the English Payment by Results tariff rates as opposed to the Welsh block contract method.[80] Mr Andrew Gunnion, Chief Executive of Flintshire LHB admitted that his Board was "currently getting a good deal" in its contract with the Countess of Chester Hospital,[81] but other commissioners thought that the fact that English providers would receive more for their services if paid at tariff price rather than block contract price was irrelevant. They noted that contracts between English providers and Welsh commissioners were negotiated and agreed upon and argued that there could be no question of underpayment where Welsh commissioners were paying the price agreed in the contract.[82]

58. Welsh commissioners also argued that providers were receiving a "fair deal" in terms of the price for their services.[83] Mr Gunnion argued that the Payment by Results tariff system could result in over-charging for some services. He gave the example of an antenatal appointment including a blood pressure check. If the patient was found to have slightly high blood pressure, she might be monitored for an hour. Under Payment by Results, the commissioner would be charged twice for this patient: one price, or code, for the outpatient attendance and then another for a day unit attendance whilst her blood pressure was monitored. Under the block contract system, there would be no such additional charge for the blood pressure monitoring. Mr Gunnion concluded that "[under the] payment by results process…everything is counted separately and costed separately [and] that was how we can ratchet up the costs".[84] He added that the result of this example would lead to an potential £300,000 a year in extra costs for Flintshire LHB, but "[w]hether there is an £300,000 additional cost in the system, I think we would argue probably there is not".[85]

59. Overall, the view of the Welsh commissioners concerning the 'deficit' for English providers was that any perceived shortfall should be the responsibility of the UK Government whose NHS funding change in England had brought about the situation. Under the terms of a Concordat agreed between the UK Department of Health, the Cabinet of the National Assembly for Wales and the Department of Health, Social Services and Public Safety in 2001,[86] where one party imposes costs on the other, the party whose decision leads to higher or extra costs is to make any necessary financial transfers. First Minister Rhodri Morgan said in evidence:

    The changes that have caused the divergence have been mostly English changes rather than Welsh changes…2005-06 and 2006-07 were a bad couple of years for that reason, in getting the English system to settle down without disadvantaging Welsh patients and to abide by the 2001 concordat on due compensation if one country made a change that disadvantaged another country.[87]

Welsh commissioners shared the view of their First Minister. Ms Rebecca Richards, Director of Finance for Powys LHB said, "if we were funded to pay for contracts on the basis of payment by results, then of course we would pay it […] The current advice from the Assembly is that we do not because we have not been funded to be able to pay to that level".[88] Indeed, some English providers had a similar understanding. Mr Tom Taylor, Chief Executive of Shrewsbury and Telford NHS Hospital Trust, commented that: "It does need the English Government, the Department of Health, to fund the Welsh system to pay that money back".[89]

60. Equally, it was recognised in evidence that in the present situation there is a strong mutual dependence between English providers and Welsh commissioners. Whilst Welsh patients need the English providers for the highest quality care as close to their homes as possible, many of the English providers in border areas rely on the incomes from treating Welsh patients to remain viable.[90] Mr Tom Taylor, Chief Executive of Shrewsbury and Telford NHS Hospital Trust said:

    …if I pull out of this contract completely and I cannot replace it with a matching income from England then £10.5 million worth of doctors and nurses have got to go… Yes, you can say £2 million worth of subsidy, but look at the other side, if it was not there what would I do if I had that total loss of income?[91]

Bishop Anthony Priddis, Bishop of Hereford, also emphasised the benefits of English Trusts providing services to Welsh commissioners in terms of the increased capacity of the Trusts to provide specialised services to all patients, English and Welsh:

    If you withdraw that funding [from Welsh commissioners] and you get below the critical mass level, then some of the specialisms cannot be supplied because the budget does not stack up for a 24/7 provision in this particular department; and everybody suffers.[92]

61. There is clearly a lack of effective communication between the Welsh Assembly Government and the Department of Health on these issues despite the practical nature of the problems faced by NHS providers on both sides of the border. The issue appears to be firmly lodged in the 'too difficult' tray by officials and Ministers and that is not acceptable. If Ministers cannot agree on a fair approach at a strategic level they should agree a form of arbitration which is neutral and independent and make a commitment to accepting its adjudications. There is an urgent need for enforceable protocols between the UK and Welsh Assembly governments to address the current unsatisfactory state of affairs.

Strategic influence

62. In nearly all cases, Welsh patients are a small minority of an English hospital's workload. Some Welsh commissioners reported that, as a result, they had little influence on the strategic decisions made by English providers. This is not wholly a product of devolution, however, Mr Geoff Lang, Chief Executive of Wrexham Local Health Board said that the situation had been exacerbated by the creation of foundation trusts in England:

    There were always difficulties in terms of ensuring that Welsh residents had an important influence on strategic development of services over the border which would be their provider. That has always been a challenge, but we have managed to do that. I think as systems change and become increasingly different, that introduces more tension into that relationship. For example, if you have a foundation trust that has a particular agenda and a particular means of transacting its business and a strategic approach on which trusts have been established with a very clear focus, that may not sit quite so comfortably with the relationship and planning structures in Wales.[93]

Nevertheless, some English providers told us that Welsh interests were represented at strategic level, for example the Robert Jones and Agnes Hunt NHS Trust, told us that 25% of its board were Welsh residents.[94]

Commissioning for specialist services

63. The way in which Wales commissions specialist health services from English providers was also raised as an issue in evidence. Specialist services are commissioned on a national basis by Health Commission Wales, rather than individual local health boards. In relation to Child and Adolescent Mental Health Services (CAMHS), the Children's Commissioner for Wales told us:

    There is…a severe lack of specialist provision within Wales for those children and young people whose challenging or violent behaviour requires medium and high secure CAMHS placements, which result in placements being made in England. There is currently no provision for inpatient treatment of eating disorders within Wales. Children and young people are required to travel to England for treatment. There are often problems with the long term funding of these placements by Health Commission Wales. In some cases funding ends before therapy is complete.[95]

64. The Muscular Dystrophy Campaign reported similar difficulties. Its report Building on the Foundations: The Need for a Specialist Neuromuscular Service across Wales highlights inequalities and inconsistencies in commissioning of specialist services across the border in England.[96] The Campaign stated in evidence that LHBs and Health Commission Wales could not always agree on whether treatment of a particular condition counted as a specialist service or not and who was therefore responsible for commissioning care.[97] It argued for UK-wide commissioning for neuromuscular conditions as a solution to the lack of consistency in this area. Similarly, the Association of the British Pharmaceutical Industry (ABPI) Cymru Wales suggested to us that it would be in the interests of patients to ensure consistent funding of orphan medicines (i.e. medicines intended for the diagnosis, prevention or treatment of a life-threatening or serious condition affecting not more than 5 in 10,000 people in the European Union) by introducing a UK-wide commissioning process.[98]

65. In response to this evidence, Mr Ben Bradshaw MP, Minister of State for Health Services in the Department for Health, wrote to the Committee noting that:

    The National Commissioning Group (NCG) commissions 40 highly specialised services from a small number of English hospitals for English patients with rare conditions or who need rare interventions. The NCG also commissions some or most services for the residents of Scotland, Wales and Northern Ireland under specific contractual arrangements with the Devolved Administrations. There is no mechanism for services to be commissioned on a UK basis…For a service to be nationally commissioned by the NCG it will usually involve fewer than 400 patients.[99]

The Minister did not agree that the National Commissioning Group was the appropriate commissioner for services for muscle wasting neuromuscular conditions in the UK, given the higher numbers of patients in this group (over 1,000 children and adults for every 1 million of the population).

66. Our evidence has demonstrated that there are problems with the cross-border commissioning of specialist care for the conditions such as Muscular Dystrophy and mental health care. The difficulties patients have experienced must be recognised and addressed in a holistic way and we are not convinced that the Minister is right to dismiss UK-wide commissioning out of hand. Given that this problem faces regions of England, even though they generally have far larger populations than Wales, it may be that some other form of high-level commissioning that goes across the boundaries of English regions and across the Welsh border would be appropriate for such specialised services. The solution should be driven by the need of patients rather than existing practice.


67. Our evidence clearly demonstrates the existence of tensions between the Welsh and English commissioning and funding structures in dealing with cross-border treatments. The provider hospitals and commissioners have so far been left to deal with these disputes on a local basis. First Minister, Rt Hon Rhodri Morgan AM said in evidence:

Witnesses told us that the UK Government was also reluctant to become involved. The Countess of Chester's memorandum stated that the Department of Health had resisted involvement in its negotiations:

    Flintshire Local health Board have insisted that they are complying with cross-border policy and that resolution of any underlying deficit in funding will only be resolved by the Department of Health in England transferring funds to Wales. The Department of Health, however, resist this and believe it should be resolved through local agreement.[101]

If the Department of Health is determined to maintain that approach it should nevertheless provide for, and agree with the Welsh Assembly Government, an arbitration system to deal with unresolved difficulties with the outcome binding on all parties.

68. The Committee was told that the Welsh Assembly Government Minister for Health and Social Services had made a request for additional funds from the Department of Health in order to cover the monies English providers have claimed are outstanding. The amount requested was in the region of £16 million.[102] Mr Ben Bradshaw MP, Minister of State for Health Services in the Department for Health, did not confirm whether this request had been rejected, but stated that his Department was not yet convinced that the figure suggested was based on robust data.[103] In oral evidence given in June 2008 he acknowledged that "this is something that needs to be resolved [...] in the form of a properly worked out protocol".[104] However, as the Government's response to our interim Report makes clear, no permanent protocol covering these issues has yet been agreed.

69. Contracts for the treatment of Welsh patients in English hospitals therefore remain a matter for negotiation between the English providers and the Welsh commissioners. It is clear from our evidence that a significant amount of time and effort has been expended on these negotiations and attempts to develop workable local arrangements by providers and commissioners. Localised solutions have appeared in some areas and some have been relatively successful. For example, we were told of the Central Wales-West Midlands Memorandum of Understanding on Cross Border Collaboration between the Welsh Assembly Government and the West Midlands Regional Assembly, established in March 2007. This is not a legally binding agreement, but signifies a commitment from its parties to be aware of cross-border issues and share information when developing policy. Bishop Anthony Priddis, Bishop of Hereford welcomed the Memorandum of Understanding, but argued that it was not a substitute for national recognition of the issues involved:

    …the memorandum of understanding perhaps has achieved two things that are significant and important, but it is only in some ways a beginning. One is that it has been a clear acknowledgment that these issues are around and that they are difficulties that need addressing. The second is that it has therefore been a means to conversation taking place and the dialogue happening for people to have some channels and routes by which they can talk more about shared difficulties and shared issues. However, that is nowhere near enough. The discussion needs to take place but it is a starting point. It has got to lead, as we have been saying, to some further actions. It is not just a matter of local people across the border being able to resolve the problems themselves; hence your own agenda and your own roles, because these are not just local issues or not just regional, but also national issues.[105]

70. Several providers gave evidence of a achieving a degree of accommodation within existing negotiated contracts for funding of activity in addition to that predicted, or of negotiating Welsh contracts on the basis of "tariff" calculations. However, these contracts can come under strain if predictions are inaccurate. As noted earlier in this Report, the Walton Centre has recently requested compensation from the Welsh Assembly Government for unexpectedly high levels of activity during the last contract period. Its initial contract with Health Commission Wales had a value of £7.8 million, and an over performance reserve of £200,000. In its evidence to the inquiry, the Centre told us that it approached the Welsh block contract payment as Payment by Results "in shadow form" meaning that it negotiates the contract on a cost per treatment basis, with the aim of achieving a contract value not dissimilar to what it would be receiving under the tariff system.[106] However the over-performance contingency in this contract proved insufficient. The Walton Centre's letter to the Welsh Assembly Government Minister for Health and Social Services states "GP referrals have increased by 12% year on year to the end of November 2008…there was no way that anyone would have anticipated the level of over-performance that we are currently experiencing". Whilst additional funding has been provided to meet similar over-performance in contracted activity with English Commissioners, this has not been the case in Wales. In its letter, The Walton Centre concludes that the Welsh Assembly Government must be involved in a solution to this problem:

    In our discussion with the Welsh Commissioners, there has been a recognition that our negotiations for the 2009-2010 contract will need to take account of lessons learnt from this year but, in respect of the current contract, they have nowhere else to go to seek additional revenue to bridge the gap.[107]

71. Other evidence reported fundamental and ongoing difficulties with contractual negotiations. The memorandum from the Countess of Chester Hospital states:

    The Local Health Board have refused to enter into a formal contract arrangement with appropriate dispute resolution arrangements arguing that they are forbidden to do so by the Welsh Assembly. In the event of a dispute of this nature as an individual provider of NHS services the Trust has very little ability to reach agreement with a local commissioner supported by its government and national policy.[108]

It would be a matter of concern if it were true that the Welsh Assembly Government is paying lip-service to local settlements being struck while unreasonably restricting the discretion of LHBs to negotiate contracts. We recommend that the Audit Commission and the Welsh Audit Office undertake a joint inquiry into this situation and recommend ways of resolving the issue.


72. In the course of our inquiry, we were concerned to determine whether the challenge of managing different funding regimes resulted in any differential treatment between English and Welsh patients and whether it affected the choice of provider to which a patient was referred. One of the key points raised by the Welsh Local Government Association was the potential for diverging policies to lead to undesirable decision-making, particularly where funding was concerned:

73. The representatives of all the NHS Trusts who gave evidence to the Committee assured us that their difficulties in managing different funding and commissioning arrangements had not impacted on service provision.[110] It was nonetheless acknowledged that for some Trusts, under the present arrangements it is potentially more "profitable" to treat an English patient than it is to treat a Welsh patient.[111] Mr Tom Taylor, Chief Executive of the Shrewsbury and Telford NHS Hospital Trust told the Committee that this had created a temptation to "align…services towards English patients rather than Welsh" in order to secure higher levels of income and that this had affected the strategies put in place in his hospital under a previous, failing management.[112]

74. Conversely, one way for Welsh commissioners to manage the problem of over performance of English providers and subsequent requests for payment which they cannot meet would be by not commissioning English services. This would, of course, only ever be reasonable if the cost of Welsh provision were equal to or lower than that of English sources. The evidence we received on this subject was mixed and is connected with the perceived move towards "all Wales commissioning" discussed in the previous section of this Report. Some witnesses told us that Welsh commissioners were increasingly requiring pre-approval for funding of English services. They reported that the Welsh Assembly Government has instructed local health boards in Wales not to pay for elective treatment unless it is authorised in advance. The North Bristol NHS Trust told us that "in practice, this has meant that a referral from a Welsh GP cannot be accepted without approval from the Local Health Board (LHB) or Health Commission Wales (HCW) for specialist treatments", adding to the administrative burden of clinicians and administrators in the hospital.[113] It also states: "Welsh Commissioners have rigorously applied that guidance and have refused to pay in cases where the Trust has not obtained prior approval".[114]

75. We have heard several personal accounts of delays and distress from patients in Wales receiving treatment in England, which were attributed to problems in navigating the different systems.[115] Dr Rosaline Quinlivan, consultant in Neuromuscular Disorders, wrote to the Committee to tell us that that she is "often asked to complete pre-referral forms for patients from Wales…The questions asked are on the whole irrelevant and not applicable to my service…these forms simply add delay to the patient pathway".[116] Witnesses from the NHS agreed that the situation was beginning to affect patients' experiences. Mrs Wendy Farrington Chad, Chief Executive of the Robert Jones and Agnes Hunt NHS Trust said that the prior approval process causes confusion amongst patients by "building in a delay which may not result in treatment" and frustration for staff who "sometimes find themselves justifying the different systems and the processes".[117] We have heard some complaints that treatment has not been authorised, even when it is clinically justified,[118]or that Welsh patients have had a lower level of service than their English counterparts.[119] For example, the Muscular Dystrophy Campaign told us that Welsh commissioners do not consistently fund diagnostic tests for Welsh patients at recognised specialist centres in England.[120]

76. It is unacceptable that the Welsh NHS should erect bureaucratic barriers which stand in the way of patient needs being met swiftly and efficiently. To erect such obstacles for a very marginal impact on costs is evidence of a process-driven approach to patient care. We urge the Welsh Assembly Government to review its approach as a matter of urgency.

Developing a sustainable funding solution


77. To some degree, local re-negotiation of contracts may provide solutions to the funding and commissioning disputes outlined in this Report. However, these are unlikely to be resolved successfully in every case. For a genuinely sustainable solution to be developed, a holistic approach to cross-border issues must be adopted. The problems we have described will recur if not resolved in a sustainable way.

78. However, Ministers from both the Welsh Assembly Government and the UK Department of Health did not appear to consider the problems in this area to be severe. Mr Ben Bradshaw MP, Minister of State for Health Services in the Department for Health said that the sums involved were "really quite small" relative to the overall budget and that the issues were "perfectly resolvable".[121] Equally, First Minister Rhodri Morgan claimed several times in evidence that the disputes were historical and dated from 2005-06 and 2006-07, but had now been resolved.[122] Nevertheless, both Ministers made reference to an imminent new permanent protocol which they claimed would resolve the funding issues.[123] As noted earlier in this Report, a permanent protocol has yet to be agreed.

79. In addition, both Ministers pointed to local causes for funding and commissioning disputes, rather than the actions of national governments. Rt Hon Rhodri Morgan AM said that providers had not abided by Department of Health guidance in asking for additional income from Welsh commissioners, and added: "Maybe quite wrongly some of the patients were brought into that process and they should have been left out of it completely by the clinicians or by any of the admin managers as well".[124]Mr Ben Bradshaw MP, Minister of State for Health Services in the Department for Health, stated "there is always going to be an element of tension between commissioners and providers".[125]

80. Even if the Ministers are right to say that the figures are small and the financial implications marginal, any failure to resolve these issues will appear neither small nor marginal to the individuals affected, nor to their families. Tension between commissioners and providers may be inevitable, but they must be resolved without damaging patient care.

81. There are potentially serious consequences of leaving individual organisations to cope with the tensions raised by different funding and commissioning arrangements for Welsh and English patients. The opportunity for financial pressure to impact on health service provision must be removed. It is unacceptable that individual providers and commissioners have been left to negotiate ad hoc solutions to a problem caused by government-level decisions, apparently taken without regard for their impact on cross-border commissioning. A solution must involve a sustainable and enforceable long-term agreement between the two governments so that future disputes will be avoided and that the patient experiences a seamless National Health Service which meets their needs and not those of accountants. We are therefore deeply disappointed that no permanent protocol has been agreed between the Department for Health and the Welsh Assembly Government, or even published in draft for consultation, almost a year after we were assured that a protocol was imminent.

82. At present, both English providers treating Welsh patients and Welsh commissioners are left in an unacceptable position. Department of Health guidance states that English providers should continue existing arrangements with Welsh Commissioners, yet it also encourages them to devise management strategies orientated towards a market-led system in England. Conversely, Welsh commissioners see no reason to diverge from a long-standing system due to policy changes across the border over which they have no influence. Neither position is sustainable in the long term.

83. While we were assured that those currently supplying cross-border health services were not influenced by the present perverse arrangements, the potential for detriment to patients is clear. It is to the credit of clinicians and administrators that high quality health care continues to be provided to patients despite ongoing disputes over funding. Nevertheless, we have heard some evidence that patients are beginning to suffer, at a time when they are least able to cope with bureaucracy, administrative confusion and delays in medical treatment. This evidence is necessarily anecdotal, but it is persuasive. We note that there is a deficit of robust research concerning cross-border healthcare and we therefore urge the Department of Health, as the UK-wide body, to undertake a study of the impact of cross-border movements on health services. It would be helpful to be able to compare cross-border issues between English regions to the issues across the border between England and Wales in order to distinguish between issues that are a consequence of devolution and those that are simply the result of 'normal business'.


84. One of the issues raised during this inquiry, as well as in other strands of our work on the provision of cross-border public services for Wales, is the serious deficit in transparency concerning inter-governmental negotiations and discussions between UK-wide Departments of State and the Welsh Assembly Government. Whilst we were assured that negotiations on a permanent protocol were ongoing, we were given no evidence of this. We reiterate the recommendations of our earlier Report on cross-border further and higher education, that meetings between Ministers and officials of UK Government departments and the Welsh Assembly Government must be made more transparent. This is in the interests of a healthy democracy and the effective operation of devolution.

54   Qq 53 and 74 Back

55   There is also a move in England towards GPs commissioning specialist services direct for their patients. Back

56   Ev 126. The default legal position would be that residency determines a patient's entitlement to treatment. Back

57   Qq 476, 482 and 510.  Back

58   Government Response to the Welsh Affairs Committee interim report on the provision of cross-border health services for Wales, Cm. 7531, January 2009, page 6. Back

59   The amount received is adjusted for local factors such as labour costs by a 'market forces factor'. Back

60   Ev 127 Back

61   An Audit Commission Report, The right result? Payment by Results 2003-07, 14 February 2008, supplies discussion of the performance of the Payment by Results system. Back

62   The Walton Centre said that it has a contingency amount within its contract with the Welsh commissioner for over-performance. It notes that it has been insufficient to cover the level of over-performance and there is still therefore an under-payment by Welsh commissioners for the services provided (Letter from Ken Hoskisson, Chairman, The Walton Centre for Neurology and Neurosurgery NHS Trust to Edwina Hart AM, 13 January 2009 [not printed]). Back

63   For example, Breakdown of Cross-border Agreements is Costing the English Trusts Millions, Health Service Journal, 14 February 2007. Back

64   Ev 221 Back

65   Ev 147 Back

66   Ev 122 Back

67   Since the oral evidence session The Walton Centre has copied the Committee into a letter addressed to the Welsh Health Minister, dated 13 January, which identifies a much larger deficit due to unexpected increased activity.  Back

68   Q 53 Back

69   Ev 122 Back

70   Ev 146 Back

71   Robert Jones and Agnes Hunt Orthopaedic and District Hospital NHS Trust Annual Report 2006-07, p.21. Back

72   Q 346 Back

73   Q 71 Back

74   Ev 121; Ev 146 Back

75   Ev 122 Back

76   Q 161 Back

77   Letter from Ken Hoskisson, Chairman, The Walton Centre for Neurology and Neurosurgery NHS Trust to Edwina Hart AM, 13 January 2009 [not printed]. Back

78   Audit Commission, Hereford Hospitals NHS Trust, Annual Audit letter, October 2007. Back

79   Q 577 Back

80   For example, Q 436 (Powys LHB) Back

81   Q 207 Back

82   Q 211 Back

83   Q 220 Back

84   Q 219 Back

85   Q 219 Back

86   Devolution concordat on health and social care: UK Department of Health, Cabinet of the National Assembly for Wales Department of Health, Social Services and Public Safety, 1 May 2001.  Back

87   Q 579 Back

88   Q 436-437 Back

89   Q 71 Back

90   For example, Ev 145 from Hereford Hospitals NHS Trust and Q 126 (NHS Confederation) Back

91   Q 74 Back

92   Q 18 Back

93   Q 194 Back

94   Q 339 Back

95   Ev 117 Back

96   Muscular Dystrophy Campaign & Genetic Interest Group Building on the Foundations: The Need for a Specialist Neuromuscular Service across Wales February 2008, p.5. Back

97   Q 283 Back

98   Ev 99 Back

99   1 July 2008, Letter from Ben Bradshaw to Chairman (Ev 134). Back

100   Q 595 Back

101   Ev 123 Back

102   Qq 491 and 498 Back

103   Q 499 Back

104   Q 491 Back

105   Q 33 Back

106   Q 160 Back

107   Letter from Ken Hoskisson, Chairman, The Walton Centre to Welsh Minister for Health and Social Services, 13 January 2009 (not printed). Back

108   Ev 123 Back

109   Ev 271 Back

110   Qq 74 and 342 Back

111   Qq 63, 71-72 and 158 Back

112   Q 73. The board of the hospital was replaced at the time Mr Taylor took up his post. Back

113   Ev 184 Back

114   IbidBack

115   For example, Ev 140, Ev 193 and Ev 281 Back

116   Ev 215 Back

117   Q 354 Back

118   Several individual cases including delays and refused clinician referrals are documented by the Conwy Federation of Community Health Councils (Ev 118); see also Ev 215. Back

119   Q 370 Back

120   Muscular Dystrophy Campaign & Genetic Interest Group Building on the Foundations: The Need for a Specialist Neuromuscular Service across Wales, February 2008.  Back

121   Q 498 Back

122   Qq 577 and Q600 Back

123   Qq 490, 520 and 577 Back

124   Q 599 Back

125   Q 488 Back

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Prepared 27 March 2009