development of a registration fees scheme across provider markets 26 march 2010
TRANSCRIPT
Development of a Registration Fees scheme across provider markets
26 March 2010
Background
CQC has the power to set fees across all the provider markets which will be registered in 2011 and beyond (c.45,000 providers)
The proposal for NHS providers for 2010/11 is complete
The consultation on the interim fee structure for adult social care and independent healthcare providers for 2010/11 is commencing
This presentation is to discuss the strategic fee scheme options to allocate and recover costs post 2011.
Ernst & Young have been appointed to develop:
- overarching fees scheme for 2011 and beyond
- including market analysis of impact of the scheme
- cost model
Where we are today
Strategic assessment
Strategic assessment
► Exploration of other regulators approaches to fees
► Joint Ernst & Young/CQC workshops on fee scheme options
Cost assessment
Cost assessment
► Assessment of costs associated with registration, compliance and enforcement
► Map costs and activities
Market analysisMarket
analysis
► Segment the market and carry out trend analysis to understand potential changes in the provider base
Options analysis and scenario
simulation
Options analysis and scenario
simulation
Stakeholder engagementStakeholder engagement
Model amendments and preferred option selectionModel amendments and
preferred option selection
► Populate data and make amendments to the model functionality once tested with real data
► Explore the sensitivities of the different options and certainty of cost recovery
► Meet a cross section of ‘voices for’ and ‘voices in’ the market to discuss broadly discuss fee scheme options
► Make amendments from stakeholder feedback
► Rate and score options → agreement of preferred option
Build model and final report
Build model and final report
► Clean options and extend functionality for the selected option where required
► Write final report
Jan
April
Today
Analogous research
Seven organisations were reviewed:
The Audit Commission
Ofsted
The NHS Litigation Authority
The Environment Agency
Financial Services Authority
The Civil Aviation Authority
ABPI
Detailed profiles of their fee scheme structures are in Appendix A
Market segments
Hospitals
(Ind/NHS)
Community provider
(Ind/Vol/ NHS PCT)
NHS GP practices
Dental Provider
(Ind/NHS/Mixed)
Hospitals(Ind/NHS)
Independent private
practice by NHS
consultantsWalk in centresSecure
provision
(Ind/NHS)
Care Homew/o nursing
(Ind/NHS(LA)/Vol)
Non residential care (in
community)
Urgent Patient Transport
(Ind/NHS/Vol)
Planned Patient
Transport(Vol/Ind/NHS)
Care Home(Ind/
NHS(LA)/Vol)
Hospitals(Ind/NHS)
Secure provision
(Ind.NHS)
Mental HealthAmbulance
Services
Primary Medical Services
DentalOther
AcuteCommunity
Health Adult Social
CareLearning
Disabilities
NHS Blood and Transplant
Health Protection
Agency
NHS Direct
Doctors currently in
private practice
Out of hours services
Prison services
Immigration and detention
services
This diagram is still under construction and will be finalised once all data has been collected. The adult social care elements for mental health and learning disabilities have been accounted for in adult social care. Therefore only the healthcare elements are shown under mental health and learning disabilities in this diagram.
Segmentation of the overall CQC market by service provision was undertaken to understand the current and future state of this market.
Decision criteria
Qualitative CriteriaPerceived Legitimacy Level of acceptance of fee scheme and understanding of
its structure in the marketSimplicity CQC ability to implement and maintain the Fee Scheme
Degree of incentivisation Extent to which scheme promotes desirable behaviour
Quantitative CriteriaDegree of change % change in fee levels of providers from current interim
scheme Recovery of CQC costs Certainty of cost recovery depending on a number of
scheme characteristics related to external factors.
Accuracy of cost allocation
Estimate of how close recovered costs match costs across and within market sectors
Stability The extent to which the fee scheme leads to a change in the provider base
Building blocks
Structure
Imposition mechanism
Cost recovery*Cost drivers
One fee structure and one annual fee for all markets (e.g. based on a percentage of turnover)
Multiple fee structures by market segment (e.g. different fees by Acute, ASC, GPs)
One fee structure for all markets with charges broken down by CQC activity at different rates (e.g. lower rate for registration but higher rate for variation)
Multiple fee structures with charges broken down by CQC activity at different rates for each market (e.g. lower rate for registration but higher rate for variation in social care only)
Multiple fee structures by provider type with one annual fee (e.g. Different fees for major acute, teaching, DGH)
One fee structure and one annual fee for all markets (e.g. based on a percentage of turnover)
Multiple fee structures by market segment (e.g. different fees by Acute, ASC, GPs)
One fee structure for all markets with charges broken down by CQC activity at different rates (e.g. lower rate for registration but higher rate for variation)
Multiple fee structures with charges broken down by CQC activity at different rates for each market (e.g. lower rate for registration but higher rate for variation in social care only)
Multiple fee structures by provider type with one annual fee (e.g. Different fees for major acute, teaching, DGH)
Fee with early option payment discount
No discount
Fee with late payment penalty
Fee with early option payment discount
No discount
Fee with late payment penalty
Direct costs
Over-heads
1. 50% 1. 50%
2. 75% 2. 75%
3. 100% 3. 100%
Direct costs
Over-heads
1. 50% 1. 50%
2. 75% 2. 75%
3. 100% 3. 100%
Risk profile (e.g. Based on the risk profiles created for each market –compliance risk framework)
Gross costs
Annual turnover
Number of locations
Specialty
Number of beds
Activity
Staff WTE
Public / private / social
Profile( e.g. track record, year of establishment)
Risk profile (e.g. Based on the risk profiles created for each market –compliance risk framework)
Gross costs
Annual turnover
Number of locations
Specialty
Number of beds
Activity
Staff WTE
Public / private / social
Profile( e.g. track record, year of establishment)
Quality incentive Provider
protection
Incentivise best performers by reduced fees (e.g. no claims discount)
Penalise the worst performers and distribute the collected funds between the best performers
No incentive
Incentivise worst performers by charging a lower fee to allow them to invest in improvements
Incentivise best performers by reduced fees (e.g. no claims discount)
Penalise the worst performers and distribute the collected funds between the best performers
No incentive
Incentivise worst performers by charging a lower fee to allow them to invest in improvements
No fee for SME entities
No charge based on provider legal status (e.g. charity) or importance to local health economy
Cap of fees based on operating costs (e.g. fee based on a ratio on costs of the provider)
No SME protection
SME protection for certain markets (e.g. social care)
No fee for SME entities
No charge based on provider legal status (e.g. charity) or importance to local health economy
Cap of fees based on operating costs (e.g. fee based on a ratio on costs of the provider)
No SME protection
SME protection for certain markets (e.g. social care)
* Given current employment practices (ie staff employed on permanent contracts) most costs cannot be changed in the short term. We have therefore assumed all costs directly related to registration to be fixed. We suggest that costs are allocated as either:
Direct costs: costs directly related to registration activities (e.g. staffing)
Overheads: the share of indirect costs required to support registration activities (e.g. HR, IT etc)
The Fee scheme could choose to recover only direct costs, overheads or both..
The first two options are based on achieving straight line recovery
Option 1 - The simple approach (% of turnover)Option 1a - The simple approach taking into consideration market segment sensitivities and locations
Fee Structure
One annual fee per provider, ie, not broken down by registration, compliance, enforcement
One structure for all markets
Cost Drivers Turnover
Incentive scheme
None
Other fee schemes
This is similar to the approach adopted by the Association of British Pharmaceutical Industry (ABPI) except the ABPI have a fee for registration and charge an annual fee based on two tiers of % of turnover.
Fee Structure
One annual fee per provider, i.e. not broken down by registration, compliance, enforcement
Fees are split by segments (e.g. Dental, GPs, Acute)
Cost Driver Cost drivers for all sectors are the same: turnover and location.
Incentive scheme
None
Other fee schemes
This is similar to the OFSTED approach in terms of charging per location and the Financial Services Authority Approach in terms of banding providers by type and setting fees based on % of turnover.
The second two options are based on maximising the accuracy of cost allocations
Option 2 - Fees broken down per CQC activity, using a risk based approach.
Option 2a - Fees broken down per CQC activity using a risk based approach. In addition to option 1 enforcement charged as ‘pay as you use’
Fee Structure
Fees are broken down by: a flat fee for registration by segment a combined fee for compliance and enforcement by segment based on risk and turnover.
Cost Drivers
Cost drivers for all segments are the same: turnover and risk rating
Incentive scheme
No incentive.
Comparability to other fee schemes
This is similar to the NHS Litigation Authority Approach of setting fees based on the risk profiles of providers.
Fee Structure
Fees are broken down by: a flat fee for registration by segment an average fee for compliance by segment a ‘pay as you use’ enforcement fee
Cost Drivers
Cost drivers for all segments are the same: turnover and risk rating
Incentive scheme
No incentive.
Comparability to other fee schemes
Similar to the NHS Litigation Authority Approach but also including the Environment Agency and Civil Aviation Authority Approach of setting fees based on activities.
The last option is a based on incentivising good performance
Option 3 –
Fees broken down per CQC activity using a
risk based approach
Enforcement charged as ‘pay as you use’
Direct financial reward for top performers
Fee Structure Fees are broken down by: A flat fee for registration by segment An average fee for compliance by segmentA ‘pay as you use’ enforcement fee
Cost Drivers Cost drivers for all segments are the same: turnover and risk rating
Incentive scheme
Fee reduction on compliance only for top performers, calculated as a % of the fee a particular providers is supposed to pay (e.g. 1% for good performers, 2% for excellent).
Comparability to other fee schemes
Similar to the NHS Litigation Authority Approach using risk profiles and in setting discounts based on achieving CNST standards but also including the Environment Agency and Civil Aviation Authority Approach of setting fees based on activities.
Implementation Issues
Turnover data
Availability
Extracting non-registerable activity
Year on year movements
• Risk data
• Availability
• System for new providers – measuring risk associated with dentists, GPs and private ambulance providers
Risk of over recovery – new registrations in year paying fees
CQC recovering through incumbents – risk over recover.
Stakeholder approach
Provider Advisory Group and specific provider association meetings (voice of the market)
Telephone interviews and meetings with individual organisations in each segment (voice in the market)
To test options in broad terms, explore views about strengths/weaknesses, compare differences between sub-segments and voices in and for the market.