CPCF funding changes 2016/17 and 2017/18

CPCF funding changes 2016/17 and 2017/18

On 20th October 2016 the Government imposed a two-year funding package on community pharmacy, with a £113 million reduction in funding in 2016/17. 

This will take total funding to £2.687 billion for 2016/17. This is a reduction of 4% compared with 2015/16, but it will mean that contractors will see their funding for December 2016 to March 2017 fall by an average of 12% compared with November 2016 levels.

This will be followed by a reduction in 2017/18 to £2.592 billion for the financial year, which will see funding levels from April 2017 drop by around 7.5% compared with November 2016 levels.

Changes to Fees and Allowances

A Single Activity Fee (SAF) is being introduced which incorporates and replaces the Professional Fee, Practice Payments, Repeat Dispensing Fee and EPS Monthly Allowances. For December 2016 to March 2017 the SAF is set to £1.13 per item. The SAF will then rise in 2017/18 to a level of £1.25 per item.

Establishment Payments are being reduced from Dec 2016 by 20% compared to 2015/16 levels. The following table outlines the payment level from Dec 2016 to Mar 2017:

Items per month Payment per month
2,500 – 2,829 £1,552
2,830 – 3,149 £1,613
3,150 + £1,673

From April 2017 Establishment Payments will be further reduced, by 40% compared to 2015/16 levels. The following table outlines the payment level from April 2017:

Items per month Payment per month
2,500 – 2,829 £1,164
2,830 – 3,149 £1,210
3,150 + £1,255

Quality Payments

Beginning in 2017/18, £75 million of the CPCF funding will be allocated to Quality Payments. At two specific review points during the year, pharmacies will need to declare which of the various criteria they are compliant with, in order to accumulate quality points. A total of 100 points will be available during 2017/18, and payment will be made to eligible contractors depending on how many points they have achieved. The value per point is expected to be set at £64.

It is likely that some pharmacies may not meet the criteria for Quality Payments, which would result in a portion of the allocated £75 million not being delivered. Therefore after the two review points, there will be a reconciliation process during which remaining funding from the originally allocated £75 million will be dividied between qualifying pharmacies based on the number of points they have achieved.

For further information about Quality Payments please see our dedicated Quality Payments page:

Quality Payments

Pharmacy Access Scheme

As part of the package, DH confirmed the introduction of a Pharmacy Access Scheme (PhAS), with the stated aim of ensuring that a baseline level of patient access to NHS community pharmacy services is protected.

Qualifying pharmacies will receive an additional payment, meaning those pharmacies will be protected from the full effect of the reduction in funding from December 2016.

For further information about PhAS please see our dedicated PhAS page:

Pharmacy Access Scheme

Impact on contractor income

The indicative income tables and calculator below will allow contractors to assess the impact of the changes on their business – updated for SAF of £1.25 per item from April 2017.

Indicative income tables

Indicative income calculator (incl. cashflow calculator)

FAQs

Q. How will the funding cut be implemented?
The Government will reduce Establishment Payments by 20% from December 2016, and by 40% from April 2017 compared with current levels. The Single Activity Fee, which will replace the Dispensing Fee, Practice Payment, Repeat Dispensing Annual Payment and EPS payment, will be set at a level to deliver the target funding.

Q. How much will the Single Activity Fee be worth?
We estimate that the Single Activity Fee will be worth around £1.13 per item. Final figures are not yet known, because the cost of other elements of the changes being imposed needs to be calculated.

Q. Will there be further funding cuts in future years?
The Government has set out a funding total of £2.592 billion for 2017/18, a further reduction from the 2016/17 sum of £2.687 billion. It is too early to speculate on what funding beyond 2017/18 might be.

Q. Will there be further Category M reductions in December?
The Department of Health (DH) made reductions to Category M prices in June, in response to the preliminary findings of the 2015/16 medicines margin survey. The final outturn of the survey is not yet settled but it is likely that a further reduction will be needed, and we would expect that to take effect from December 2016.

Q. What impact will these changes have on pharmacy businesses?
The imposed cuts will have a profoundly damaging effect on contractors’ finances, weakening a sector on which the NHS and its patients rely heavily. This is particularly so given the decision to make heavy cuts in the last four months of this year, resulting in a cut in income for a typical (non-PhAS) contractor of c.15% from December 2016. Combining this with a recovery of margins from the previous year through reimbursement price reductions is punitive. This will provide a damaging blow to contractors’ cash flow which may well be impossible to manage. Contractors have a high fixed cost base and little discretionary spend so may have little option but to make reductions in staffing levels. We will be providing detailed information to help contractors make accurate predictions of the impact on their businesses, and encourage them to consider whether they should talk to their banks before the December changes hit. PSNC strongly advises all contractors to make whatever provisions they can for the funding reductions and to continue to take advantage of any additional locally commissioned services, that they can afford to provide.

Q. Will pharmacies close this year?
Amended regulations which will facilitate the consolidation of community pharmacies are expected to take effect late in 2016; this may enable some neighbouring pharmacies to merge their businesses. The funding cut, combined with the reductions to Category M prices following a significant over-delivery of margin last year, will have a significant and negative impact on contractors’ NHS income in the later months of this year.

Funding changes webinar

PSNC held a webinar about the funding changes being introduced as part of the 2016/17 and 2017/18 package on 9th November 2016; a recorded version of the webinar is now available to watch.

 

Return to the CPCF changes 2016/17 and 2017/18 hub page



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