Price Cap Guidance: An update 1/2
Jim Mackey, the new Chief Executive of NHS Improvement wrote to all NHS providers last Friday 18th February to advise that as of April 1st all trusts in scope of the agency rules use approved frameworks for the procurement of all agency staff. I will blog separately about my own framework status, but the interesting point for me in the correspondence was the additional guidance for framework operators. In a separate document NHSI advise that operators of a framework, for example the Crown Commercial Service, which runs the non-medical non clinical resources framework must apply to Monitor to have their framework approved for use by NHS organisations. That application must be made by 3rd March and Monitor will publish a full list of approved frameworks by 14th March.
And what assessment criteria will Monitor use to grant approval? Well framework operators must meet a number of conditions, but chief amongst them is the provision of a detailed plan on how the operator plans to contractually embed price cap rates into their framework by November 2016. This is a sensible strategy, funnel the spend through approved frameworks and suppliers, and cap rates. Spend should in theory reduce and it is more easily tracked and managed. However, the major problem is that price cap rates are completely misaligned to true market rates.
On the nmnc framework, candidate pay rates are determined by the afc band. The approximate calculation is basic salary divided by 205, which isn’t far off the number of working days in a year, so an interim covering a band 9 post that pays £84,688, should have a maximum daily rate of £411. This is how the nmnc framework is supposed to work, and the same pricing was in place for the first iteration of the framework 2010-2015. The price cap guidance issued by Monitor in November 2015 uses hourly rates (because its designed mainly for agency nurses / locum doctors, interims are just caught in scope) and the hourly rate for a band 9 is £50.35, which is a day rate of just over £400 based on an 8 hour day. So the nmnc rates are broadly aligned to price cap rates. But under the price cap guidance, there is of course an allowable 55% uplift, which means the maximum hourly rate an NHS organisation can pay is (£50.35 * 1.55=) £78.04, or £624 / day. Not bad, but take off an agency margin at c. 15% and you’re down to a candidate rate of £530, which is not really enough for a band 9.
A band 9 interim is actually paid between £700 and £1000 / day, depending on their professional function, and the exact rate is determined a range of factors, but mostly supply and demand. A client coming to market needing an interim band 9 with a budget of £624 / day could recruit, but they wouldn’t find a band 9 calibre interim. Candidates, clients and agents know this and know that the market essentially functions at a different pricing level to price cap rates. Everyone understands that the NHS interim market is a free price system and can’t be a fixed price system, price is determined by supply and demand, not the government, and this is reinforced by the fact that the goods in this particular market (the interim managers) are able to influence prices in a way that an inanimate box of paperclips cannot. Over the last few years agencies have enjoyed a position whereby they are on the framework but don’t abide by the framework rates. The Crown Commercial Service historically have not had the resource to properly police agencies paying candidate rates over and above the framework rates and I there is also a practice of agencies not fully reporting their management information back to CCS. I don’t see things changing from November 2016, I would expect NHS organisations to be more compliant in the use of frameworks, but they will necessarily need to exercise discretion or get creative when it comes to applying the framework rates.
In part 2, I’ll talk about what the solutions and workarounds might look like.