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Finance & IT FAQs

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How are CNST contributions set?

How is a member’s basic contribution calculated?

What is the source of the WTE and birth data used to set each member’s basic contribution?

How is a member’s historic claims experience used to adjust the basic contribution?

How is a member’s risk management standard used to adjust the basic contribution?

How is my levy for ISTCs, ECNs and FCNs calculated?

How are CNST contributions set?

CNST is a pay-as-you-go scheme. This means that sufficient money is collected from the members of the scheme each year to cover the claims and costs paid during that year. By operating on this basis, no reserves need to be held to cover either the claims that have been reported, but not yet settled (the reported outstanding claims) or the claims that have been incurred but not reported (also known as the “IBNR”). The fundamental benefit of this is that it keeps more money in patient care, rather than in reserves.

For the 2010/11 year, £778m is being collected from the members of CNST to pay for settlements made on clinical negligence claims during that time. Having estimated the total payments that will be made during 2010/11, this amount is allocated between members of CNST in as fair and equitable a way as possible whilst keeping the process reasonably simple.

This is done by estimating the clinical negligence risk that each member represents and allocating the £778m in proportion to that risk. Following this initial allocation of the £778m, a small loading is made to cover the expenses of running the scheme. Finally adjustments are made to reflect individual members’ historic claims experience and risk management standards.

The following questions address how the CNST contributions are calculated in more detail.

How is a member’s basic contribution calculated?

Each member’s basic contribution is calculated by determining their relative risk compared to other members of CNST. Each member’s risk is measured in terms of the number, the clinical specialty and the grade of Whole Time Equivalent (WTE) staff that they employ and the number of babies they deliver.

To set the 2010/11 contributions the aggregate claims data that the NHSLA hold was analysed alongside the number of WTEs employed by each member at 30th September 2008 and the number of registered births in 2008/09.

This provides a way of measuring how risky different clinical specialties are. The primary measure that we consider for each specialty is the value of claims per WTE. However, obstetric risk is estimated by considering the value of claims per birth rather than the number of obstetric WTEs (ie obstetricians and midwives) since the number of births is a better indicator of risk.

Each clinical specialty is allocated into one of thirteen risk groups. The groups are:

• Nursing and other,

• Ambulance,

• Low Risk,

• Psychiatry/Mental Health,

• Anaesthetics,

• Medium Risk,

• High Risk,

• General Surgery,

• Neurology,

• Accident & Emergency,

• Trauma & Orthopaedics;

• Neurosurgery, and

• Obstetrics.

Some of these risk groups contain several clinical specialties where the relative riskiness per WTE is similar. Others cover only one specialty. The specialties that have their own risk group are either high risk groups or special in some other way. For example, owing to the large proportion of doctors working in psychiatry (over 1 in 10 doctors in the NHS work in psychiatry), they have their own category.

Having allocated the specialties into these groups, the value of claims per WTE for the risk group as a whole is then assessed. This is used to determine a relative risk weighting for that risk group. For example, a WTE in the medium risk group is assumed to have twice the risk of a WTE in the psychiatry risk group.

There is also differentiation between nurse specialists and qualified doctors. Nurse specialists are allocated into the appropriate risk group but they are only assigned a small fraction of the risk that is assigned to a fully qualified doctor in that risk group.

The number of WTEs employed by each member in each risk group (or the number of births for obstetrics) is then multiplied by the relative risk weighting for that risk group to produce a total risk value for each member.

The global contribution is then allocated among the members in proportion to their total risk value.

The analysis to determine the risk weight of each clinical specialty is updated each year so that emerging trends can be incorporated. As planned, we have increased the number of risk categories in recent years in order to assess the clinical risk of each member more accurately.

What is the source of the WTE and birth data used to set each member’s basic contribution?

The NHSLA is a signatory to the Concordat between bodies inspecting, regulating and auditing healthcare and is working hard to redesign its systems to contribute to "reducing burdens" on healthcare providers. As part of this work the NHSLA now uses the WTE data available from the NHS Health and Social Care Information Centre to set CNST contributions. The WTE data used to set the 2010/11 contributions was the annual census at 30th September 2008.

The birth data is collected directly from members by the NHSLA in the autumn each year. The births data used to set the 2010/11 contributions was the number of registered births in 2008/09.

How is a member’s historic claims experience used to adjust the basic contribution?

In assessing a member’s historic claims experience their actual historic experience is compared against the expected experience based on the risk profile used to calculate the basic contribution. That is, the risk profile based on the number, clinical specialty and grades of WTEs, and the number of births.

This comparison of actual clams with expected claims is based on two measures. These are the total value of claims and the total number of claims. It is important to take account of both these measures to be sure that a member’s claims history is materially different from what is expected given their risk profile.

For example, a member’s expected claims experience may be five claims totalling £1.0m. However, it has actually had one claim of £1.5m. Is the experience good or bad? There are fewer claims by number than expected but the total value of the claims is greater than expected. In this particular case, based on the selected criteria, an adjustment would not be applied to the contribution. Only when we are confident that the experience is materially different from what is expected is an adjustment made to the contribution.

There are four possible adjustments that can be made to the contribution as a result of a member’s historic claims experience. The adjustment is determined as follows:

Adjustment	Criteria
10% discount	Actual claims are less than 50% of that expected both by number and value

5% discount	Actual claims are less than 50% of that expected by number and less than 75% of that expected by value Or Actual claims are less than 75% of that expected by number and less than 50% of that expected by value
5% loading	Actual claims are more than 50% greater than expected by number and more than 25% greater than expected by value Or Actual claims are more than 25% greater than expected by number and more than 50% greater than expected by value
10% loading	Actual claims are more than 50% greater than expected both by number and value

If none of the above criteria are met, then no adjustment is made to the basic contribution.

The experience rating for each member is shown at the bottom of their contribution statement.

How is a member’s risk management standard used to adjust the basic contribution?

Members can qualify for Risk Management Discounts (RMDs) by attaining certain standards. There are three levels of discount going forward: Level 1 which provides a 10% reduction, Level 2 which provides a 20% reduction and Level 3 which provides a 30% reduction.

There RMDs are assessed separately for general and maternity care. The general RMD will apply to CNST excluding maternity, LTPS and PES contributions. The CNST maternity standards are assessed separately and the level of discount will apply to the maternity element of CNST contributions only.

The RMDs will apply whilst the standards are maintained so any investment in achieving these standards could be repaid many times over through savings in contributions.

How is my levy for ISTCs, ECNs and FCNs calculated?

PCTs can outsource the provision of care to Independent Sector Treatment Centres (ISTCs), Extended Choice Network providers (ECNs) or Free Choice Network Providers (FCNs). However, any clinical negligence liability that is incurred when an NHS patient receives care at an ISTC, an ECN or an FCN is covered by CNST.

A small part of the global contribution of £778m relates to claims associated with ISTCs, ECNs and FCNs. In 2009/10, this amount was charged to PCTs in one of two ways.

· Where there was a specific contract in place between a particular ISTC and one or more PCTs, the cost of the clinical negligence cover for that ISTC was charged to the PCTs participating in the contract as appropriate.

· For all other ISTCs, ECNs and FCNs, the cost of the clinical negligence cover was spread across all PCTs in proportion to the PCTs’ main non-maternity contribution.

The way in which the cover for ISTCs, ECNs and FCNs is charged is under review for 2010/11. More information will be added shortly.