(extracts from an article in Issue 28 of the NHSLA Review by Joe Monk, a Partner at Lane Clark & Peacock LLP)
CNST is a pay-as-you-go scheme, which means that sufficient money is collected in each year to cover the claims 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 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 2004/05 year, approximately £410 million is being collected from NHS Trusts and PCTs to pay for settlements made on clinical negligence claims during that time.
Once we have estimated the total payments for the year, these are allocated between NHS Trusts and PCTs in as fair and equitable way as possible. An estimate of the clinical negligence risk each Trust represents is calculated and the £410m is allocated in proportion to that risk.
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 became aware that the information we have historically collected annually from members to enable us to calculate a CNST contribution was available from the NHS Health and Social Care Information Centre and thus we have used this source for the attached notices. We analyse historic claims data to assess the clinical risk of each clinical specialty. For example, we estimate that Gastroenterology has twice the value of claims per doctor than Rheumatology.
Each clinical specialty is allocated into one of five categories: low risk, medium risk, high risk, very high risk and obstetrics. Certain specialties are considered separately. For example, due 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. Over time we intend to increase the number of risk categories in order to assess the clinical risk of each Trust more accurately.
The relative risks of all the specialties in each category are assessed to produce a relative risk weighting. For example, a medium risk doctor is assumed to have twice the risk of a doctor working in psychiatry. These relative risk weightings are applied to each trust’s “Whole Time Equivalent” form to produce a total risk value for each trust. This is calculated by multiplying the number of WTEs in each risk category by the relative risk weighting for that risk category. The total £410m required to be collected is allocated among the members in proportion to the trust’s units of risk.
Two further adjustments are made to a trust’s contribution: a discount for risk management and an increase or decrease for the claims experience of a trust.
Each trust can qualify for risk management discounts (RMDs) by passing certain standards. A Trust can reach level 1, 2 or 3 for its RMD: level 1 is worth a 10% reduction in a Trust’s contribution; level 2 is worth a 20% reduction; and level 3 is worth a 30% reduction. These reductions are well worth having, not only for this year, but also for subsequent years. Any investment in achieving these standards could be repaid many times over in the future.
The second adjustment is for experience rating. The experience rating for each trust is shown at the bottom of the contribution assessment form and takes one of five values: +10%, +5%, 0%, -5% and -10%. This means that a trust with very poor claims experience has a 10% increase in its contribution, while a trust with very good experience obtains a 10% reduction in its contribution level. This adjustment is already included in the figures quoted at the top of the form.
In assessing a trust’s claims experience we look at two measures. First, the total value of claims a trust has had, in comparison with that expected through its risk profile. Secondly, the total number of claims in comparison with that expected from its risk profile. It is important to take account of both measures to be sure that a trust performing particularly well or badly has the appropriate adjustment made.
For example, we may be expecting a trust to have five claims totalling £1m, based on its WTE form. If it actually has one claim of £1,250,000, has it got good or bad claims experience? It has fewer claims by number but the total value of the claims is greater. In this particular case, we would not apply any adjustment to the contribution level. A trust has to have very poor claims experience with far greater than expected claims by number and value in order to have an increase in its contribution level.