The Elective Recovery Fund and Payment-by-Results: Transformations in NHS Funding 2023-24 

About the Elective Recovery Funding for 2023-24

Elective Recovery Funding (ERF) is a system implemented during post Covid-19 pandemic. It has been modified for the next two financial years to support the NHS in its endeavour to increase its elective activity, which are the non-emergency procedures that have been scheduled in advance. Here’s a simple overview:
The government has made Elective Recovery Funding available to each Integrated Care Board (ICBs) to eventually achieve around 30% more elective activity than what was done before the COVID-19 pandemic. The financial year 2023-24 nationa l target aims to reach 107% of the activity levels seen in 2019-20 (pre-pandemic). 
NHS England, the body overseeing this process, will set individual targets for each ICB, which in turn agrees on individual targets for each provider in its area. These targets are based on the activity recorded in the first half (H1) of 2022/23 (which was below pre-pandemic levels at 98%); the further behind an ICB is, the higher the local target is to recover its position. 
The great news is that if ICBs exceed their target, they will receive additional funding to cover the costs of the extra elective activity.  This level of additional funding is uncapped and has no conditions attached. This differs from previous years, where funds were only released if certain activity thresholds were met and productivity and efficiency gains were achieved.  

However, speaking to NHS trust senior managers and leaders, there is still some misunderstanding that these thresholds exist.  Despite the good news of no thresholds, there are some potential complications; the additional funding will only be given if the ICB’s overall target has been exceeded.

If some ICBs are under their target, they won’t receive additional funds until the overall target is exceeded.  This means withholding funding to an underperforming provider and giving it to an overperforming provider. 
The reality of this happening is questioned. To manage this, a portion of the funding will be withheld by NHS England and only released based on how well providers meet their targets during the year. 
Regarding payments for NHS trusts, there will be a fixed payment (covering services outside the scope of elective activity, such as emergency care and follow-ups) and a variable payment (funding the elective procedures and related services). Providers will receive 100% of the set prices for all elective activities covered by the variable payment, irrespective of how much they deliver. This means they are incentivised to carry out as much activity as possible. 

Why has there been a return to Pbr?

The return to the Payment by Results (PbR) system in the NHS is driven by several reasons. It can incentivise providers to increase their activity levels because the more patients they treat, the more they get paid.
The key reason for this return is that when PbR was last fully in place, it successfully achieved an 18-week Referral to Treatment (RTT) target.
PbR can incentivise increased activity, encouraging faster treatment of patients and reducing waiting lists. Therefore, the system’s ability to effectively manage patient waiting times and ensure timely access to needed healthcare is a strong argument for its re-implementation.
It’s also worth noting that the PbR system provides a degree of transparency and standardisation in healthcare financing. It’s easier for government, regulatory bodies, and the public to understand and scrutinise how money is spent in the healthcare system.

What are the concerns regarding a return to payment by results?

The decision by NHS England (NHSE) to implement a payment-by-results system has sparked controversy, with some of the service’s largest trusts expressing concern over the changes, according to a report by Health Service Journal (HSJ). Barts Health, one of the NHS’s largest trusts, has suggested that part of the new proposals might cause systems to fail, and Leeds Teaching Hospitals Trust decried the move as a step in the wrong direction.
Many trusts have criticised these new arrangements, particularly the plans to introduce a “variable element” to elective procedures. Trusts have warned that this could financially destabilise providers if they fail to meet elective targets due to circumstances beyond their control.
The payment system was confirmed at the end of last month, but NHSE did not release an analysis of the responses to their consultation, which is typically standard procedure.
Furthermore, the NHS Confederation notes that Social Care shortages remain: Current statistics show that over 12,000 hospital patients are medically fit to leave daily but cannot be due to social care shortages. These shortages prevent these patients from being adequately cared for in their homes – a return to PbR does not address the issue of “bed blocking”.
In summary, many trusts believe that additional support is needed to meet elective care targets, and the new regime will likely result in many trusts reporting a deficit as they fail to meet the new activity demands.

18 Week Support Opinion

18 Week Support welcomes the return to the payment by results (PbR) system. We believe that the PbR model effectively incentivises activity and fosters an environment of productivity and efficiency in service delivery. We understand that this transition to the new financial regime might be challenging for many.
However, it’s important to emphasise that during this period of change, we stand ready to offer our unwavering support. Our commitment to facilitating high-quality patient care and supporting healthcare professionals remains steadfast, and we are fully prepared to adapt and assist wherever necessary to make this transition as smooth as possible. 

Conclusion

In conclusion, the Elective Recovery Fund and the reimplementation of the Payment by Results system signify substantial shifts in NHS funding. They present both opportunities and challenges: opportunities in terms of increased elective activity, service improvement, and more transparent financial mechanisms, challenges regarding the potential destabilisation of providers, and the risk of deficits for trusts struggling to meet targets. 
Amid these changes, we at 18 Week Support stand prepared to offer much-needed support during the transition, underscoring our commitment to facilitating quality patient care and reducing the backlog. As we move forward, it will be crucial to monitor how these new measures unfold in practice, how effectively they incentivise increased elective activity, and how the NHS navigates the resulting complexities.
Ultimately, the goal remains clear: to enhance patient care and increase the volume of elective activity, thereby reducing waiting lists.