From block grant to spot purchasing

I went to an excellent seminar the other day, in which Bristol City Council’s health and social care commissioning team explained key changes in how they are going to fund various organisations around the city. But while the changes make sense financially and in terms of service user choice, they could spell problems for the provider organisations concerned.

Many health and social care services across the city, such as day opportunity services for older people and support for carers, are provided by voluntary and community sector organisations.

Until now, these organisations have been supported by a fixed annual ‘block grant’ from the Council, which funds the specific services that they provide. In line with national policy, the Council is now moving towards ‘spot purchasing’ of specific services from individual organisations.

All service users will be subject to a needs assessment, which will determine what sort of services they will require and how much the Council will contribute towards purchasing them. Individual service users are then able to use their ‘personal budget’ to select the specific services that they want, which the Council will then procure on their behalf.

So if a service user needs support in preparing meals, for example, they can decide whether they want ‘meals on wheels’, a meal in a community centre or perhaps just a microwave and a supply of ready meals. They can also decide who they want to provide this service, from a list of registered providers.

From the point of view of the voluntary and community sector organisations that provide these services, this is a significant change. For starters, not all of their current service users will be eligible for support. One organisation that was represented at the seminar had found that only 47% of its users were set to receive financial support from the Council. For another organisation, the figure was 27%.

Furthermore, even if organisations’ current service users are eligible for financial support, there is no guarantee that they will choose to spend their personal budget on the services provided by that organisation. They may not have enough money to cover the cost of that service, or may choose to purchase it in a different way or from a different provider.

Together, these issues mean that voluntary and community sector organisations providing health and social care services could be looking at a significant drop in the amount of funding that they receive from the Council. So what can they do about it? Here are a few ideas.

1. Disaggregate your services. Not all users will need – or be willing to pay for – the whole service that you provide. So think about whether you can split your services into a ‘menu’ from which users can choose according to your needs. One of the organisations at the seminar provides day opportunities for older people, but it had cleverly broken this down into a series of six options, such as morning activity only, morning activity plus lunch, lunch only, whole day, etc., each of which was priced accordingly.

2. Market your services to the Council. Organisations providing health and social care services need to make sure that the Council’s care brokerage service (which matches service users to service users) is aware of the services that they provide. Not just the services that are currently covered by a block grant, but all services that would be eligible for health and social care funding under the new arrangements.

3. Market your services to current service users. If current service users are eligible for funding, they will still need to choose to continue to receive that service. And if they are not eligible for funding, then they are probably going to need to pay for the service themselves (unless organisations can afford to provide it for free).

4. Market your services to potential service users and those who have contact with them. Think about who might be interested in the services that you provide and how you can best communicate with them. Make sure they are aware of your services and how brilliant they are. I’m not a marketing expert, though, so you might want to find someone with expertise in this area to help you out.

5. Explore the cost of providing the service. If you are going to charge a fair price for the service that you provide, then you need to know how much it is costing you. (We’re getting now to the bit where I am an expert.) I’m not talking about just the total cost of the service, but what these costs are and how they behave. Which costs are fixed and which vary depending on how many service users you have? What is the cost of having one more user? How many users do you need to break even? Can you reduce costs by doing things differently?

6. Look for alternative funding. It is likely that the amount of money that you get from the Council next year will be less than you got last year. So unless you can find some way of cutting your costs to cope with this reduction in funding, you are going to need to find the money from somewhere else. You may be able to charge service users who are not funded through the Council, for example, or to apply for a grant from a local or national funding body. Either way, you won’t be the only organisation in this boat, so you might want to start thinking about it now.

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