Direct Payments: Cost-Effective Implementation

1. Direct Payments:Cost-Effective Implementation Commissioned for the Department of Health by the Care Services Efficiency Delivery Programme (CSED) May 2007

2. Contents Background, context and approach Summary of findings The economic case Delivering best practice Benefit realisation

3. Background and Context • There is a strong political drive towards self-directed support for social care, with individual budgets (IBs) due to become the norm • Direct payments (DPs) are a recognised mechanism for getting money to individual clients to access social care services and personal assistance as an adjunct/alternative to those services provided by the Local Authority (LA) • Although DPs have been available to LAs as a means of distributing funds after assessment for ten years, uptake of DP has been variable • DPs are expected increasingly to become the norm. LAs that have promoted DPs have demonstrated that it is a cost-effective approach as well as one that supports better outcomes for the client in terms of a better and more flexible way of life: “independence, social inclusion and enhanced self-esteem” • According to the “Choosing Well” report by the Audit Commission, May 2006: • “Benefits for local authorities include lower administration costs…. and lower overall costs of provision”. But there is a “perception that LAs and the public would incur additional costs that made introducing choice less desirable” • This paper focuses on: • A “best practice” process model based on LAs that have made DP work effectively • Key best practice elements to support the success • Evidence that the adoption of DP can deliver financial as well as social benefit

4. Approach Development of the case for DP has applied a Backcast Planning approach, working back from the implementation of DP to define what needs to be in place, in terms of policy, organisation structure and processes to deliver DP efficiently and effectively Backcast Planning is therefore based on the future state, where DP and IB are the norm, and where any redundant costs associated with reduced direct provision of services have been eliminated The economic case is therefore based on the IB and DP future state, not on a series of incremental steps The benefit of the Backcast Planning approach is that it focuses on the desired outcome (rather than the incremental steps)

5. Contents Background, context and approach Summary of findings The economic case Delivering best practice Benefit realisation

6. Summary The study has produced a validated DP process, in terms of what needs to be done – leaving free the option of how (in-house or outsourced, and, if in-house, by which operational function) it is done The study, both top-down and at the detail level, demonstrates that a properly-implemented DP payment process should be at least cost neutral, and be potentially beneficial in terms of cost A critical component in achieving a cost neutral implementation of DP is recognition by the LA that DP is not an exception or incremental process, but is a core component of the care process

7. Contents Background, context and approach Summary of findings The economic case Delivering best practice Benefit realisation

8. The Economic Case(DP Processes) Setting up the Direct Payments Support Service (DPSS) is an incremental cost Once the DPSS and DP have been implemented, this will be offset by significant savings in the payment process and by elimination of redundant costs in the direct provision functions The detailed process model is available separately

9. The Economic Case(DP Payments) Funder (the LA) Variable monthly payment Based on PO, timesheet & invoice Service Provider (a PA?) Fixed monthly (or one-off) payment Buyer (the client) Service Provider (a PA?) Funder (the LA) Current (Direct Provision) Future (Direct Payments) The only incremental cost is related to any additional BACS payments to clients (over and above those paid to service providers), offset by savings in the PO/timesheet/invoice reconciliation and payment processes

10. The Economic Case(Transition to DP and IB) IB Implementation a b DP Implementation The way in which costs and savings accrue to the LA will depend on the migration sequence to a new operating system Prioritising IB (a) will set up the appropriate infrastructure for managing DP payments Prioritising DP (b) will, by implication, set up a significant component for future IB provision

11. The Economic Case(Transition to DP) Total Costs Total cost (of payments) Cost of direct payments Cost of direct provision DP Implementation Timescale It is recognised that in the transition process to DP there may be a period when DP costs are incurred without commensurate savings in direct provision It is critical that, once DP is established, redundant costs are taken out of direct provision

12. Contents Background, context and approach Summary of findings The economic case Delivering best practice Benefit realisation

13. Policy Prerequisites for Best Practice • Recognise that DPs and IBs are the way of the future and support the initiative: • “Choosing Well” by the Audit Commission May 2006: “Benefits for local authorities include lower administration costs…. and lower overall costs of provision” • Consequently, treat DPs as the norm rather than as an exception. Exception management will always generate additional costs: • “Choosing Well” by the Audit Commission May 2006: “DP users bear a higher proportion of fixed and overhead costs compared with the much larger number of domiciliary social care clients” • Actively seek to change the hearts and minds of practitioners and administrators, and provide effective training to support DP as “business as usual”. Recognise that: • The change to DPs does not change the provision of care and accountability for it • Many of the activities carried out under a DP regime (e.g. interviewing and recruitment of PAs, requisition of services etc.) would also be carried out or paid for in a direct provision environment • The focus on outcomes means that more is available than “care hour £” • Develop a pragmatic policy to simplify administration (contracts etc.) and financial risk management processes (adopting new lighter touch CIPFA guidelines) • As the proportion of DPs and IBs increases, actively seek toredeploy administrative effort away from redundant procedures and processes

14. Planning to Deliver Best Practice Create a Direct Payments Support Service (DPSS) function that helps clients (and, where appropriate, their PAs) to set up and administer funds under a DP regime Make an initial investment to ensure that DPs are the norm Provide effective training for relevant LA staff and practitioners Help clients to fulfil their statutory obligation to use a discrete bank account (or accepted alternative financial arrangement) to manage DPs when there are multiple payments Set up simplified and easily-understandable contracts for individual clients to use with service providers Where clients are less likely to be able to provide accurate information for regular reviews, help them to use payroll services to guarantee that provision During assessment and implementation, focus on outcomes, not care hour £ equivalents There is an upfront cost, but applying best practice is worth the investment. As identified by the Audit Commission in “Choosing Well”, however, “when choice is introduced inefficiently, it can add to costs and reduce value for money” 14

15. Delivering Best Practice The rest of this presentation sets out best practice guidance for handling DPs, based on components of DP processes already implemented by a number of LAs Implementing “best practice” guidance as set out in this presentation will limit additional DP implementation costs incurred by LAs The model represents “what” needs to be done rather than “how”. It is not proscriptive: LAs are free to implement alternative processes for managing DP payments, including the use of in-house and external resources If the LA proposed (alternative) method of payment for DP imposes significant cost increases, particularly when compared to the “best practice” guidance, the proposed DP payment method is inappropriate

16. Provide DP Support Service The DP Support Service is a key element of effective service provision. It drives and champions DP across the LA, with practitioners and with clients It offers, where appropriate: Support to clients to set up bank accounts and payroll services Support to clients to procure services and recruit PAs Brokerage of information on service suppliers As part of its core function, the DPSS also: Sets up contracts with individual clients Manages payment to clients Manages financial reviews and (where appropriate) risk reviews Offers training to practitioners and administrators The LA may manage all of these in-house, but may also outsource service provision to a third party or set up a separate organisation internally and treat it as a third party The DPSS represents a management cost to the LA for the DP advocacy role, but all other incremental costs are offset by: Improved/reduced processes and effort elsewhere Transition of effort from redundant activities 16

17. Process Model The detaileddirect payments process model is available separately

18. Key Process Differences

19. Significant Savings Traditional Direct Provision Set up payee Set up budget Process requisition Produce purchase order Receive/process timesheet Process invoice Match PO, timesheet & invoice Authorise payment Make (variable) payment Direct Payment Set up payee Set up support plan/funding Set up monthly payment Make (fixed) payment Implemented as a supplier payment process in Accounts Payable, DP payments by the LA should incur only additional BACS transaction costs… …while generating significant savings from the simplification of the payment process

20. Main DPSS Process Elements Initiate DPProcess for Individual Provide DP Support Service Service Delivery (meet Outcomes) Payment Management Subsequent pages show how direct payments arenot only cost-neutral forLAs in comparison todirect provision,but can also demonstrate real savings Risk Management

21. Initiate DP Process for Individual

22. DP Support Service: Advisory

23. DP Support Service: Bank Account

24. DP Support Service: Payroll Service

25. DP Support Service: Sourcing Advice

26. DP Support Service: HR/Recruitment

27. DP Support Service: Brokerage

28. DP Support Service: Training

29. Service Delivery (out of scope)

30. Payment Management

31. Risk Management

32. Contents • Background, context and approach • Summary of findings • The economic case • Delivering best practice • Benefit realisation

33. Benefit Realisation DP implementation will be recognisably successful when the following Recognition Events TM occur: DP is a standard payment procedure within the LA The deployment of DP is a standard component of all LA sourcing strategies DPs (including charging, paying, monitoring, review and claw back) are routine Accounts Payable activities The only direct, additional cost that DPs incur are direct BACS transaction costs Redundant costs (management and administration) of direct provision have been eliminated DP training is provided to all relevant council staff, partner agency staff, information providers and DP recipients All eligible clients are offered the DP option (at initial contact, assessment and review) Support for people about to, and using, DP is readily available DP is promoted by, and to, staff as a standard option A number of these components have also been included in the self assessment tool 33