Individual Service Funds Management Fees: An Appraisal Of Options

What is the problem we are trying to solve? Individual Service Funds (ISFs) create the opportunity to radically change how support is commissioned, shifting the locus of control further towards citizens and their support providers who can work together to adjust support arrangements flexibly to ensure they meet outcomes and remain ‘best fit’ for the people they support.

ISFs empower accredited support providers and independent brokers (where they exist) to act as trusted partners of local authorities, collaborating closely to review and adjust support arrangements. There are several examples where ISFs have led to better and more efficient use of personal budgets through person-centred planning and brokering alternative support arrangements.

Where ISFs have demonstrated significant improvements compared to traditional arrangements, i would expect to see the holding support provider organisation:

  • Working in partnership with the commissioner
  • Placing the person at the centre of their support arrangement and decsion making
  • Identifying outcomes and breaking them into smaller achievable steps
  • Planning, organising, and brokering different support arrangements to best meet the identified outcomes
  • Regularly reviewing arrangements and making changes as required

This approach represents a shift away from standard support provision, moving from delivering a set number of hours prescribed by social workers or care managers to focusing on outcomes and working flexibly with a personal budget allowing for greater creativity and flexibility in support planning.

Given that these activities represent a new way of working for many organisations, and may lead to a reduction in core income by reducing commissioned support hours, it is crucial to develop an ISF funding structure that fosters creativity, partnerships and change. This often involves ensuring that organisations within ISF contracting frameworks feel fairly compensated for these additional activities, usually through the setting of a weekly ISF management charge set within the total personal budget.

As with any commissioning approach that may significantly impact social care budgets over time, it is important to thoroughly weigh the pros and cons of each ISF management fee option and to use financial modelling to understand the impacts on current and future budgets.

How Do We Set a Fair Management Fee for ISF Holding Organisations?

Evidencing value for money in outcomes-based commissioning approaches is challenging. However, some research, such as the Better Lives (2014) study, shows that ISFs can improve lives and reduce costs, demonstrating a 44% reduction in support costs over time.

Organisations adopting this dynamic approach to support arrangements may incur additional costs compared to traditional providers. Therefore, it is important to explore options for fair remuneration for these enhanced activities.

Several potential funding options are available for commissioners to explore, each with its pros and cons. These options must be tailored to local market forces, as what works in one region may not work in another. Regional and local adjustments may be necessary to account for market forces and workforce demographics.

It is also important to note that the national uptake of ISFs has been slow, representing a cultural and systemic change that may take many more years to become universally recognised and adopted around England. ISF management fees are therefore unlikely to create a single seismic shock to local authority annual budgets.

Options for ISF Management Fees

Below are some options for encouraging the growth of ISFs and covering the costs of brokering and managing an ISF budget on behalf of the supported person.

Option 1 – Do Not Pay an Additional ISF Management Fee

Pros:

  • No visible additional cost to the local authority budget.
  • No changes required to current resource allocation approaches.

Cons:

  • No incentive for providers to change practices or work with the local authority to maximise independence.
  • Lack of funding for brokerage and community connecting activities may reduce their effectiveness.
  • Signals an expectation of more activity from providers without recognition through additional funding.
  • May not drive any change in practice without significant other market-shaping activities such as building tiered frameworks that reward more creative providers through formal partnerships.
  • Not all providers will want to accept this as they may feel it presents an unquanitifiable financial risk.
  • Prohibiting providers from charging people directly for ISF support at policy level may be a fettering of discretion.

Cost Impacts:

  • No additional costs to social care budgets, but may hinder large-scale uptake of ISFs, reducing any potential savings through creativity.

Considerations:

  • Success depends on the provider market’s acceptance and their current financial health. Providers with good cash flow may absorb ISF brokerage costs, while those struggling may be less willing to develop an ISF offer.

Option 2 – Pay a Flat Rate ISF Management Fee

Pros:

  • Signals recognition of the value of ISFs.
  • Simplifies the system for providers and citizens.
  • Allows providers to project cash flow and build infrastructure for ISF brokerage.
  • Facilitates market buy-in.
  • Simplifies personal budget setting for social workers.
  • Weekly costs may be offset by creative support planning.
  • Moderation by commissioners ensures good value.

Cons:

  • May be more difficult to agree and set a universally agreeable flat rate.
  • Rates require regular review and adjustment for inflation.
  • Existing support costs may increase if not offset by creative approaches.

Cost Impacts:

  • Creative approaches to support planning should help offset fees within existing budgets.

Considerations:

  • Simplest to manage strategically, providing market clarity. Encouraging ISF management fees to be offset within existing budgets can mitigate cost pressures.

Option 3 – Banded Rate ISF Management Fees

Pros:

  • Signals recognition of ISFs’ value.
  • Allows for customisation to meet an individuals specific needs.
  • Simplifies the system for citizens.
  • Allows providers to project cash flow and build ISF brokerage infrastructure.
  • Facilitates market buy-in.
  • Simplifies personal budget setting for social workers.
  • Weekly costs may be offset by creative support planning.
  • Moderation by commissioners ensures good value.

Cons:

  • May be more complex to operate for commissioners
  • Rates will require regular review and adjustment for inflation.
  • Existing support costs may increase if not offset by creative approaches.

Cost Impacts:

  •  Creative approaches to support planning should help offset fees within existing budgets.

Considerations:

  • Provides a balance between flexibility and simplicity. Market shaping and dialogue with providers are essential.

Option 4 – Providers Set ISF Fees Individually

Pros:

  • Signals recognition of ISFs’ value.
  • Allows providers to project cash flow and build ISF brokerage infrastructure.
  • Encourages market competition and buy-in.
  • Weekly costs may still be offset by creative support planning.
  • Management fees can be capped and overseen for value.
  • Common approach elsewhere in England.
  • Potentially better value with fees set below the ceiling.

Cons:

  • Adds price competition into the equation for social workers and commissioner’s, complicating personal budget setting.
  •  Rates require regular review and adjustment for inflation and may need to be individually negotiated.
  • Existing support costs may increase if not offset by creative approaches.
  • Adds complexity to setting indicative personal budgets.

Cost Impacts:

  • Overall cost impact is hard to gauge; further modelling is needed. Creative approaches should help offset fees within existing budgets.

Considerations:

  • Less simple strategically, but allows market-driven fees. Complexity in setting personal budgets must be managed. Market shaping and provider dialogue are crucial.

Commissioning Recommendations

According to Think Local Act Personal (TLAP), effective management of ISFs requires transparency and fairness in fee structures. Dr Simon Duffy, a leading advocate for personalised support, emphasises the importance of co-production with individuals and their support networks to ensure that ISFs are tailored to meet individual needs effectively. Both TLAP and Dr Duffy advocate for involving local people and support providers in setting ISF management fees, ensuring that these fees are fair, transparent, and reflective of the actual costs incurred by providers.

To align with these recommendations:

  • Engage in co-production of ISF management fees with local people and support providers to ensure the system is fair and practical.
  • Incorporate feedback from individuals and providers to develop a transparent and equitable fee structure.
  • Ensure ongoing dialogue and collaboration with all stakeholders to continuously improve the ISF framework and its implementation.

By following these guidelines, ISFs can better achieve their goal of providing personalised, flexible, and effective support for individuals.

For more detailed guidance on ISF management fees, refer to Think Local Act Personal’s Beyond Direct Payments guide.

Chris Watson
Chris Watson is the founder of Self Directed Futures and the Chair of SDS Network England. With extensive experience in strategic commissioning and change management, Chris advocates for innovative, community-led approaches to adult social care.

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