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Advance payments and Covid costs

Treasury 1075.jpg

Advance payments and Covid costs

Atif Butt examines the implications of the settlement between the government and the PSNC for community pharmacies in England…
Between April and July last year the community pharmacy sector received £370 million in advance funding from the UK Treasury in recognition of the significant cashflow pressures facing the sector due to the Covid-19 pandemic.

Although the government always said this was temporary funding that would need to be paid back, there was considerable pressure from the pharmacy sector to make this funding permanent as recognition of the additional costs incurred by pharmacies during the pandemic, estimated by PSNC to be around £450 million in the 2020/21 financial year.

After months of uncertainty the government and the PSNC have finally concluded their negotiations, with an agreement reached that community pharmacy will pay back the £370 million in advance payments received last year in six equal monthly sums from October 2021.

It is expected that the repayments will be recovered as part of the monthly NHS reconciliations from October 2021 to March 2022, although the PSNC has said there are continuing discussions around how this will work in practice. 

However, it’s not all bad news, as it was also agreed that pharmacies will be able to claim back a range of Covid-19 related costs incurred for the 13-month period from 1 March 2020 to 31 March 2021. The government first offered such a scheme last summer, but its initial proposal was rejected as inadequate by PSNC. It has since been updated and represents “a significant improvement” on the original offer, according to PSNC.

So, what can you claim, when do you need to do it by, and how do you go about it? Under the deal, contractors can claim for four categories of costs:
·      Additional staff costs due to Covid-19. This can include costs for taking on additional staff to cover Covid-related absences such as staff being ill, shielding or self-isolating, and to meet additional customer demand and extra staff time requirements due to the pandemic.
This should not include staff costs to cover non-Covid-related absence or deferred annual leave, or staff costs for bank holiday openings as separate funding has been provided for this.
·      Additional costs incurred to make premises Covid-19 secure. This includes costs for cleaning and hygiene products, signage and barriers, and costs over £300 for adjusting premises to support social distancing measures, but it excludes costs for PPE and hand sanitiser.
·      Additional IT and Communication costs to support remote working and virtual patient contacts. This includes hardware costs, such as phones, laptops and webcams, and software costs (eg. software licenses for computer applications).
·      Closures up to 14 days for infection control purposes notified to NHSE&I. In this case contractors will be paid an amount equal to their average daily fees in 2019/20 plus the average number of items dispensed daily in 2019/20, multiplied by £0.77 to reflect medicine margin for each day they were closed , up to a maximum of 14 days. Closures for any other purposes other than infection control or that were longer than 14 days will not be included.
All claims must be submitted to the NHSBSA by 15 August by completing and returning the claim form that was made available on 5 July and can be downloaded from the NHS website as an Excel document.

On the form contractors need to set out their costs and indicate the evidence they have for them. Contractors will also need to confirm that documentation to evidence their claims is available should the NHSBSA ask to see it and be able to provide this within 5 working days if so requested. The claims will be reviewed, and payments will be made on 1 October.

It is crucial for pharmacies to claim back as much of their Covid-related costs as possible in the relatively short space of time that is available for them to do so, and this is something your accountant should be able to help you with.

Getting this done in time will also help to soften the blow of the advance funding recovery that will begin to impact on pharmacy revenues for the six months from October 2021.
Atif Butt is a senior accountant at Hutchings Accountants.

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