Skip to main content Skip to footer

Financial forecasting

Financial forecasting helps Primary Care Organisations (PCOs) with financial planning.

The forecast out-turn is a forecast of the spend for each practice for the current financial year, calculated using the expected profile of expenditure for England.

Calculating the forecast out-turn 

Calculation
The forecast out-turn (FO) calculation assumes that each month's expenditure for a practice is in line with the national trend for proportionate spend, ie it is assumed that a practice's cumulative spend to date is the percentage of total spend defined by the national trend. The percentages used are updated each year to reflect the latest trend information.

The FO formula for an existing practice is:

(CUMULATIVE ACTUAL COST X 100) / CUMULATIVE PROPORTIONATE SPEND FIGURE

The FO will not be shown for the first two months of the financial year (relating to April and May dispensing) due to the volatility of forecasting over the beginning of the year. The first month that this will be shown, for each financial year, will be for June dispensing.

This profile will be used to calculate forecast out-turns for 2017/18 prescriptions from the June 2017 PMD report onwards.

To note:

  1. Profile excludes drugs costs met centrally
  2. Includes practice, out of hours, and community nurse prescribing
  3. Profile is subject to change

The method used to calculate the forecast of primary care prescribing expenditure is:

  • Considers monthly expenditure data from the last five years.
  • Removes the effect of policies (that is, reductions due to PPRS and Category M) from last year's expenditure.
  • Looks at the effect of the number of dispensing days, the position of the month in the year and the year of expenditure.
  • This is collated to predict the monthly expenditure for this year.

The percentage is then applied to data from the monthly Prescribing Monitoring Document.

Revision to the In Year Forecast of Primary Care Prescribing Expenditure

The profile for 2017/18 is subject to change and is based on the best information available at the time. The profiles will be revised accordingly as further information becomes available. 

 

Forecast out-turns 2017/18

Month

Practice Prescribing Monthly Profile

Practice Prescribing Cumulative Monthly Profile

April 2017

7.97%

7.97%

May 2017

8.43%

16.40%

June 2017

8.38%

24.78%

July 2017

8.32%

33.10%

August 2017

8.22%

41.32%

September 2017

8.48%

49.80%

October 2017

8.62%

58.42%

November 2017

8.53%

66.95%

December 2017

8.27%

75.22%

January 2018

8.58%

83.80%

February 2018

7.77%

91.57%

March 2018

8.43%

100.00%

Total

100.00%

 

Forecast template

Produced by the Department of Health (DH), the forecast template is intended to support PCOs with their primary care drug spend planning. The output doesn’t state the position of the DH or NHSBSA.

View the forecast template 2017/18

The template inputs up to 5 years of historic data into a linear regression model and calculates a forecast spend for each month of the current financial year, taking into consideration:     

  • the number of dispensing days
  • the position of the month in the year (seasonality)
  • the year of expenditure

It can also make adjustments for any policies/local initiatives that will affect prescribing spend.

The template allows organisations to input their own historical data and policy changes/local initiatives.

This forecasting methodology uses similar background data as the forecast out-turn provided in the Prescribing Monitoring Documents, however the forecasts are based upon local data rather than national level profiles applied to local data.

Detailed guidance behind the methodology

Send queries to Indicesanddrugsbill@dh.gsi.gov.uk.

Other forecasting methods (forecasting spreadsheet)

The NHSBSA provides a forecast spreadsheet that primary care organisations can use to calculate their forecast expenditure for the financial year.

Historically, the NHSBSA was asked to provide a simple and user friendly forecasting tool; as such the forecasts are purely based upon previous prescribing costs.

Local prescribing policies could also affect the forecasts and users should take such policies into consideration when estimating expenditure.

View the Forecasting Spreadsheet 2017/18

The spreadsheet uses two different forecasting methods:

Linear trend method

The linear trend method is the simpler of the two and is calculated by drawing a ‘best fit line’ through previous data, and extrapolating this line into the future.

The advantage of the linear trend method is that it is simple to calculate and understand. However, it can be easily skewed by extremes in expenditure. For example, expenditure is often high around October due to prescribing of influenza vaccines; this peak could skew the data and produce artificially high forecasts. Known extremes could be locally amended to reduce bias expected in forecasted data.

Moving averages method

The moving averages method smoothes the data in such a way that the effect of random variation is reduced and the underlying pattern is easier to see.

The advantage of the moving averages method is that the smoothing process produces more stable forecasts from month to month.  The disadvantage to this method is that it reacts slower than other methods to permanent changes in the level of expenditure; for example policies such as the Pharmaceutical Price Regulation Scheme and the Category M price changes could mean that forecasts based on old higher prices will be too high.  In this case, additional calculations could be carried out locally to estimate the impact of such policies and the forecast adjusted accordingly.

Please send any questions, comments or suggestions about the information and forecasting methods contained on this page to: lynn.norris1@nhs.net

Dispensing days

View the number of dispensing days by financial year.

It includes the number of dispensing days per month for the current and the previous three financial years.

Dispensing days excludes Sundays and bank holidays.

National average discount percentage

The National Average Discount Percentage is used to calculate actual cost shown in NHS Prescription Services prescribing and financial reports . It is calculated by: the sum of all discounts / the sum of all basic price * 100.

2017/2018

Used for Reports in

National Average Discount Percentage

Oct 17 7.43
Sept 17 7.37
Aug 17 7.47
Jul 17 7.48
Jun 17 7.38
May 17 7.30

Apr 17

7.42

2016/2017

Used for Reports in

National Average Discount Percentage

Mar- 17

7.28

Feb- 17

7.33

Jan-17

7.42

Dec-16

7.37

Nov-16

7.44

Oct- 16

7.39

Sep-16

7.35

Aug-16

7.34

Jul-16

7.34

Jun-16

7.42

May-16

7.45

Apr-16

7.46

2015/2016

Used for Reports in

National Average Discount Percentage

Mar- 16

7.43

Feb- 16

7.46

Jan-16

7.64

Dec-15

7.54

Nov-15

7.63

Oct- 15

7.54

Sep-15

7.48

Aug-15

7.56

Jul-15

7.52

Jun-15

7.48

May-15

7.51

Apr-15

7.52

2014/2015

Used for Reports in

National Average Discount Percentage

Mar-15

7.43

Feb-15

7.51

Jan-15

7.70

Dec-14

7.62

Nov-14

7.77

Oct-14

7.56

Sep-14

7.53

Aug-14

7.58

Jul-14

7.52

Jun-14

7.65

May-14

7.58

Apr-14

7.66