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Financial forecasting

Financial forecasting helps Commissioners and Providers 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. This means it's 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.

The amended profile will be used to calculate forecast out-turns for 2020 to 2021 prescriptions from the June 2020 PMD report onwards. The profile:

  • excludes drugs costs met centrally
  • includes practice, out of hours, and community nurse prescribing
  • is subject to change

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

  • considers monthly expenditure data from the last five years
  • removes the effect of policies (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 2020 to 2021 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. 

  • The Department of Health and Social Care (DHSC) receive a number of queries about our data that we're unable to answer (for example the treatment NCSO cost pressures). These queries should be directed to those responsible for the data collection or the relevant CCG policy contact in the NHS.

Forecast out-turn 2020 to 2021

Reviewed and updated 31 July 2020

Forecast out-turn 2020 to 2021 will be made available with reports released in August 2020 relating to June 2020 prescribing

Month

Practice Prescribing Monthly Profile

Practice Prescribing Cumulative Monthly Profile

April 2020

8.46% 8.46%

May 2020

7.94% 16.40%

June 2020

8.37% 24.77%

July 2020

8.48% 33.25%

August 2020

8.03% 41.28%

September 2020

8.48% 49.76%

October 2020

8.92% 58.68%

November 2020

8.42% 67.10%

December 2020

8.25% 75.35%

January 2021

8.14% 83.49%

February 2021

7.69% 91.18%

March 2021

8.82% 100%

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 2019 to 2020 (Excel: 75KB)

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 (Word: 929KB)

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 2020 to 2021 (Excel: 35KB)

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: nhsbsa.help@nhs.net

Dispensing days

View the number of dispensing days by financial year (Excel: 10KB)

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.

2020 to 2021

Used for Reports in National Average Discount Percentage
Jul 20 7.11

Jun 20

7.10
May 20 7.06
Apr 20 7.04

2019 to 2020

Used for Reports in National Average Discount Percentage
Mar 20 7.11
Feb 20 6.92
Jan 20 7.02
Dec 19 7.05
Nov 19 7.07
Oct 19 7.14
Sep 19 7.15
Aug 19 7.16
Jul 19 7.04
Jun 19 7.07
May 19 7.13
Apr 19 7.09

2018 to 2019

Used for Reports in National Average Discount Percentage
Mar 19 7.09

Feb 19

7.14
Jan 19 7.19
Dec 18 7.18
Nov 18 7.23
Oct 18 7.31
Sep 18 7.20
Aug 18 7.22
Jul 18 7.13
Jun 18 7.22
May 18 7.19
Apr 18 7.26

2017 to 2018

Used for Reports in

National Average Discount Percentage

Mar 18 7.18
Feb 18 7.31
Jan 18 7.33
Dec 17 7.37
Nov 17 7.52
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 to 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 to 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 to 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