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Changes to the NHS tariff an ‘impossible balancing act’

NHS providers and commissioners will share equal responsibility for managing increases in the number of emergency hospital admissions, under proposed changes to the 2015-16 national tariff unveiled by Monitor and NHS England.

Within the consultation paper, there are plans to revise the Marginal Rate Rule from the current 30:70 split to 50:50, so that commissioners take on a heavier workload. According to Monitor and NHS England, this will give acute providers approximately £70m extra to invest in patient care.

However, providers will now be faced with an efficiency factor of 3.8%, compared to 4% last year. It was stated that, based on previous experience, the target is consistent with achieving the net 2% efficiency requirement for the whole of the NHS as described in the Five Year Forward View.

But Chris Hopson, chief executive of the Foundation Trust Network (FTN), disagrees. He said: “Whilst NHS providers have successfully realised nearly £20bn of savings over the last four years, everyone acknowledges that providers can’t carry on realising 4% efficiency savings each year without extra investment. The 2015-16 tariff was always going to be an impossible balancing act between an underfunded NHS and growing demand.

“The ‘so-called’ efficiency factor of 3.8% proposed is therefore both unrealistic and unsustainable. It is, effectively, a straight forward cut branded as efficiency and is likely to mean that providers of ambulance, community, mental health and hospital services will end 2015-16 over £1.1bn in deficit.”

Hopson did, however, welcome the change to the Marginal Rate Rule. He called it the first step to the abandonment of this policy “which has failed in its stated aim of stopping demand for A&E services rising”.

His counterparts at NHS Clinical Commissioners were less welcoming to the news. The organisation stated that the introduction of a 50% marginal rate for acute prescribed specialist services will have an impact on the CCGs that commission a mix of specialised and non-specialist services from providers.

“We fear that the proposal for the  remaining 50% of marginal rate to be held back by NHS England to balance its spend and therefore not manage increases in service demand will shift financial risk to providers,” they said.  “The implication is that CCGs will be asked to ‘fill the gap’ at a time when they are themselves stretched financially and has the potential to put routine patient care at risk.”

Within the consultation document there was good news for ensuring parity of esteem for physical and mental health under the payment system, to which NHS England has committed a further £80m. This includes £40m funding for early intervention in psychosis, equivalent to an increase in funding of 15% nationally for these services, and amounts to an uplift of 0.35% for all mental health services.

Additionally there are plans in place to introduce a new mechanism for sharing between providers and commissioners the risk associated with an increase in spending on acute specialised services above planned levels. This will help commissioners spend their budgets in ways that most benefit patients. NHS England said it will establish a panel comprising providers of specialised care, clinical commissioners and patient groups to help drive further improvements in specialised commissioning efficiency over the coming year.

Simon Stevens, chief executive of NHS England, added: “These changes represent important steps towards the Five Year Forward View. We’re rebalancing the payment system to help support smaller and middle sized hospitals – where the funding pressures are greater, partly because they have a higher share of patients funded from the tariff and as emergencies.

“So while next year is going to be tough financially, these changes move us in the right direction.”

Another key change will be an attempt to promote best practice models of care, with the introduction of a new “best practice tariff” to drive better care for patients admitted in an emergency with heart failure.

Commenting on the changes, Rob Webster, chief executive of the NHS Confederation, said: “Monitor and NHS England acknowledge that this tariff sets a difficult challenge for the NHS next year, especially considering it will cut prices for the fifth year running.

“We cannot ignore the fact that even if the challenging savings demanded by the 2015/16 National Tariff Payment System are realised, almost half of providers will likely be in deficit. If we fall short, more than three-quarters could be in the red. This funding gap must now be addressed and the government needs to use the Autumn Statement to set a more sustainable funding envelope for next year.”

Dr Steve Kell, co-chair of NHS Clinical Commissioners, added that a reform of the payment system needs to empower the whole system, locally and nationally, and to bring commissioners and providers together around the needs of the local populations, and the tariff needs to reflect the ambitions of the Five Year Forward View to enable new and better ways of working. 

“We would have liked to have seen that level of ambition reflected in this document so we see a whole scale approach to the payment system that looks at outcomes rather than activity,” he noted.

FTN’s Hopson stated that he fears an NHS cash crisis feels “inevitable” next year as the new tariff proposed by Monitor and NHS England takes over £1.2bn (3.8%) out of budgets from frontline NHS services in 2015-16.

He argues, as does the King’s Fund, that the only way this can now be averted is by providing extra funding in the Autumn Statement next week. “Any extra funding for the NHS will be welcome but there is a £2bn gap to fill,” he said.

The consultation documents, and details on how to provide feedback, can be found on the Monitor website. The deadline for responses is 12.00am on 25 December 2014.

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