Most providers opt for ‘temporary solution’ tariff option

Approximately 88% of all NHS providers will move to the new voluntary tariff option for 2015-16, but this has been labelled a temporary solution to a difficult problem that is “threatening the structural integrity” of the health service. 

Chris Hopson, chief executive officer at NHS Providers, stated that while trusts welcome the extra £500m investment in the provider sector created by Monitor and NHS England’s enhanced tariff option (ETO), it will not cover the costs of patient care NHS foundation trusts and trusts are expected to provide in 2015-16. 

Monitor and NHS England reported that 211 out of 241 NHS trusts and foundation trusts (88% of all NHS providers) will move to the ETO. 

However, the minority of providers who have not affirmatively opted in to the ETO will continue on current prices (the 2014-15 Default Tariff Rollover, or DTR) “until such time as a new tariff is established”. But it was noted that this will not be until later in 2015, possibly following a referral by Monitor to the Competition and Markets Authority. 

It is claimed that choosing the ETO will help reduce the funding pressures on acute hospitals, without raiding necessary investments in mental health, primary care and other services. 

Also the marginal rate providers are paid for extra emergency admissions will increase from 30% now to 70%; the marginal rate for extra specialised services will also increase from the originally proposed 50% to 70%; and the headline efficiency requirement will be 0.3% lower than originally proposed. 

But Hopson said: “The introduction of a marginal rate for specialised commissioning – with providers only being paid 50% or 70% of the care they give and the cost of drugs and devices their patients use – is still strongly opposed by all providers of this type of care. 

“We recognise the need to control the pressures on NHS England’s specialised commissioning budget but believe the best way to achieve this is through extended collaborative consideration of the options available rather than a late arbitrary imposition of a new marginal rate.” 

He added that under the current arrangement, and even for those opting for ETO, providers can no longer guarantee the right quality of patient care, meet NHS constitutional performance targets and deliver financial balance on what they are currently paid. 

“Provider deficits will therefore rise, targets will be missed and there will be growing risks to the quality of patient care,” said Hopson. “NHS Providers is particularly concerned that our mental health members tell us that many CCGs appear unwilling to meet their proscribed commitment to increased funding for mental health. They also tell us it’s not clear whether and how the funding to meet the new mental health access standards and targets will reach the providers who are required to deliver these new commitments.” 

The issue of mental health funding was covered recently in an NHE blog by Saffron Cordery, director of policy and strategy at NHS Providers. 

A revised timetable for planning, contracting and dispute resolution in 2015-16 has already been agreed between Monitor, the NHS Trust Development Authority and NHS England. 

The final NHS Standard Contract will be issued next week, together with an updated version of the ‘Dispute Resolution Process for 2015-16’, and more detail on administering the ETO and DTR. 

Providers opting for the DTR track will “for the time being” continue to be paid a 30% marginal rate for emergency hospital admissions, versus the 70% rate on offer through the ETO option; will not benefit from prices that incorporate additional funding for CNST premium increases; and will not benefit from the proposed “service uplift” for mental health. 

In a letter to providers and CCG leaders, Monitor added: “Providers opting for the DTR will not be eligible for CQUIN for the entirety of 2015-16 in recognition of the lower efficiency implied in the DTR and the statutory need for commissioners to live within the funding Parliament has allocated.” 

Hopson added that the national payment system is ultimately about realistic funding for NHS providers so they can deliver safe and high quality patient care, distributed equitably across the entire sector. “Until this happens, we will continue to get what we pay for,” he said. 


Rob Webster, chief executive of the NHS Confederation, said that as not everyone has agreed to the ETO, “urgent work is needed to resolve the delay in agreeing prices for 2015-16 with those providers on the DTR”. 

“It is too simplistic to paint the last few months as a battle between commissioners and providers, and the suggestion of winners and losers is nonsense,” he said. “The financial challenge for the NHS means this year’s tariff was always going to be difficult. There is simply not enough money in the system to comfortably balance provider budgets with the ability of CCGs to manage their local health economy effectively. 

“The most important message now is that providers and commissioners need to work together, based on a shared purpose, to ensure sustainability and invest in new models of care needed in the future.”

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