06 February 2009
By Tash Shifrin
The Department of Health has again delayed publication of the new NHS treatments tariff after health bodies raised concerns about its operation during testing.
NHS leaders and finance chiefs warned that lack of transparency in the proposed new tariff – which underpins the 'payment by results' hospital funding system – made it hard to calculate how income levels would change from one year to the next, or to trace the outcomes of spending within hospital trusts.
Hospitals and primary care trusts face a February 27 deadline for signing activity contracts for 2009/10, despite the delay to the tariff, which sets the cost for hundreds of treatments.
The tariff was originally due to be published alongside details of PCT funding allocations and the new NHS operating framework in autumn last year, but was delayed after earlier tests revealed problems.
The allocations and framework were eventually published in December, but NHS organisations struggled to assess the impact of the new financial regime without details of the tariff, which is based on a new, much more wide-ranging, costing system, dubbed HRG4.
A draft version of the new tariff was released to NHS organisations for a 'road-testing' period, which ended on January 12. The DoH had pledged to release the final version by the end of January.
But a DoH spokeswoman confirmed that the tariff will be further delayed, putting this down to the need to take account of feedback from the road-tests. 'We are very pleased with the level of engagement by the NHS in the road-testing of the national payment by results tariff,' she said.
'We received a substantial amount of feedback from the service and are taking the necessary time to ensure we consider all the comments. We are working hard to ensure that a final version which meets the needs of the local NHS is available shortly.' The tariff is now expected in the next couple of weeks.
Speaking when the tariff was still expected by the January deadline, Healthcare Financial Management Association communications officer Chris Calkin, who is finance director at University Hospital of North Staffordshire NHS Trust, said: 'Keeping to this timetable will be important if commissioners and providers are to meet the contract signing deadline of February 27.' But he added that the complexity and 'increased granularity' of the new system meant 'rigorous road-testing is absolutely vital'.
HRG4 was 'a step forward', offering a more sophisticated costing system, Calkin said. But he told Public Finance that the road-test version of the tariff had 'lots of little changes and the combined impact is difficult to ascertain with absolute confidence'.
He added: 'I think there will be a few outliers who will be either advantaged or disadvantaged.' This would leave the losers struggling to cope within the year, while some trusts could make 'huge gains that they can't invest sensibly within 12 months'.
Sue Slipman, director of the NHS Confederation's Foundation Trust Network, said the combination of changes in HRG4 and the 'market forces factor' used to compensate trust for local variations in costs created 'a lot of volatility' in trust income levels.
Finance chiefs were finding planning 'extremely hard', she said. 'There's probably a lot of risk in the system.' She urged 'sensible mitigation' by strategic health authorities to help trusts affected by sharp changes.
Slipman added: 'Because of the complexity, there's a real issue with the transparency of the tariff. People are not able to track the previous [financial] position with the new position.' It was also hard to make the HRG4 system – which crosses over clinical specialties – work with service-line reporting, which is being introduced to track the impact of spending within specialties, she said. This made it 'hard to find the outcome' of spending decisions within trusts.
Slipman added that because of the 'paucity' of the reference cost data used to underpin the system, some treatment areas in the tariff had remained 'non-mandatory'.
This would encourage price competition, with cash-strapped PCTs trying to hammer out cheap deals where the tariff was not mandatory, she warned. 'It's likely to lead to a whole load of local agreements – which goes against the rules-based approach.'
Calkin agreed that this 'creates an environment where cherry-picking by price is possible'.
He added that the tariff had been changed to take account of adjustments to the market forces factor and also to take in a huge hike in the cost of the clinical negligence scheme for trusts – a 70% rise at his own trust. But there was 'no reconciliation, no working paper' from the DoH to show how this had been done.
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