NHS financial planning ‘in disarray’ after tariff veto

29 Jan 15
Proposed changes to the NHS national tariff system have been vetoed by hospitals and other providers and will now be delayed, health service regulator Monitor has announced.

By Richard Johnstone | 29 January 2015

Proposed changes to the NHS national tariff system have been vetoed by hospitals and other providers and will now be delayed, health service regulator Monitor has announced.

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Commentators said the ‘unprecedented’ decision put financial planning in the NHS into disarray and cast doubt on efficiency savings.

Providers accounting for a majority of NHS services objected to changes planned for 2015/16, which means the tariff cannot be implemented.

Just over a third (37%) of providers objected, but together they supply three quarters of NHS services. By contrast, only 13% of clinical commissioning groups opposed the plans.

Monitor had planned to reduce the payments NHS commissioners pay to providers by 3.8%. This standard ‘efficiency factor’ is intended to ensure that providers make the savings.

In a statement, the watchdog said it would now consider whether to consult on revised proposals, or to refer the payment arrangements to the Competition and Markets Authority.

‘Monitor and NHS England are now considering the feedback received from the consultation and possible next steps, in the context of what the legislation permits in the event that an objection threshold is breached. Amongst the options available are engaging with the sector then re-consulting on revised proposals or referring the method to the Competition and Markets Authority,’ it said.

‘Meanwhile, commissioners and providers will be expected to continue planning for 2015/16 on the basis of the timetable and guidance that has already been issued.’

NHS England’s chief financial officer Paul Baumann said that, since the overall NHS funding totals for 2015/16 are now agreed, any changes to the tariff would ‘be robbing Peter to pay Paul’. This could include less investment in other hospitals, mental health or GP and community services.

‘The alternative is that the Health and Social Care Act says that in these circumstances the Competition and Markets Authority now considers the issue,’ he added.

‘While that happens, the current tariff rolls forward. To ensure NHS finances balance during this interim period before a new tariff takes effect, there may need to be equivalent reductions to CQUIN [Commissioning for Quality and Innovation] and other supplementary payments. It would mean that, in the meantime, the proposed increases to the emergency marginal rate from 30% to 50% would not take effect.’

Richard Murray, director of policy at the King’s Fund, said the rejection of the tariff was an unprecedented development.

‘It signals that the policy of implementing year-on-year reductions in the prices paid to hospitals for their services has reached the end of the line,’ he added.

‘It is not clear what the outcome will be but, with just three months to go before the start of the financial year, it will throw financial planning in the NHS into disarray.’

NHS Confederation chief executive Rob Webster said the delay suited no one.

However, he said there were concerns about some proposed elements of the tariff, in particular the introduction of the marginal rate for some specialist services.

‘Without the evidence to the contrary, our members can only infer that this seems a risk transfer from NHS England’s budget to local systems,’ Webster said.

‘It will have a big impact on a number of health systems and the extent of concern raised over the last few months demonstrates this.’

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