Time to make the NHS tariff fit for purpose

4 May 16

Faith in the national NHS tariff is waning rapidly. It’s ripe for reform and a reappraisal of what it is trying to achieve

Unlike last year, a national NHS tariff for 2016-17 has been agreed and will govern how NHS services are paid for. The tariff is explained across more than 20 different documents, covering around 2,000 national prices and is the product of at least a year’s worth of engagement with NHS professionals.

So if the tariff seems complicated, it’s because it is and it generally needs to be in order to effectively spend billions of pounds worth of NHS funding.

Many NHS leaders, though, view the tariff as unnecessarily complex. A web of rules that each year becomes further detached from how care needs to be delivered locally. This is a perception borne out in a recent survey of NHS Confederation members. When asked what should happen with the national tariff over the next five years, 65% of leaders called for the NHS to move away from it completely.

Of course, much of the animosity towards the tariff reflects its recent role in driving year-on-year savings. For the last five years, an efficiency factor of around 4% has pushed down the prices paid to providers, which has led to financial instability across the sector. This factor has now been reduced, at least for this year, and net prices will begin to increase once again.

There is also a belief that too much focus is unhelpfully put on activity-based objectives in this flow of finances, despite the intention that services will increasingly emphasise a continuum of care rather than specific episodes. If prices are set for acute services, and it is certainly the case that national prices impact hospitals in particular, then incentives are considered to be pulling patients into hospitals despite the vision of a greater community-based care model.

In truth, squeezing providers and encouraging activities are neither inherent nor primary features of the tariff, so reform is certainly possible to help rebuild faith in its ability to distribute resources. Changes to the tariff have been on the cards for some time and discussions on long-term reform have looked at how the payment system might do more for patients, however short-term challenges have inhibited the national bodies in realising this ambition.

When Payment by Results was first introduced in 2003 it was built on the premise of maximising the benefits from a substantial growth in NHS funding. Clearly, this is not the situation we face today. Nonetheless, the building blocks on which the tariff was created remain important for the current system and include paying providers fairly, setting prices transparently, supporting patient choice and refocusing discussions from disputes over prices to the volume and mix of services to meet population need.

These were all reasons we moved to the tariff in the first place and most are still relevant to what we are trying to achieve today. There is little evidence to suggest a complete shift to global budgeting, away from national currencies, would put us in a better place to achieve these objectives. Certainly, it’s unlikely there is appetite across the whole system to move back to retrospective reimbursement, which has long since been abandoned by most Western health care systems due to a tendency to inflate costs.

Nonetheless, it’s strongly agreed that prices in the NHS need to better reflect costs and the right incentives must be established to encourage innovation and transformation. This should not mean having to scrap the tariff altogether, but instead finding a way to make it fit for this purpose.

It was once said that a strong spirit transcends rules. The NHS needs to rediscover the spirit behind the national tariff, so it can rise above the rules that govern it. This means that, while we might not always understand and like how the tariff works, we will at least understand the point of it and what it is helping us to achieve.

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