News / Broad welcome for tariff proposals – but directors highlight efficiency concerns

01 February 2016 Seamus Ward

The planning guidance proposed a net 1.1% uplift in prices, made up of a 3.1% cost inflation uplift and an efficiency factor of 2%. Adjustments to specific prices would reflect an anticipated 17% increase in clinical negligence scheme contributions.

Monitor confirmed that 2.2 percentage points of the 3.1% overall cost uplift relates to pay – representing a 3.3% increase in pay and pension costs. The marginal rate for emergency admissions will be 70%, mirroring the enhanced tariff option (ETO) taken by 80% of providers in the current year.

According to Monitor, the current approach to the market forces factor will continue. The formal inclusion of a marginal rate (or risk share) for specialised services has been delayed. Formal consultation on the tariff proposals is expected to open this month.

NHS Providers chief executive Chris Hopson welcomed the tariff announcement, which follows a net reduction of 1.9% in 2015/16. The tariff, together with the £1.8bn sustainability and transformation fund and a move to three-year planning, represented a positive step.

‘This turns a previously impossible looking 2016/17 task into one that looks just about deliverable, albeit extremely challenging. But this extra early investment is only temporary and comes with conditions attached,’ he said.

‘Trusts and foundation trusts will have a year to turn around their finances, develop long-term efficiency savings plans and identify the long-term changes their local health and

care system need. All this must be delivered while continuing to deliver outstanding care to a million patients every 36 hours. Restoring short-term stability must lead to long-term sustainability.’

Provider finance directors welcomed the move, but questioned whether the ‘real world’ efficiency factor would be higher than 2% for some. If a trust did not meet its control total for 2015/16, its 2016/17 plans must address this with higher efficiency levels to ensure it achieves its control total. ‘Very few organisations will get away with just doing 2%,’ one director said.

HRG4+ delay confirmed

The planning guidance confirmed that the introduction of the more granular HRG4+ currency has been postponed until 2017/18. This means that other changes will also be delayed by a year, including the move to new top-ups for specialised services. Monitor and NHS England said they would continue to analyse the changes in the run-up to using the new currency and ‘if necessary mitigate the effects’.

HRG4+ makes three big changes, introducing greater granularity to better reflect complexity; more age splits; and grouping patients according to better clinical logic. The move to HRG4+ was proposed by Monitor and NHS England last summer and was supported by 80% of respondents, including 70% of providers. Subsequently, however, the service raised concerns that the impact of the redesigned currency was not known. Monitor and NHS England decided to postpone the implementation.

At the Commons Public Accounts Committee hearing in January, NHS Improvement chief executive Jim Mackey said: ‘It presented a risk that there might be financial instability as a result.’ He added that the two bodies were contemplating creating a formal shared team or shared resource to work together on pricing, particularly incentivising out-of-hospital care.

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