National prices return for elective activity

The consultation on the 2023/25 NHS payment scheme proposes to continue with the aligned payment and incentive approach to paying providers for most secondary care, removing the £30m threshold below which API does not currently apply. The API system involves a fixed payment for a level of activity that is ‘stretching but achievable’. This would cover non-elective care, maternity, mental health, community and ambulance services, as well as expected best practice and CQUIN payments and some activity that supports elective recovery, such as outpatient follow-ups. But from next year it would not include elective activity, which will be paid for at 100% of national unit prices for the activity delivered.

In the current year, agreed levels of elective activity were included in the fixed payment, with a variable payment at 75% of unit prices for activity above this level. A proposed clawback for under-performance was not implemented due to extreme pressure on services from higher than expected number of Covid-19 patients and emergency demand.

The partial return to a payment by results-style approach has been criticised by some commentators. The old activity-based payment system was seen as being at odds with system working and a more collaborative approach to the delivery of services.

‘The planning guidance is right to set out the ambition to go further and faster in reducing [NHS] backlogs,’ said Matthew Taylor (pictured), chief executive of the NHS Confederation. ‘We are however concerned that returning to paying full unit prices reintroduces an element of payment by results. This is a retrograde step that risks undermining innovation, system working and value for money.’

The payment proposals cover two years, with a formula used to update the cost uplift and efficiency factor in the second year. Prices will continue to be based on pre-pandemic costs from 2018/19, uplifted for cost and efficiency. Moving from a single-year tariff and payment system is hoped to support local planning and reduce the administrative burden.

Elective activity includes elective ordinary and day case activity, outpatient procedures and first attendances, diagnostic imaging and nuclear medicine, and chemotherapy delivery. Elective recovery fund funding will also be used for outpatient follow-ups, radiotherapy, critical care related to elective procedures, and pathology. But the elective variable element will not apply to these services.

Three other payment mechanisms will also be used. Block payment arrangements will cover arrangements with an annual value of less than £0.5m, reducing the number of low value transactions and bureaucracy. Activity-based payment will be used for non-NHS providers. And local payment arrangements will be used for any activity not covered by other payment approaches.