News / News analysis: Differential equation

The national tariff for 2014/15 – the first overseen by Monitor and NHS England – looked to be fairly uncontroversial towards the end of last year. An early insight into broad intentions was first given before the summer and then formal consultation got under way. With well trailed plans for a year of stability , the early engagement seemed to have removed the potential for surprises. But the final tariff document – published towards the end of December – managed to catch people unawares.

The consultation document had shared cost uplift and efficiency assumptions. However, the one area it left blank related to the additional costs that providers might incur as a result of NHS England’s as-then unpublished mandate. In fact, an additional £196m of costs were added to cover the expansion of the friends and family test (£46m) and to meet requirements tied to the Francis and Keogh reports to deliver safer, higher quality care.

No arguments at this point from providers accustomed to being told that they would have to meet cost pressures by increasing their efficiency further. But the subsequent detail is what caused the trouble. The Keogh and Francis-related initiatives were ‘specific to acute services’, the tariff document said, and so the relevant £150m cost allowance would also be targeted at the acute sector. What this means is that acute providers face a nominal price adjustment of -1.5%, while non-acute services face a a cut of a further 0.3% or an adjustment of -1.8%.

It didn’t take long for the non-acute sector to work up a head of steam on this issue. One mental health foundation trust finance director said there was ‘no evidence base’ for the differential approach and that mental health organisations, through Care Quality Commission inspections, were also having to demonstrate appropriate staffing levels. ‘Mental health trusts are facing exactly the same pressures emerging from the safety and quality reviews,’ he said. ‘The parity of esteem pledge gets made, but the reality in pounds and pence is that acute is made a special case.’

Chris Hopson, chief executive of the Foundation Trust Network, is leading the calls for a rethink. ‘The differential tariff discriminates against community and mental health providers,’ he told Healthcare Finance. ‘The assumption is [the difference] is to cover the increase in staff numbers and ratios coming out of Francis and CQC reviews.

‘If you delve into the detail of all that work, it says there is a piece of work being done by NICE that will be coming out and will go for acute first and then community and mental health. But in the meantime, you have to follow the staffing guidance issued by the NHS England nursing director and that applies equally across all healthcare settings.’

He continued: ‘So the reality is that there is a requirement for all organisations to address this – and do so quickly. We don’t understand why this has only been applied to acutes.’

There appears to be support for this view in high places. In a statement issued by the Department of Health, care and support minister Norman Lamb said: ‘I believe the decision to cut the tariff for mental health and community providers more than for acute providers was flawed.’

However, with NHS England’s independence in the new structure, what direct action the minister can take is less clear.

He said that the differential tariff did not reflect the whole picture with regards to mental health funding. ‘We will be carefully scrutinising local funding plans to ensure equal treatment between mental and physical health this year,’ the statement said. ‘I am determined to hold the system to account for delivering real progress on parity of esteem in the NHS. This will be through the mandate, which is crystal clear on this point. I want to build a fairer society, and that means providing better care for people with mental health problems.’

Serious concerns

Welcoming the minister’s stance, Stephen Dalton, chief executive of the NHS Confederation’s Health Network, said there had been a reduction of 2.36% in real terms in mental health trusts’ budgets between 2011/12 and 2013/14.

‘Coupled with Monitor’s announcement to cut the tariff price for mental health and community trusts’ services by a fifth more than the reduction proposed for acute providers, we have serious concerns about the system's institutional bias and lack of true commitment to parity,’ he said.

But at the end of January, it looked as though these concerns had fallen on deaf ears, despite the FT Network, NHS Confederation and Mental Health Network meeting with senior representatives of NHS England and Monitor to press the case.

In more general terms, Monitor’s and NHS England’s first national tariff signals no significant change in direction for mental health payment. The 21 clusters (one unused) remain the required currency for working age adult services with prices to be set locally. However, there remains a major get-out, with this mandatory requirement overruled if ‘an alternative payment approach has been agreed’.

In effect, this means that block contracts can – and probably will – be used to govern payment by clinical commissioning groups for mental health services.

The tariff document explains that the aim of the gradual approach is to ‘provide an opportunity for providers and commissioners to make progress on quality reporting and developing local cluster prices’.

The specifics of this progress are covered by rule 9 in the tariff document, requiring health economies to agree, then monitor, quality indicators for each cluster and to ensure that the mental health minimum data set is always completed.

Paul Stefanoski, chairman of the HFMA’s Mental Health Finance faculty and deputy chief executive at Black Country Partnership NHS Foundation Trust, said it was vital that mental health providers take this call for progress seriously.

‘We’ve highlighted before the importance of improving data quality and of ensuring we have an outcomes focus, but we really need to deliver improvement in this area this year,’ he said.

Mr Stefanoski also highlighted some key challenges for providers – especially managing the expectations of commissioners seeing national indicative costs as a potential opportunity to negotiate lower local prices.

‘The national approach gives us a chance to get into some decent conversations locally and we mustn’t jeopardise this by destabilising services while we are all gaining a better understanding of the services needed and currently provided,’ he said.

He added that using block contracts to risk share might cause problems for some providers in areas where there are rising levels of activity. Rising levels of activity are also causing more widespread concern – with the issue featuring prominently in early contributions to a ‘crowdsourcing’ initiative being undertaken by Monitor.

The regulator is using the online brainstorming technique to examine how the payment system could develop beyond 2014/15. It is structuring the debate in three main sections: guidance and rules; access to intelligence; and spreading risk.

A number of contributions have identified a need to incentivise demand management and ensure mental health and community providers are fairly paid for increased activity.

Monitor says the exercise will inform its thinking as it develops the payment system. But for the moment, the focus in local health economies is firmly on contracts for 2014/15 and making progress with the payment system as it stands.