News / News analysis: Getting critical

NHS providers want a national tariff for critical care. That’s the clear message from an HFMA survey of critical care providers undertaken recently, in which nearly 90% backed a move to national prices. They claim there are increasing difficulties in setting and agreeing appropriate local prices that cover rising costs.

According to the Department of Health’s reference costs, critical care – across adult, neonatal and paediatric services – accounts for about £2.6bn of the total £55bn covered by the collection. But it remains an important part of providers’ non-tariff income and this is particularly true for specialist providers.

So it is understandable that providers want to ensure payment covers costs. Slightly different arrangements apply across the three areas of critical care. For adult and neonatal critical care, there are nationally mandated currencies based on healthcare resource groups, with prices expected to be set locally. There is no mandatory currency or tariff for paediatric units, but there are HRGs, introduced as part of HRG4 (first used for reference costs in 2006/07 – see box).

So for all types of critical care, prices are set locally and it is the way these prices are set that concerns providers. Across all three areas, ‘historic prices’ was the most common basis for price-setting in the 25 providers in the survey. 

Some organisations rebase their prices each year to reflect most recent reference costs, but many use older base costs. This means there is only a rough connection between current costs and prices in some organisations. There is also alarm at the efficiency expectations of commissioners.

University Hospital Southampton Hospital NHS Foundation Trust receives about £55m for critical care services (£35m in adult services, the balance spread across neonatal and paediatric).

Rising costs

‘The costs in critical care basically don’t go down,’ says Kevin Ross, trust director of contracting. ‘There are some volume efficiencies and non-staff-related savings, but you can’t put staff efficiency into a unit that requires such a prescribed high level of staffing, sometimes one-to-one staffing. Yet there is an expectation that we will apply the general efficiency requirement to critical care along with other areas.’

A finance manager in another trust with more than £50m of critical care income agrees. ‘There is the expectation from commissioners that local prices will reduce by tariff deflation,’ she says. ‘Critical care is a prime example of where this may not be possible due to staffing resource requirements.’

For 2013/14 prices, a 1.5% reduction was the national starting point for local non-tariff discussions in general, based on a 2.5% cost uplift and a 4% efficiency requirement.

In Southampton, Mr Ross says the use of the most local reference costs as a basis for
price-setting at least aligns the local price to the actual cost of delivery at a relatively recent point in time. Of course, future efficiency expectations are then applied to this base cost  in line with guidance.

‘Rebasing means the actual efficiency achieved is passed through into the price, rather than a generic rate calculation which may or may not  be possible in a critical care service,’ he says.

But other organisations that do not rebase their local prices each year do not enjoy even this small ‘protection’. There have been some benchmark or indicative prices published as part of payment by results guidance since 2009/10 (originally based on 2006/07 reference costs). Some organisations have used these as a starting point. For others, ‘historic’ prices means a base price that goes much further back.

The Royal Brompton and Harefield NHS Foundation Trust, a specialist heart and lung service provider, is increasingly concerned about the historic price basis for its critical care activity. It currently receives £48m for critical care services, split between its adult (£34m) and paediatric (£14m) units, and estimates this is about £7m short of what the services cost to run using the trust’s 2013/14 reference costs. Local prices were originally based on the indicative tariffs in the 2011/12 payment by results guidance, with a 2.5% reduction applied.

 Helen Maguire, the trust’s head of commercial commissioning, explains that this marked a modest improvement compared with previous prices, but was seen as a transitional step towards the introduction of a national tariff. However, subsequent years have seen further efficiency requirements imposed (although there has been additional support from NHS England).

Commissioners are also facing financial pressures and many are worried that a change in price-setting process would mean an overall increase in spending on critical care. Providers think a national tariff may be the best way to force proper engagement on the subject and avoid time-consuming and difficult negotiations.

However, providers recognise that introducing a tariff is not straightforward. As one finance manager points out, not all hospitals operate at the same levels of acuity. A patient kept on a ward in one hospital would be in an intensive care bed in another. Any tariff might need to
find a way of adjusting for this.

There are also issues with the currency. According to one senior finance manager at another trust with a shortfall on critical care income, using organ count as the basis for the adult critical care tariff, assumes each organ is the same in cost terms. 

‘Renal patients, for example, are expensive because you are often dialysing as well – that could cost £800 a day per patient on top of the other costs,’ he says. He adds that specialist critical care units – such as cardiac and burns units – will often have completely different cost structures to general units.

There has been recognition of this in reference costs in recent years.  As part of the 2012/13 reference costs, providers were asked to report separately for burns and spinal critical care units and for 2013/14 this expanded to 13 categories (including surgical, medical, neurosciences, cardiac and renal). So there is a potential mechanism for requiring local health economies to differentiate prices based on type of critical care unit. However, the 2015/16 tariff will be based on the 2011/12 reference costs (as 2012/13 reference costs would mean a wholesale shift to the new HRG4+ currency), so changes would appear unlikely in the short term.

Many providers believe a more fundamental shift is needed, with some critical care payment linked to required capacity and not just activity. Although this is allowed for in tariff guidance – suggested to be of particular interest to commissioners of smaller critical care units – some providers believe a more definite steer from the centre would be useful.

For paediatric critical care, providers believe a simpler first step is needed – the adoption of a mandatory currency. Many areas simply do not use the HRGs in the HRG4 currency because of concerns about price volatility.

‘Our currency is midnight length of stay with just two prices – one for the intensive treatment unit and one for the high dependency unit,’ says Ms Maguire at the Royal Brompton and Harefield. ‘But this means we lose out on a number of bed days a year.’

Currency flaw

For example, children with an atrial septal defect (hole in the heart) are fast-tracked through the system. They come in for the repair in the morning and are then moved to intensive care before being taken back to a lower intensity bed in the evening.

‘We don’t get anything for that because the patient wasn’t in the bed at midnight,’ she says. ‘The reality is that any patient can change clinical status within a 24-hour period. For example, they may have required intensive care nursing for a 12-hour daytime shift, but then step down to the high-dependency unit during the evening shift, or vice versa.

‘So the midnight status does not truly reflect the previous 24-hour period, in particular the staffing ratio that was decided based on the earlier intensive care unit status.’

While providers accept that the tariff and broader payment system is not intended to provide an exact match between costs and services for all activities, many believe the gap between costs and prices for critical care is getting too wide. National prices are seen as a good way of addressing these concerns.