News / News analysis: Looking for clues

Monitor has acknowledged it is considering the potential to set future tariff prices for more than a single year, although this would not necessarily mean cost data would move away from annual collection.

Working closely with the NHS Commissioning Board, Monitor will assume responsibility for setting the payment by results tariff, setting its first tariff for 2014/15. It is already reasonably advanced in thinking through the broad issues relating to this responsibility. It commissioned and published an evaluation of current reimbursement mechanisms (see ‘Price flaws’, Healthcare Finance March 2012, page 8). That report identified the need for ‘significant improvement’ in the information underpinning reimbursement. A further commissioned report looking at the specific options for improving costing is expected to be published this month.

But the soon-to-be sector regulator has given a high-level glimpse of some of the issues it is debating in its response to its consultation over licence conditions – in particular those relating to pricing.

Alongside Monitor’s role in setting prices, the regulator will licence providers of NHS services. At the end of last year it began consultation on proposed licence conditions covering seven licence chapters.

Its consultation on pricing conditions provoked different views from providers, according to a summary of the feedback to the consultation documents. ‘Some suggested that submissions should be made monthly, while others suggested every three years to coincide with a longer tariff period,’ the document said.

Respondents also flagged up the current time delay between collection of data and the publication of tariff. And several called for clear guidance and time for providers and commissioners to prepare systems and train staff before introducing any new approach.

Monitor said it would ‘consider how we can make sure prices are based on information that is as current as possible, including ways of reducing the time lag between collecting data and publishing the tariff’.

Raw costing data is not submitted to the Department of Health until July and once this has been turned into draft tariff prices there are onerous sense check processes to undergo. In total this has led to a three-year lag –  so the 2011/12 reference costs data would form the basis of the 2014/15 tariff.

In response to publication frequency, Monitor said it would consider the potential of tariffs that lasted more than a year. ‘This could give providers and commissioners a greater degree of certainty and reduce the potential for disruptive price fluctuations each year,’ it said.

The evaluation of reimbursement, by PricewaterhouseCoopers, found that more than 40% of individual tariff prices fluctuated by more than 10% over years where analysis was possible. These fluctuations are seen as blunting intended pricing incentives and can affect service line performance, potentially damaging clinical engagement.

But the regulator added that it would need to consider how to take unforeseen cost changes into account – for example, change brought about by new ways of delivering services or new health technologies. And it underlined that even if prices were set for a period of more than a year, it might still need to collect data annually –  or more often – to make sure its cost assumptions remained valid.

Monitor had also floated the idea of requiring licensees to give it an independent assurance report on submitted information. Echoing the HFMA consultation submission (see www.hfma.org.uk and follow links for publications and consultation responses), respondents raised concerns about the potential costs and administrative burden this could impose.

While there was agreement that stronger assurance procedures might result in better quality data, most respondents favoured self-certification or an internal solution – particularly for smaller providers. Some suggested that external reports should only be required where there were known or suspected issues.

The HFMA has highlighted one possible approach to self-assessment of patient level costing data using a materiality and quality score (MAQS), as set out in its Clinical costing standards. It believes this, or something similar, could have a role in assurance.

Monitor underlined the perceived value in external assurance –  ensuring prices were on a firmer footing and potentially encouraging greater confidence in prices. But it also raised the possibility of using some form of peer review.

‘We intend to consider a range of different assurance options and the costs and benefits of each option,’ it said. ‘If we decide external reports are necessary, we will consider whether they will be a requirement for all providers or for a sample of providers, in which case we will consider how the sample should be constructed.’

There were general concerns about the additional burden on providers in submitting data and pleas to make best use of existing data collections. Monitor also said it was ‘thinking about whether it is desirable or feasible to collect data on quality or outcomes for the purposes of setting and monitoring the impact of prices’. It stressed that promoting service provision in which quality was maintained or improved was part of its remit. However it acknowledged that quality information was already collected, in particular by the Care Quality Commission, and it would look at the potential to use these existing sources.

All eyes will now turn to the expected June report, again authored by PricewaterhouseCoopers, on options to improve costing. Monitor’s response will have a big impact on NHS finance departments. Its decisions will dictate the  focus and approach for costing activities in the short and long term. But it is also likely to have a significant impact on the way tariffs are calculated and how closely they cover provider costs and incentivise improvement.