News / News analysis: A sense of purpose

The Department of Health will make a move away from today’s approach to payment by results in 2011/12 by expanding the number of best practice tariffs and setting prices for several high-volume procedures at below national average costs. However, no plans have been announced about a more general move towards using the tariff as a maximum price.

The plans for 2011/12 were published in a letter from NHS deputy chief executive David Flory alongside the timetable for the sense check that will see draft prices shared with a small number of NHS bodies. The changes represent an attempt to put into action the proposals set out in June’s revised operating framework and the Liberating the NHS white paper.

In particular the changes to tariff look to deliver three priorities: incentivise quality and better outcomes; embed efficiency within the tariff; and expand the scope of tariff.

It is perhaps the ‘embedding efficiency’ proposals that will catch finance directors’ eyes initially, with some healthcare resource group prices set below national average costs. Feedback from the sense-check sites (19 providers and 14 primary care trusts) is likely to be crucial in determining the financial impact of taking this policy forward.

However, Mr Flory reassured finance directors that the Department was aware of the financial squeeze that was being built into individual tariffs. ‘I recognise that some of these changes represent an in-built efficiency requirement,’ he said. ‘While I cannot at this stage confirm what the national efficiency requirement for 2011/12 will be, I can confirm my intention to take account of these in-built efficiencies when setting the national requirement.’

Next year there will also be an acceleration in the use of best practice tariffs, as trailed in the coalition government’s white paper. Best practice tariffs can be higher than national average costs, providing a financial reward for adopting best practice – or lower than average costs – which means the failure to adopt best practice will create a financial pressure.

The four areas covered by best practice tariffs in 2010/11(cataracts, gall bladder removal, fragility hip fracture and stroke care) will be joined by five more service areas including adult renal analysis (non-mandatory prices were published in 2010/11 as an initial step) and hip and knee replacements.

Building on this year’s experience, revisions are also being made to the existing tariffs for hip fracture and stroke.

The letter from Mr Flory makes no mention of moving towards tariffs as maximum prices – first trailed in last year’s PBR guidance and picked up in the new government’s white paper. However, it does confirm that from April 2011, hospitals will not receive further payment for patients readmitted within 30 days of discharge – although a number of as-yet-unspecified services will be excluded from this.

There is understood to have been confusion over whether the revised operating framework had implied that this 30-day rule would be introduced from December this year. However, the December deadline was to ‘apply the provisions of the [2010/11] guidance if they were not already doing so’. The 2010/11 guidance had only called for local arrangements to be agreed, focused around readmissions within 14 days.

The operating framework proposal had caused some concerns about disagreements over responsibility for readmission. These concerns may be addressed in part by not applying the rule to all services. Some in finance believe it may lead to commissioners paying for pathways, with hospitals subcontracting for post-discharge support.

The Department also said it would increase some tariffs for emergency admissions to reflect the fact that readmissions in some services may be appropriate. PCTs have been told to use savings created by not paying for readmissions to support services such as re-ablement.

Long-stay payments are also subject to change. Day cases will no longer feed into the trim point calculation, which will lead to longer lengths of stay before per day payments are triggered. A minimum five-day trim point will also be introduced and payments will be standardised at the HRG chapter level. Some HRGs will also have the same tariff set across all settings. This will seek to incentivise movement of some procedures from elective settings to day case and outpatients but in a more targeted way than the planned same-day tariff used in 2009/10.

The Department has also signalled its intention to try again in moving accident and emergency services onto HRG4, moving it off version 3.2 and in line with other services. It had planned to do so this year but as a result of last year’s sense check decided against it on the basis that it would ‘introduce an unacceptably high level of volatility’. Revised specialised services top-ups are also being tested (see box).

More changes are clearly planned downstream and some early signals are given. For instance, the use of currencies for adult and neonatal critical care is being mandated in 2011/12 as a forerunner to a future national tariff. Ambulance services are also back in the PBR frame with reference costs collection being amended to support a currency in 2012/13. Currencies for cystic fibrosis* and smoking cessation make a first appearance, while a local podiatry* currency will also be highlighted. And mental health trusts will be required to allocate all service users to mental healthcare clusters.

The Department has clearly underlined the importance attached to PBR by ministers to deliver priorities on quality and efficiency. Finance managers can expect rapid changes over coming years.

From 2011/12 the Department will mandate the currencies all providers and commissioners must use in adult and neonatal critical care contracts. But it will not set national tariffs for these services.

Healthcare resource group prices will be agreed locally and the Department said commissioners and providers may need to change the structure of the payment mechanism and activity measures in their contracts. These changes could include, but were not limited to, a capacity payment mechanism (such as 80% of contract paid up front to protect capacity), marginal payment for activity above plan and activity-based contracts that incorporate outcome-based quality measures.

Mandated currencies for paediatric critical care are under consideration.

The Department plans to expand the scope of best practice tariffs in 2011/12 by adding five new service areas. These are:

Interventional radiology This aims to incentivise the use of new techniques for endovascular aortic repair and uterine fibroid embolisation

Primary hip and knee replacements Prices for a number of HRGs will be based on enhanced recovery ‘best practice’ lengths of stay

Transient ischaemic attacks (mini-strokes) A tariff for TIA follow-up services to complement stroke best practice tariff, which was introduced in the current financial year

Adult renal dialysis* Incentivises vascular access via a fistula and ‘real choice of home haemodialysis’, together with reimbursement on an activity rather than fixed contract basis, using the national renal dataset

Day cases Day cases incentivised by setting prices higher than elective prices for a range of procedures, in line with British Association of Day Surgery suggested rates.

The new best practice tariffs will be added to the four existing areas, introduced in the current financial year. These are (HRGs are shown in brackets):

Fragility hip fracture (HA11-14) Changed in 2011/12 to increase the payment differential between best practice and non-best practice approaches. Encourages surgery within 36 hours of arrival or diagnosis and the involvement of a geriatrician in patients’ care

Stroke (AA22Z and AA23Z) Changed for 2011/12 as above. This tariff incentivises urgent brain imaging and delivery of care within an acute stroke unit

Cholecystectomy (GA10C, GA10D and GA10E) Gall bladder removal – unchanged in 2011/12. Incentivises day case laparoscopic procedure where clinically appropriate

Cataracts (BZO2Z and BZO3Z) Unchanged for 2011/12. This aims to encourage a streamlined pathway by carrying out pre-surgery assessments at the same time, operating as a day case and arranging follow-up assessments on one day around two weeks after surgery.

Following a review of the method used to calculate the payments, changes to specialised top-ups will be tested as part of the sense check. Top-ups will be introduced for four new areas. The Department said it would work with specialised commissioning groups and other partners to review eligibility lists for spinal, neurosciences and cardiac/cardiology, and will explore the possibility of establishing specialised orthopaedic and cancer services eligibility lists.