Comment / No simple solution

People are queuing up to take a swipe at the tariff. The broad thrust of comments is that a simple switch to a capitated payment approach would set the NHS on the right road.

Everybody agrees the system needs reform – a consensus that has been in place for several years. It was created to drive activity, when more activity was the key policy goal. Many of the incentives are in
the wrong place. It doesn’t adequately cover the need to have an ‘always on’ emergency service regardless of activity. It doesn’t drive integration or transformation. The list goes on.

But while there is a good argument for making changes as rapidly as possible, there must also be recognition that the change is not straightforward.

Getting it right is imperative, especially at a time when money is tighter than ever, making health economies more vulnerable to swings in funding. And while a new payment system might underpin new pathways and delivery models, it won’t magic away an affordability gap.

As the HFMA has said this month, the ‘national tariff is not the right place to be having discussions about the affordability of services’.

If we are going to wait for a payment system to deliver transformation, we will be waiting for a few years yet. The transformation has to begin now – it should already be under way. And it needs to be paid for either using the existing tariff or agreed variations on it. The tariff will then catch up – in reality being fine tuned by experiences in local pilots.

However, there seems to be some assumption that a capitation approach would be simpler – a view perhaps fuelled by the recent problems with the rejected tariff and the need to issue an enhanced tariff offer.

Simply offering providers a budget for a patient or cohort of patients – either covering a whole area’s population in terms of urgent care or a subset of it such as those with a long-term condition – may seem less complicated than piecemeal payments for each intervention. And clearly, there is potential for this approach to incentivise pathway reform – more proactive support for patients and preventative measures.

But we’re not talking about a simple return to crude block contracts. Getting the budgets right will still be a major challenge. Getting it wrong presents a significant risk to local health services.

We need to move to rapid piloting of these approaches, with good risk-sharing mechanisms at least initially. But we should recognise that there will be significant technical challenges in getting the budgets right.

What is absolutely clear is that the NHS will still need a good grasp of the activity undertaken in different pathways and the costs of the individual interventions undertaken.

This will not only help in setting the budgets at the right level, but it will also help local health providers understand the potential value delivered by proposed new pathways compared with existing approaches.

All of which brings us back to the current proposals to transform costing in the NHS. The HFMA last month published the latest version of its Clinical costing standards as part of Monitor’s Approved costing guidance. The association makes no excuse for continuing to bang the drum about the importance of costing in supporting the transformation of services.

The prime reason to improve cost data is to inform local decision-making. But any national or local payment approach will only be enhanced by a thorough understanding of how the service currently spends its money.