News / Report provides evidence for pricing decisions

Monitor has taken the first steps towards changing the way NHS providers are paid by publishing an independent report on the current secondary care reimbursement system.

The report by consultancy PricewaterhouseCoopers, An evaluation of the reimbursement system for NHS-funded care, follows a four-month review, described

by Monitor chairman David Bennett as the ‘most comprehensive analysis of pricing in the NHS that has ever been done’.

He added that decisions on pricing had one goal – to improve care provided to patients. ‘The report highlights a number of areas for potential improvement, not least the need for good-quality information that accurately identifies the true costs of providing care.’

The report’s key finding was that the information underpinning the reimbursement system, which distributes some £66bn via national tariffs and local agreements, needs significant improvement. It said there were unexplained variations in the unit costs for the same services between providers, suggesting that other health systems do things better. Germany for example has a ‘rigorous level of assurance of the cost information used in price setting’.

The consultancy also raised concerns that instability in prices – resulting from poor information – meant that organisations did not necessarily respond to deliberate price signals. They pointed out that more than 40% of prices set under payment by results change by 10% or more each year, undermining confidence in prices.

The review also ventured into controversial territory. ‘We did not find evidence that the level of adjustment a provider receives through the market forces factor [MFF] reflects differences in the costs of treating patients,’ the consultancy said. This is an issue that has been the subject of numerous previous reviews, which to date have always confirmed the validity of the MFF to adjust for unavoidable cost differences.