Comment / The right tariff

Publication of Monitor’s tariff engagement has signalled the first step in the process for setting prices for 2016/17. For a provider sector beset with deficits and stretching financial control totals and a commissioner sector that needs to transform the way care is delivered, the tariff will be a key focus of attention for finance staff returning from their summer breaks.

 It has never been so important that the tariff is credible and reflects the true costs of delivering care. It is hoped the move to the more granular currency provided by the HRG4+ healthcare resource groups will bring us closer to prices that take better account of the services we deliver to an increasingly complex set of patients.

It will be critical for providers over the coming months to understand the impact of the new tariff on the financial contribution each service makes as they formulate plans to get back to financially sustainable positions.

Central to tariff-setting is the concept of reimbursing only the ‘efficient’ costs of care. While you can’t disagree with this as a general rule, I’m sure there will be a significant number of finance directors wishing they had it in their power to deliver a cost base aligned with the tariff definition of ‘efficient’.

Pressure on costs relating to the provision of nursing ratios, locums to fill gaps in junior doctor rotas and consultants in shortage specialties present a number of difficulties in containing costs within the tariff envelope. Providers in more rural locations will continue to struggle to provide the volume of activity that provides an efficient service as determined by tariff.

We have seen the approval of the first successful tariff modification application at University Hospital Morecambe Bay NHS Foundation Trust. But there will be many less extreme cases or organisations that don’t trigger the 4% deficit threshold, so can’t apply.

This means it will continue to be important for commissioners and providers to work together to understand what the range of services is that can be provided within a tariff structure locally and where more innovative solutions will need to be found.

Some of the other tariff publications that came out over the summer could provide help for economies wanting to work together to mitigate the risk of
service change.

Approaches outlined on the sharing of gains and losses on implementing new care models and the proposed approach to urgent and emergency care tariffs could support organisations in local economies that want to incentivise change.

We need to adopt payment approaches that facilitate networked services and understand how these could fit with local approaches to redesigned care.

It has never been as important to have a tariff in place that aligns with the true cost of service provision so that the important decisions that need to be made are underpinned by the right information.

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