Comment / What does the future hold for the national tariff?

Following the first ever two-year tariff for 2017/18 and 2018/19, NHS England and NHS Improvement had been expected to release their proposals for the next two years any day now. The transition to a two-year tariff appears to have been a success, giving both commissioners and providers greater stability when making medium-term plans and investment decisions. There were even suggestions that a longer period would be useful to provide further stability.

However, last week it emerged that the two system leaders will not be publishing a 2019-21 national tariff engagement document in the short-term. Instead, they have opted to reflect on the July funding settlement and align the development of tariff and pricing proposals with the development of the longer-term plan for the NHS, before engaging with the sector.

In a health and social care system manoeuvring itself towards a more integrated service, and with some areas already departing from using the national tariff, it is expected that this approach will be welcomed, provided any delay does not significantly impact organisational planning for 2019/20 and beyond.

The recent HFMA and PwC report Making the money work in the health and social care system identified that 75% of surveyed finance professionals felt that the current approach to funding NHS organisations was not fit for purpose, with 78% believing there should be a single budget for each local health, social care and public health economy.

Also, in HFMA’s July 2018 NHS financial temperature check survey responses, some finance directors raised concerns over the limitations of the national tariff. They suggested that fundamental changes to the payment systems are needed to reflect the progress being made towards system-wide working.

Given that the current tariff system breaks down patient care into individual episodes, within individual organisations, it does not lend itself well to recognising the need for continuity and co-ordination of care across existing organisational boundaries.

It should also be remembered that it’s not the method of reimbursement alone that drives integration, improved productivity and efficiency. Instead, the real impact will be through the integration of planning and management of resources to deliver efficient high-quality care. And for this environment to be successful, it should to be supported and facilitated by a payment system that reflects such collaborative working.

It is unlikely that a one-size fits all solution is achievable, or indeed suitable. A number of areas are already taking different approaches and a pick’n’mix style system can be seen as a pragmatic solution. This involves using different contracting arrangements for different services, different pathways and indeed different stages along the integration journey.

Moving to such a system requires behavioural change, collaborative working and trust along with clinically defined, specified and well-documented pathways. And while designing a payment system that links payment to quality or outcomes goals effectively is very difficult, a capitated budget approach, for example, could create an incentive for providers to focus on sustainability and transformation partnership (STP) strategic objectives such as prevention.

A capitated budget approach with outcomes and a whole population budget approach have been outlined in NHS England and NHS Improvement’s recently published draft Overview of integrated budgets for integrated care providers, which is designed to support their Integrated budgets handbook.

Camden is one health economy already on this journey, and members of the Healthcare Costing for Value Institute can learn about the experiences of Camden Clinical Commissioning Group developing a population approach to commissioning in the recent case study A population approach to value-based healthcare.

Any changes to the payment mechanism are unlikely to mean the end of national tariffs altogether. The basis of what it costs to treat a patient – or rather a nation of them – will continue to provide essential information at both a local and national level.

So what does the future hold for the national payment system? During the transitional phase of integration, the national tariff offers a stable platform. Within the less well established STPs, clinical commissioning groups would be able to continue to commission in a familiar format while establishing their governance structures and developing strategic objectives further. Equally, those areas further down the integration journey are likely to prefer to adapt the system according to their local needs rather than starting from scratch in the early years of increased collaboration.

However, as more STPs become integrated care systems it is difficult to envisage the national tariff continuing to cover the largest segment of NHS provider income – as it has done since the introduction of payment by results in 2003/04.

The HFMA will continue to cover the topic of payment systems over the coming months as part of the 2018/19 policy and technical work programme. This will include:

·         the HFMA response to any future sector engagement

·         a ‘how it works’ briefing on the national payment system

·         continued support to NHS England and NHS Improvement on the development of the national payment system.

If you are interested in contributing to the HFMA’s work on payment systems, I would be delighted to hear from you at [email protected].