Prices for NHS services can change by 10% every year, finds study

BMJ 2012; 344 doi: (Published 24 February 2012) Cite this as: BMJ 2012;344:e1405
  1. Adrian O’Dowd
  1. 1London

Many prices for NHS services set by the current Payment by Results system can change by 10% or more every year, claims a new report commissioned by the NHS’s regulator of foundation trusts.

The report from Monitor analyses pricing in the NHS and the reimbursement system for NHS funded care and suggests that there is much room for improvement in the way that providers of NHS services are paid.

It found that more than 40% of prices set under the current Payment by Results framework—the national tariff system in which prices are set for certain services—change by 10% or more each year.

Such changes undermine the confidence that providers and commissioners have in the tariff, as often they do not understand why prices fluctuate widely, says the report, and this can lead to poor compliance with the system.

The report, described by Monitor as the most comprehensive analysis of pricing in the NHS ever carried out, is the first stage in establishing the evidence for Monitor to use to develop new ways of using pricing to deliver benefits for patients.

The government has proposed that Monitor take on joint responsibility for pricing in the future, working closely with the NHS Commissioning Board.

This prompted Monitor to commission PricewaterhouseCoopers to carry out an independent evaluation of the strengths and weaknesses of the pricing system for the NHS. The evaluation found some evidence that the existing system had brought about improvements in the quality and efficiency of care, as well as greater choice for patients.

However, the information that underpins the reimbursement system was in need of major improvement.

The report’s authors said they found “unexplained variations in the unit costs for the same services between providers” and evidence of areas where data quality was poor. This was the case in acute, community health, and mental health services.

Lack of confidence in the Payment by Results system was evident in the finding that providers and commissioners were increasingly negotiating prices locally and abandoning the pricing system.

From 2007-8 to 2010-11 the proportion of revenue from primary care trusts for services for patients that was delivered through local negotiations between commissioners and providers rose from 23% to 28%, said the authors, according to data from a sample of 69 NHS trusts.

This was the opposite of what they expected to find, given that an increasing number of services have moved under the remit of Payment by Results.

There was little evidence of increased delivery of care closer to patients’ homes, despite the government’s desire to see such a trend, said the authors.

“In the last year growth in expenditure on community services was 6%, only moderately outstripping the 5% rate of growth in expenditure on acute care,” they said.

Monitor’s chairman, David Bennett, said, “Our decisions on pricing will have one ultimate goal: to help improve the care provided to those who need it. This report highlights a number of areas for potential improvement, not least the need for good quality information, which accurately identifies the true costs of providing care.

“We are already thinking about how the findings of this report can be developed into changes that could make a difference for patients.”


Cite this as: BMJ 2012;344:e1405