Intended for healthcare professionals


Hospitals pay penalties of £1.2bn for “too many” admissions and “too early” discharges

BMJ 2014; 348 doi: (Published 19 February 2014) Cite this as: BMJ 2014;348:g1653
  1. Nigel Hawkes
  1. 1London

Schemes designed to penalise hospitals in England for exceeding agreed numbers of emergency admissions and for readmitting patients within four weeks of discharge have cost them more than £1.2bn over the past four years, an investigation by the Channel 4 programme Dispatches has found.

The penalty schemes aim to discourage hospitals from increasing numbers of emergency admissions beyond agreed levels and from discharging patients before they are well enough. For any unbudgeted emergency admissions, hospitals are paid at only 30% of the normal tariff, the so called “marginal tariff.” Funds are also withheld for readmissions within 30 days of an elective procedure and for some other readmissions, subject to local negotiation.

The marginal tariff rule was introduced because Payment by Results, the scheme that pays hospitals according to numbers of procedures, encourages activity, so there is a perverse incentive for hospitals to treat as many patients as possible, which may be clinically unjustified and which strips healthcare commissioners of money. The readmission rule seeks to improve clinical outcomes and patients’ experience by penalising hospitals that discharge too many patients too soon.

Despite these disincentives, emergency admissions have continued to rise, and so have readmissions. The Foundation Trust Network has criticised the schemes, saying they are not working. But no figures have been published showing how much money is actually withheld.

Dispatches sent requests under freedom of information legislation to 156 acute trusts and 212 clinical commissioning groups seeking the data. The response was high, with 143 trusts providing data covering the period 2010-13. Clinical commissioning groups do not hold data for the earlier years, as they were not in existence then, but provided figures from April 2013, which were provisional as they did not cover a complete year.

The results, published in the BMJ,1 show that a total of £848m (€1bn; $1.4bn) was withheld from trusts over a period of almost four years under the marginal tariff rule, and an additional £390m was withheld under the readmission rules, a total of £1.24bn. Nottingham University Hospitals NHS Trust headed the list, with £32m withheld, and 14 others reported more than £15m. But while money is withheld with one hand, it is given with another: the government this winter promised an additional £400m to stave off a crisis in hospital emergency departments.

A spokesman for NHS England said, “To say that funding has been withheld from hospital trusts completely misses the point of the marginal payment arrangements and the wider issues in the health and social care system. The payment arrangements are not fines. They are designed to enable greater investment in community and social care to prevent avoidable admissions and reduce the strain on hospital facilities—the money is therefore not withheld or lost, it is invested to help proactively manage potential pressures before they happen.

“In 2014-15 NHS England and Monitor conducted an in-depth review into the marginal rate tariff. It concluded that the marginal rate had gone some way to help slowing the growth of emergency admissions and has encouraged more coordinated management of both demand for emergency care and discharges back into the community. For this very reason, the review recommended that the marginal rate rules needed to be strengthened to ensure commissioners invest the savings in measures to reduce demand.”

Michael Dixon, chairman of the NHS Alliance, said, “The financial penalties are a very blunt instrument, and it is far better when local hospitals, primary care services, and social services work together with local commissioners to reduce all . . . causes of readmission. Where this works well it would be difficult to defend the continuation of such penalties.”


Cite this as: BMJ 2014;348:g1653


  • Feature: How England’s emergency departments are being penalised (BMJ 2014;348:g1604, doi:10.1136/bmj.g1604)