NHS England and Monitor offer compromise deal to hospitals on payments for procedures

BMJ 2015; 350 doi: (Published 23 February 2015) Cite this as: BMJ 2015;350:h1013
  1. Matthew Limb
  1. 1London

Healthcare leaders have given a cautious welcome to a “pragmatic” new offer from NHS England and Monitor to settle uncertainty over tariff payments for 2015-16.

But hospital and commissioner organisations said that the interim “compromise” was far from ideal and that payment systems must still be overhauled to be sustainable in the future.

The latest offer would boost providers’ income overall by £500m (€680m; $769m) more than a previous proposal that most hospitals had rejected.1 This includes reduced efficiency targets and £130m towards the cost of emergency hospital admissions.

Earlier this year most NHS hospitals in England rejected the proposed national payment tariff for 2015-16, saying that the terms would leave them unable to guarantee “sustainable and safe care.”1 Monitor and NHS England have now reconsidered the offer, and on 19 February they issued an enhanced tariff option for 2015-16.

NHS England said that it would “ultimately” bear most of the extra costs and give clinical commissioning groups (CCGs) as much as £150m in support to offset additional pressures that they would face under the package.

David Bennett, head of Monitor, and Simon Stevens, head of NHS England, said in a letter to NHS leaders that the offer struck a “fair balance” in response to concerns raised over their previous proposal. They added that it would reduce funding pressures on acute hospitals without raiding necessary investments in mental health, primary care, and other services.

NHS Providers, which represents hospital, community, ambulance, and mental health trusts, said that the new offer represented “important progress” on finalising the 2015-16 tariff. But Chris Hopson, its chief executive, said that providers would be raising questions and that a long term sustainable solution to NHS financial problems was “still desperately needed.”

If all providers opt for the new offer they will “benefit” in total by £500m. Of this, £200m relates to the gross tariff deflator (excluding uplifts for pay and price inflation) being reduced “in providers’ favour” from 3.8% to 3.5%. Providers would also benefit by £130m from a rise in the marginal cost reimbursement for emergency hospital admissions, up from the current 30% to 70% (the previous offer had been 50%). Monitor and NHS England said that this adjustment “should be used to support ongoing winter resilience schemes.”

The Royal College of Emergency Medicine welcomed the increase to 70%, saying that it would mean “substantial improvement in the finances of acute trusts,” particularly those for whom acute admissions were a substantial and increasing proportion of their work.

Clifford Mann, college president, said, “Having been vociferous, informed critics of the current marginal tariff it is of course welcome news to hear it has been revised. The college will continue to demand that this money is spent on frontline services relevant to the admission of acutely ill and injured patients and not diverted for other purposes.”

Similarly, the new offer raises the marginal cost reimbursement for specialised services to 70%, compared with the 50% proposed earlier. This would be worth some £170m more to providers of specialised services. NHS England and Monitor said that the revised deal would give providers and commissioners “certainty” and would allow the annual contracting round to be completed by 31 March.

NHS Clinical Commissioners, which represents most CCGs, described the offer as “pragmatic” and welcomed the “additional £150m for CCG baselines,” although it said that some members would still have concerns.

The organisation’s co-chairs, Steve Kell and Amanda Doyle, said in a statement, “The risk is shared across the system and is not a ‘win’ for providers. Providers, as well as commissioners, face challenges next year and we must now work together to manage the impact this will have on all NHS organisations.

“We must learn from this situation, review payment systems which are no longer fit for purpose and work together to deliver a safe and sustainable NHS.”

NHS Providers said that the willingness of Monitor and NHS England to make a “swift new offer” showed that its members were right to question the original tariff proposals. Hopson said that all providers would benefit from the lower tariff efficiency factor, but he noted that the original 2015-16 tariff proposals would have taken £1.7bn out of the provider sector, so the “extra” £500m was just a reduction in this number.

He said, “Quite rightly, each provider will need to make their own decision on whether they accept these terms. They won’t be able to make an informed decision until a number of detailed questions are answered and we will be working with NHS England and Monitor to ensure these are answered in good time.

“Under these proposals, providers will still not be paid the full cost of the emergency care they provide in 2015-16 and they are being asked to deliver unprecedented savings.”

The Healthcare Financial Management Association, which represents many NHS finance staff, said that the new offer was “an interesting development” that went some way towards recognising the financial pressures facing providers in the NHS.

The association said, “It remains to be seen whether providers think that this amounts to sufficient additional funding to allow them to sign up to the proposal.”


Cite this as: BMJ 2015;350:h1013


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