Exclusive: Providers win £500m in new tariff deal

The chief executives of the two national pricing authorities are set to write to all NHS providers today to lay out details of a new tariff offer that trusts can sign up to on a “voluntary” basis for the coming financial year.

Providers will be given just two weeks to decide whether to accept the offer.

The move is an attempt to give the NHS certainty over prices after official tariff proposals were rejected by providers accounting for three-quarters of all tariff funded services. Under the Health Act 2012, this means the pricing authorities must either revise their proposals and re-consult the sector, or refer them to the Competition and Markets Authority for review. NHS England chief executive Simon Stevens last week warned that these formal processes could take “many, many months” to complete.

HSJ understands that the proposals set out in the new voluntary tariff offer would transfer up to £500m of financial risk from the provider sector to the NHS commissioning system. They include:

• Reducing the headline efficiency savings requirement built into the 2015-16 tariff to 3.5 per cent, down from the 3.8 per cent originally proposed. This would be worth up to £200m to the provider sector, spread across all categories of provider.
• Softening the impact on providers of a controversial new marginal rate for specialised services. Under the voluntary tariff providers will be paid 70 per cent of normal rates for all specialist activity above 2014-15 levels, compared with 50 per cent under the original proposals. This change is understood to be worth up to £170m to providers of specialist care.
• Further softening the impact of the longstanding marginal rate for emergency admissions. For years providers have been paid only 30 per cent of normal rates for increases in emergency admissions. While the original 2015-16 tariff proposed to raise this rate to 50 per cent, the voluntary tariff would raise it further to 70 per cent. This change is understood to be worth up to £130m for acute providers.

As previously floated by Mr Stevens, all providers signing up to the voluntary tariff will also be required to sign up to the “efficiency collaborative” work led by Lord Carter, in which they must share detailed data on their costs. The intention is that this information will allow Monitor and NHS England to be more precise when setting future efficiency targets.

Mr Stevens said this week: “The NHS is looking for more certainty about next year, and a more constructive and shared approach to helping hospitals with the genuine pressures they’re facing. This new funding option offers that, without sacrificing critical new investments in primary and mental health services. In the round, it should give the NHS collectively our best chance of preserving high quality services today while also getting going on the more fundamental changes set out in the [NHS Five Year Forward View].”

The voluntary tariff will be introduced using existing rules which allow providers to agree local variations to national prices, but will be available as a single offer to all providers. Providers that opt in will be required to keep the voluntary tariff for the full financial year.

Likewise, providers that choose not to accept the voluntary tariff will not be allowed to opt in at a later stage. They will be able to continue operating on 2014-15 prices until the point that a new tariff is set. HSJ understands Monitor has not yet decided whether or not to refer the tariff to the CMA, and that any new tariff set formally during 2015-16 would not be backdated to the start of the financial year.

Providers that opt out will not – initially, at least – face a new efficiency target for 2015-16, or the marginal rate for specialist services. However, they will not benefit from national relaxation of the marginal rate for emergency admissions, or from changes to 2015-16 prices that are intended to reflect increased premiums for the Clinical Negligence Scheme for Trusts. In addition, they will not be eligible for any commissioning for quality and innovation payments, under which trusts can earn up to 2.5 per cent of their contract income.

NHS England has calculated that a majority of providers would be better off opting into the voluntary tariff, HSJ understands.

The pricing authorities have committed to making the voluntary tariff offer without any change to the additional funds available for mental health, primary care or transformation in 2015-16. In the case of specialist services, this means principally increasing the financial risk carried by NHS England’s specialised commissioning teams, HSJ understands.

In other cases, HSJ understands that NHS England will make adjustments to clinical commissioning group funding where adoption of the voluntary tariff creates additional pressures on CCGs. This support is expected to be funded partly through the drawdown of surpluses available to CCGs, and partly through bringing forward money that has in previous years been held back to bail out overspending trusts. However, details were not available as HSJ went to publish this article.

Monitor chief executive David Bennett said: “We consulted NHS organisations and have listened to their responses. While we decide the way forward for the national tariff, our interim proposals for 2015-16 seek to strike a fair balance between the funding needs of acute hospitals and other parts of the NHS. This offer should give greater certainty and clarity for the whole NHS as it faces another financially challenging year, and ensure it continues to provide high quality care for patients.”