£500m risk transfer will not end the search for financial stability

The decision of NHS England and Monitor to switch £500m of risk on to commissioners during 2015-16 will be seen as an outright victory for providers.

Hospitals have won significant concessions by loudly demonstrating their distress over further tariff reductions.

‘The voluntary tariff is unashamedly being presented as a straightforward solution to tensions’

However, the decision is best viewed as the first engagement in a long running campaign to establish a more sustainable method of determining how the NHS’s resources are best allocated.

The offer of an “enhanced” voluntary tariff will be presented to providers as a pragmatic response to their concerns and there is no doubt it brings welcome clarity. Trusts are being given two weeks to make up their minds – after which they will be forced to live with their decision – in the name of rapidly providing badly needed certainty during the forthcoming, testing year.

The vast majority of trusts would be better off under the voluntary tariff. But it is possible a significant number may decide the deal offers insufficient shelter from the storm, and that a reconsultation on the tariff or a referral to the Competition and Markets Authority might produce a better result – whatever pain they might suffer in the meantime.

This would be a high risk strategy with far reaching consequences for all and, as a result, is unlikely. However, behind the scenes negotiations could continue after the deadline for the allocation of research and training budgets, for example.

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CCG silence

We have heard little from clinical commissioning groups.

Collectively and on an individual basis CCGs would argue any “extra” money should end up with primary care. Health and wellbeing boards – those supposed shapers of the future – would demand greater social care funding. Their reaction to the detail of the deal and what notice is taken of it will be educational.

‘Risk transfer means NHS England’s cupboard is now truly bare’

NHS England and Monitor will now be looking to enforce their side of the bargain. NHS England chief executive Simon Stevens has stressed the need for the NHS to “create” mechanisms that allow it to take “collective action” on inefficiency.

The two central bodies lack the detailed data to set specific efficiency targets for individual services or cost centres. The resulting crude measures have little credibility – as Monitor chief executive David Bennett has admitted – and therefore, little grip.

Trusts, too, struggle to know how to benchmark their costs. By requiring more trusts to sign up to the data collection exercise being conducted as part of Lord Carter’s review into efficiency and procurement, all should better understand who is paying how much and for what.

High stakes game

Should this tactic work, it will be brought to bear on issues such as huge overspending on temporary staff, driven in part by the variability of fees paid across the country. In 2016-17, for example, a limit might well be placed on how much an individual locum doctor or agency nurse could be paid per shift.

The work to identify inefficiencies will be given extra urgency by the knowledge the risk transfer means NHS England’s cupboard is now truly bare.

‘This could foreshadow several years of ad hoc approaches before the NHS can settle on a stable process’

Finally, there is the question of how these issues will be resolved in the future. The voluntary tariff is unashamedly being presented as a straightforward solution to tensions within the service.

This is in sharp contrast to the provisions set out in the Health and Social Care Act, whose timescale and uncertain outcome create more confusion.

Indeed, assuming providers do not take the nuclear option described above, it would be surprising if the mechanism is ever used.

Given the blurred political horizon and that new care models are not even out of their crib, this could foreshadow several years of ad hoc approaches before the NHS can settle on a stable resource allocation process that properly reflects the service’s long term direction of travel.