Yesterday’s proposals could make it harder for commissioners and providers to work together, at a time when they need each other the most, writes Rob Webster

The publication of the 2015-16 national tariff proposals yesterday perpetuates a reliance on technical efficiencies in provider delivery over allocative efficiencies through commissioning and system reform.

‘Local commissioners will pick up the bills and providers will feel the pain’

It could result in a shift in risk towards local systems, particularly through the proposed “marginal” rate for specialised services and Clinical Negligence Scheme for Trusts changes.

Local commissioners will pick up the bills and providers will feel the pain.

In the end, almost half of providers will still be in deficit. Monitor and NHS England’s proposals ask us to flip the risk coin and many at the front line will feel they are set to always lose.

Tariffs and ‘leakage’

NHS Confederation responded to the tariff consultation, highlighting the need for a different balance between the focus on allocative and technical efficiency and some of our specific concerns about block contracts, marginal rate tariffs and “leakage”, which Monitor has defined as the extra actions taken to improve financial positions other than efficiency.

We requested that these be considered appropriately and that the efficiency factor in the tariff set with delivery in mind, rather than as a balancing factor in affordability. We have ended up with neither in these proposals.

‘The results of delivering the scheme leaves almost half of providers in deficit’

Delivery of the 3.8 per cent efficiency factor, a reduction in the specialised services activity below the 2014-15 plan, and a 3 per cent reduction in non-elective activity through the better care fund plan are required.

Scheme payments are to be funded from clinical commissioning group baselines. The result of delivering this - which would constitute significant improvement in efficiency - leaves almost half of providers in deficit.

The result of delivering just 3 per cent is three-quarters of providers in the red.

The triple whammy

I am not out to rubbish the national bodies here. They have been set a complex task with no right answer.

So, we have to start to question the system’s ability to deliver safe sustainable services in 2015-16 and financial balance.

Rob Webster

Rob Webster

Those on block contracts, like mental health, ambulance and community services, will not have any “leakage”.

There is the triple whammy that providers of tertiary services will feel - the efficiency factor, the marginal rate for non-electives and now the marginal rate for specialised services.

Amelioration of the 30 per cent rate for non-electives will be welcome. The 50 per cent marginal rate for specialised services less so.

The latter may look to be a simple “frontier shift” of £170m of risk from NHS England - which has a duty to manage an overspent commissioning budget - to trusts and potentially, CCGs. This is unsustainable without robust demand management approaches.

If we believe the principles behind the marginal rate for non-electives are right, we need an equivalent for specialised services.


‘The demand for non-electives continues apace, despite the changes’

The requirement on local systems is to invest all of the resources for each patient over the baseline into services, with 70 per cent going into the community demand management schemes to reduce footfall and 30 per cent into acute provider if required.

This drives genuine risk share and risk management approaches in some health and care economies. In some places it has not.

The demand for non-electives continues apace, despite these changes.

Risk share or risk transfer?

So what is the equivalent on specialised services?

Which lever will NHS England pull with providers and what investments will be made to reduce demand?

Answers to these questions will determine whether this is to be a risk share or a risk transfer from NHS England to the providers and their local commissioners.

CCGs will be trying to manage the resourcing of scheme payments, transferred to local providers next year through tariff and funded from the baseline.

They will be dealing with pressures from the better care fund transfer. They will be working with local providers to deliver the service improvements in mental health announced earlier this year.

‘We need realism about the balance of risk between national and local commissioners’

My concern is that yesterday’s proposals will make it harder for commissioners and providers to work together at a time when they need to most.

That must be avoided at all costs.

Local commissioners have an opportunity to deliver reasonable contracts with providers using local flexibility where it is needed. Wise commissioners will work with providers on this as we move through a difficult transition.

That requires two things to happen.

First, we need realism from Monitor and NHS England about the balance of risk between national and local commissioners.

And more importantly, we need realism from the chancellor in the autumn statement on funding for the NHS as a whole.

Pricing strategies that require the NHS to deliver another year of unprecedented efficiencies cannot be allowed to end with a service in deficit. A stable platform for the five years ahead requires the chancellor to be as courageous with the finances of the nation, as the leaders across the NHS are with our healthcare.

Rob Webster is chief executive of NHS Confederation