In a transparent, rules based funding system like payment by results, how can we ensure a steady flow of financial goodies to the deserving rich in the London teaching hospitals?

Two pragmatic solutions were found to this dilemma when tariff funding was first introduced.

One is the “market forces factor”, the arcane regional cost adjustment that adds significantly to the “standard” tariff, especially in London. For example, the 2011-12 factor for the Royal Free Hospital in London is 1.2518 while for Plymouth Hospitals it is 1.0158, meaning an identical procedure earns 23 per cent more in Hampstead than in Devon. It is an impressive differential in an NHS that still uses national pay scales.

The other device has been to exclude £4.8bn of training spending from the tariff system. The national “multiprofessional education and training” budget remains under strategic health authority control, with medical education managed separately by postgraduate deaneries. So the cash bypasses payment by results. Its distribution remains opaque, and inevitably the teaching hospitals pick up the lion’s share.

But, published under the anodyne title of Developing the Healthcare Workforce, Department of Health proposals would change the mechanism for funding clinical education beyond recognition. 

Instead of a topslice of the NHS budget, funding for training would come from a levy on providers, potentially from all health providers, including private hospitals - even those that rely on health service trained staff yet don’t treat NHS patients.

The use of the levy would then be decided by “local provider networks”. Universities and colleges would be paid under a tariff system, to “facilitate the movement of training provision to where it is of the best quality”.

Meanwhile, the scope of this levy is trimmed back to cover only the next generation of clinical staff, allowing government to cut its central funding of Skills for Health significantly.

There is a clear logic in putting employers in the driving seat. There is a case for driving efficiency and perhaps rationalisation. But what about the deaneries? It will be interesting to see how the medical profession reacts.