Acute trusts to benefit most from new tariff

Acute trusts are set for the biggest revenue increases of up to 4 per cent while non-acutes would see the least growth, according to NHS Improvement modelling based on 2016-17 activity.

The proposals include moving sustainability funding into the tariff, along with funding for Agenda for Change pay increases, a blended payment model for emergency care, updates to the market forces factor, and the withholding of funding from trusts to pay for the operating costs of NHS Supply Chain.

Sustainability fund shift

According to the consultation documents, the changes to trusts’ tariff revenues is mainly driven by the transfer of £1bn of provider sustainability funding to non-elective and A&E prices into the tariff, along with funding for the Agenda for Change pay settlement.

The move of sustainability funding is believed to be the main reason that acute trusts - as the main recipients of STF and the operators of acute emergency care - benefit the most from the changes.

Saffron Cordery, deputy chief executive of NHS Providers, said the proposals were an “important step” in helping the provider sector get back into the black, and: ”In particular they will appreciate the shift of funds from the provider sustainability fund to the tariff.”

Blended payment

NHS Providers said it was disappointed with the blended model for emergency care. Ms Cordery said it meant trusts would “continue to be unfairly penalised” for unplanned growth in emergency admissions, and would not “incentivise or support the move towards joined up working”.

“The bulk of the risk will continue to be heaped upon providers and this runs counter to the ambitions for the sector set out in the planning guidance,” she said.

HSJ has asked NHS England and NHS Improvement to respond to this point.

However, Ms Cordery added that a new blended model for mental health providers had “merit”. This model would consist of a fixed cost element, based on forecast activity, a variable element, and payment linked to quality and outcomes – as well as an optional risk share agreement between providers and commissioners. 

Market forces factor

The changes to the market forces factor have prompted concern from London trusts, which combined stand to lose £300m of income during implementation.

One finance director, reacting to the proposals, told HSJ: “The impact across London is significant and feels slightly counterintuitive given the existing scale of deficits in the capital and the Treasury-driven requirement to take 50 per cent of deficit acute trusts back to surplus in 2019-20.”

Figures released by the regulators also revealed the majority of trusts were against the withholding of funds to pay for the NHS Supply Chain.

Supply chain

The documents also revealed the majority of trusts (184 respondents) preferred buying products from NHS Supply Chain with margins applied to products, rather than having it withheld upfront resulting in the margin being removed. 55 respondents were in favour of the latter.

But funding will be withheld regardless, as the regulators said other options would threaten the ability of NHS Supply Chain to deliver the £600m annual savings target by 2021-22.

Acute trusts will have the biggest chunk of funding withheld because they are the biggest users of NHS Supply Chain.

The consultation runs until 21 February.

If two thirds of providers or commissioners object to the proposals, the regulators would need to run a further consultation, or involve the Competition and Markets Authority, before enforcing the changes.