NHS England offered a group of trusts access to a £124m fund on the condition they dropped their opposition to its latest tariff offer, HSJ can reveal.

The national commissioning board’s finance director, Paul Baumann, wrote to 16 specialist trusts offering to backtrack on a commitment to slash funding they had previously received to mitigate the additional cost of highly specialist treatments for complex patients.

The fund, known as “Project Diamond” by the 10 London trusts it covers, also tops up the research funding they receive.

Paul Baumann

Paul Baumann wrote to 16 specialist trusts offereing to backtrack on a commitment to slash funding

NHS England had alerted the trusts last June that it would be reducing the £62m fund by half for 2014-15 and cutting it entirely in 2015-16 - a move which some organisations said would tip them into deficit.

Numerous senior sources at the trusts have told HSJ that at the height of the row over the 2015-16 tariff, which saw an unprecedented revolt by providers, Mr Baumann offered to maintain the specialist fund for this year and the next - provided they signed up to NHS England and Monitor’s revised tariff offer.

However, all but one of the 16 organisations were among the 30 trusts that last week rejected the new offer and opted to stay on the 2014-15 tariff.

NHS England has said its revised offer would put £500m more into the hospital sector than the original proposals.

The first tariff proposal would have seen the payment for specialist work above 2014-15 levels capped at 50 per cent, among other measures. It was rejected by the majority of the provider sector, by turnover, forcing NHS England and Monitor to either consult on a new tariff deal or refer the original to the Competition and Markets Authority.

Only 12 per cent of NHS providers rejected the revised offer - but by turnover they accounted for around a third of the £50bn hospital sector.

HSJ has spoken to provider chief executives and finance directors across the country who accepted the new deal under protest.

Most said that the decision by NHS England and Monitor to withhold the 2.5 per cent of their income that was contingent on hitting commissioning for quality and innovation standards, known as CQUIN, meant they were forced to take the new “enhanced tariff option” (or ETO).

The finance director of one rural foundation trust said: “It felt as though we were being blackmailed. It’s nice to be given choice but not when that choice is between the frying pan and the fire.”

He said the ETO meant his organisation had to set an “unlikely” savings target just to plan for a deficit of less than £10m.

One teaching hospital finance director told HSJ: “In terms of the two offers the difference is almost entirely down to CQUIN access.”

He said there were likely to be further arguments over what form NHS England’s extra £500m would take. “There will need to be a very transparent process to determine the cost of the ETO for each health economy,” he said.

“Providers will not expect the ETO to simply result in [having to make] bigger savings targets.”

Numerous senior sources have told HSJ some of the trusts that rejected the offer have sought legal advice on whether CQUIN payments can be withheld from them.

One source said: “There have been some places that have done a bit of a legal sounding, asking ‘can they really just take the CQUIN money off us?’ The indicative answer is probably not.”

However, another source said they believed other legal advice had “conflicted” with this.

The ETO option offered to trusts included a reduction in their headline savings target from 3.8 per cent in the originally proposed tariff, to 3.5 per cent; an increase in the proposed “marginal rate” for specialised services from 50 to 70 per cent; and a corresponding increase in the marginal rate for emergency admissions.

How the tariff dispute has unfolded

26 November 2014

NHS England and Monitor publish a consultation document for the 2015-16 tariff.

15 January 2015

Monitor delays its decision on whether it can enforce the new tariff or has to begin a new consultation while it goes through providers’ responses.

29 January

The 2015-16 tariff proposals are resoundingly rejected by the dominant providers - those responsible for a 75 per cent share of all NHS services lodged formal objections to the proposed tariff with Monitor. The pricing authorities must either refer their proposals to the CMA for review, or consult the service again on revised pricing proposals.

10 February

Simon Stevens tells HSJ trusts will be offered the options of a new “voluntary” tariff for 2015-16 or to roll over 2014-15 pricing arrangements.

19 February

Simon Stevens and David Bennett write to NHS providers laying out details of the new tariff offer. They have a deadline of 4 March to respond.

6 March

The pricing authorities announce that 211 out of 241 trusts accepted the “voluntary” tariff option. Those that rejected the deal are told they will remain on 2014-15 prices, but will not be eligible for CQUIN payments. Sources tell HSJ trusts are exploring legal action over the withheld payments.

11 March

HSJ reveals that specialist trusts were offered access to a £124m fund on the condition they dropped their opposition to the original tariff proposals.