• New standard payment mechanism would involve a “blended” approach between block contracts and activity based tariffs
  • Contracts could consist of three parts; a fixed element; a variable element; and a risk share
  • Proposed cuts to outpatient tariffs and changes to “market forces factor” still being considered
  • Formal engagement process delayed

NHS regulators are considering a new standard payment mechanism which would involve a “blended” approach between block contracts and activity based tariffs, HSJ understands.

The approach, which NHS Improvement believes could capture the positive aspects of both extremes, is among several measures which could be deployed from 2019-20.

It could see contracts consisting of three parts; a fixed element; a variable element; and a risk share; and would be aimed at incentivising the redesign of services.

These elements are already used to varying extents in different parts of the country, but regulators are keen to establish a “default” payments system for local leaders to use.

Discussions are only at an early stage, however, and formal proposals have yet to be made.

There has been ongoing debate over NHS payment systems for several years, with a widespread view that contracts based purely on activity-based tariffs have been divisive and created perverse incentives. Some areas have already abandoned the activity based tariff, which is known as “payment by results”

Provider chiefs have welcomed the move to review the financial framework, but urged caution about any measures that would add complexity.

It is unclear whether the blended approach would be adopted for single care pathways, or for entire systems.

Some services, including urgent and emergency care, already routinely operate with a “risk share” element, although providers routinely argue that they carry too much of the risk.

Regulators have previously said elective care, which now has a waiting list of more than 4 million, should continue operating under payment by results.

A formal engagement process for the 2019-20 tariff had been expected to launch in June or July 2018, but this was delayed after the announcement of the long term funding settlement, as it was felt the tariff process should not run separately.

HSJ understands the proposals that were in the original engagement document, including cuts to tariff payments for traditional outpatient appointments and an update to the “market forces factor”, are still being considered.

NHSI said in a statement: “Taking a blended payment approach for the national tariff is one of a range of proposals we are considering…

“After the new funding settlement was announced in July, the publication of the tariff engagement document was paused so the pricing plans for 2019 could reflect the financial arrangements agreed in the NHS’ long term plan.

“We will still have a consultation on the 2019 national tariff. However, feedback from providers and CCGs is key to ensuring we develop a tariff that can provide stability for providers while improving patient care.”

It is unclear when the formal consultation will be launched.

David Williams, policy advisor for finance at NHS Providers, said: “The most advanced partnerships may wish to adopt this system if they felt it supported mutual trust and common goals for their local health economies.

“However, we would warn against universally mandating it, as major changes such as this would be unhelpful in areas with less well developed relationships.

“For any new payment system our tests would be: it must simplify, rather than add complexity; it should not be less transparent than existing systems; it should align health and social care; it should reduce transactional behaviours; it should address the issues behind the difficult financial position in the provider sector.”

James Rimmer, co-chair of the finance forum at NHS Clinical Commissioners and chief finance officer at Southampton Clinical Commissioning Group, said: “Our members need national clarity on the direction of travel so that they can plan for the forthcoming year. Any new approach must be implemented across the NHS as a whole, rather [than] on a piecemeal basis.”