NHSE ploughed ahead with PbR return despite major trusts’ objections

One of the NHS’s largest trusts, Barts Health, claimed part of the new proposals would “set systems up to fail”, while another major provider said they felt “like a step in the wrong direction”.

The providers’ objections to the new financial regime were set out in their responses to NHSE’s consultation on a new payment system for the next two years, which HSJ has obtained under a Freedom of Information Act request.

The new regime includes a move from block contracts with some adjustments, to a model akin to the payment by results system in place before the pandemic.

NHSE said this would give providers “maximum financial incentive to deliver the elective activity targets they are being set”. But the arrangements attracted criticism from finance leaders.

The payment system was confirmed at the end of last month, with the elective proposals largely unchanged. No accompanying analysis of the responses was published, as is normally the case.

However, the submissions obtained by HSJ reveal that while most trusts accepted the overall set of proposals, they were opposed to plans to apply a “variable element” to electives.

Barts said in its submission: “The variable element… is setting systems up to fail. Most systems will have an elective recovery fund activity target larger than 104 per cent (2022-23 target). This year systems have struggled to achieve the target.

“Setting a larger target without the additional capacity to support it means systems are forced to claw funding back from providers as floors cannot be set, leading to material deficits.”

Another of the service’s largest providers, Leeds Teaching Hospitals Trust, said: “The move to a payment mechanism which includes elective activity at 100 per cent of the national payment system feels like a step in the wrong direction.

“There is great concern that PbR creates perverse incentives, such as a disincentive to develop pathways and incentivises providers to use resources less efficiently.”

NHS Providers CEO Sir Julian Hartley, who headed up Leeds Teaching Hospitals until earlier this year, has previously urged caution on the return of PbR.

Other trusts warned the proposals could destabilise providers financially if they were unable to hit elective targets because of factors outside their control.

Manchester University Foundation Trust said setting the variable element at 100 per cent of tariff prices was “too extreme” and called for trusts to be guaranteed a minimum level of funding. University Hospitals Birmingham FT raised concerns about the “inevitable” impact of emergency pressures on elective work, which they said were a “significant financial risk”.

The Northern Care Alliance FT also called for an income floor, stating the elective tariffs were “flawed” as they are based on pre-covid costings. “It is likely that this will result in large deficits in providers,” the trust said.

A total of 39 acute trusts said they tended to oppose or strongly opposed the variable element for elective work, compared to 32 that either tended to support or strongly supported. Another 25 said they neither supported nor opposed, or didn’t know.

NHS Providers’ director of policy and strategy Miriam Deakin said: “On balance, trusts felt able to support the majority of NHSE’s proposals. However, a number pointed out that moving closer to an activity-based model for elective care could have unintended consequences and hamper efforts by providers on greater collaboration within systems.”

She added that trusts were also concerned about the levels of financial risk their organisations will have to carry if they underperform against activity targets, “particularly given that some of the drivers of this such as high demand, workforce shortages and deteriorating public health are beyond their direct control”.

An NHSE spokesman said: “The NHS faces a huge challenge to recover the backlog of elective work and to tackle waiting times. Payment by activity will help ensure that funding is directly available to support providers’ efforts to do so.”

Updated 09.45 13/04 to include NHS England statement.