The government must set prices across most aspects of health service provision to prevent price competition accelerating under its reforms, the NHS Confederation has warned.

The Department of Health this month struck all references to “maximum tariffs” from the Health Bill, in an attempt to quash fears of price competition harming care quality.

But a confederation paper published today warns that price competition remains “possible, indeed likely” for NHS services not covered by set tariff prices, such as mental health and community services.

Only a third of current primary care trust spending is covered by the tariff, it adds.

The government will also need to invest “significantly” in developing care quality measures “to have any chance of achieving its ambitions [of avoiding price competition] within a reasonable timescale”, it states.

Confederation acting chief executive Nigel Edwards told HSJ that price competition without good measures of care quality “does have a quite significant hazard of a race to the bottom” in terms of cost.

This was “more likely to be true in the future” as the reforms removed other quality safeguards, including regulator Monitor’s compliance framework.  He also believed that new commissioning arrangements would be less focused on scrutiny of how providers were performing.

The paper remains broadly supportive of the reforms, but complains the government has left a gap between “good in principle” ideas and “details of practical delivery, which have often looked opaque or too optimistic”.

It suggests the government should make “absolutely explicit” that the new economic regulator Monitor will treat competition as a “means, not an end”. It says the introduction of “any willing provider” should be introduced in phases, to a limited list of services each year.

The report also says commissioning consortia will in “all likelihood” increase the “variability of access to services”. It recommends that consortia could be given commissioning responsibilities “at a speed they feel comfortable with” rather than by the 1 April 2013 deadline.

The paper says government must set out which organisations are at risk of not achieving foundation trust status, and how their problems will be dealt with.

It warns that handing responsibility for reconfiguration of hospitals with major problems to commissioning consortia would “create a high risk of the consortia mishandling the issue and losing the confidence of their local populations”.

Mr Edwards said this left a maximum of 18 months to two years for action. “Simply handing [these hospitals] over to a foundation trust or someone else without significant financial assistance isn’t going to work,” he added.