Published: 07/10/2004, Volume II4, No. 5926 Page 6 7

Acute trust finance directors are lobbying the Department of Health to drop the market forces factor (MFF) because it will distort payment by results, encouraging primary care trusts to choose on price grounds.

The MFF is used to reflect unavoidable variations in cost across the country, and includes staff, land and buildings.

Currently the factor is used to adjust the national tariff payable to each individual trust, meaning a PCT can purchase the same procedure from different hospitals at different prices.

Opponents say that the inclusion of the MFF under payment by results will make some trusts very expensive. They fear that trusts with a high MFF will lose business as PCTs choose to commission from less-costly providers, even though the new market is not supposed to be based on price.

Meanwhile, trusts with low MFFs are worried they will not be paid enough to cover their costs.

Foundation trusts are already using the payment by results system. University College London Hospitals foundation trust has an MFF that makes its procedures cost 26 per cent more than the national tariff. Chief executive Robert Naylor said: 'We need to see the MFF taken out of the national tariff so that everybody is on a level playing field.'

The finance director of another large London trust added: 'The MMF introduces all sorts of opportunities for PCTs to game the system and commission on price. This is against the spirit of the policy, ' they added.

Others say it has been applied to too small a unit - trusts, rather than cities or counties - and is resulting in distortions that do not reflect real prices.

For example in London, Homerton University Hospital foundation trust attracts an MFF of 17 per cent yet the nearby Barts and the London trust has an MFF of 23 per cent. St Mary's trust in Paddington has an MFF of 28 per cent while at St George's Healthcare trust in Tooting it is just 11 per cent.

One finance manager, who asked not to be named, said: 'This makes no sense. The largest factor in this equation is staff costs and these do not vary that much. It means that some of the lower factored hospitals will simply not cover their costs.'

The DoH has already acknowledged that the MFF is a cause for considerable concern. In its July response to a consultation on payment by results it said the current system provided an incentive for PCTs to commission on the basis of cost. The MFF could also place PCTs at financial risk if large numbers of patients chose expensive hospitals for treatment.

The DoH has proposed removing the MFF from the national tariff and dealing with it as a 'national levy-type adjustment to both PCTs and trusts'. No further detail has been provided on what this might mean or how a levy might operate.

A DoH spokesman said: 'The quantum of the MFF will be revealed when we publish the national tariff on which decisions have still to be taken. How it works will be in the technical guidance which is due at the end of October.' However, finance managers remain concerned that any levy should be sensitive enough to recompense them within the year for extra activity.

And while many would be happy with a national levy, HSJ finance columnist Noel Plumridge warned: 'This is the command and control system reasserting itself. It will be presented as a technical adjustment, but in effect it puts control of the rate of change in the hands of whoever controls the levy - and That is likely to be the centre.'