The next 12 months will be a 'difficult' time for the NHS as it tries to get to grips with a tariff system that is still 'unbalanced', the NHS chief executive has admitted.

The next 12 months will be a 'difficult' time for the NHS as it tries to get to grips with a tariff system that is still 'unbalanced', the NHS chief executive has admitted.

David Nicholson said the Department of Health would be taking action to ensure that payment by results ceases to favour hospitals over commissioners.

'The balance that we have got in the system is not quite right,' he told delegates. 'One of the things we are seeing across the country is fewer patients being treated but costing a lot more money. This is not because patients are sicker but because trusts are getting better at coding.'

But he added: 'There are ways we can deal with tariff and shift the balance.'

Mr Nicholson admitted that the NHS is going to go through a 'difficult period over the next 12-18 months, and as people get geared up to the system there will start to be problems'.

But he urged acute and primary care trusts to keep their disagreements behind closed doors. 'We have got to stamp out inappropriate behaviour in the system,' he said. 'It is not acceptable to have tussles between public organisations.'

Health secretary Patricia Hewitt admitted that there were some 'perverse incentives' in payment by results, but she promised more levers for PCTs to control acute activity in next month's operating framework.