The Department of Health should look at 'contracting out' elements of the tariff-setting process, according to a hard-hitting report commissioned by ministers.

The Department of Health should look at 'contracting out' elements of the tariff-setting process, according to a hard-hitting report commissioned by ministers.

The report, commissioned to analyse mistakes in setting the 2006-07 tariff, calls on the DoH to consider bringing in an outside agency to calculate the 2008-09 tariff, but health minister Lord Warner would not say whether the tariff would be set outside the DoH in the future.

The study's author, Harrogate and District foundation trust chief executive John Lawlor, criticised the DoH for its 'weak communication' in engaging with the NHS is setting and publishing last year's tariff.

The report says that the tariff - first issued in January by the DoH before being hastily retracted - was 'materially wrong' and 'inaccurate' and that the incident identified a 'lack of expertise' in the DoH's payment by results team.

'It was hard to recruit people with the right skills [in the DoH]?the management of the PbR team were trying to address the issue but had not fully succeeded by the time the tariff needed to be calculated,' it adds

The report is also highly critical of the DoH's tariff-setting project transition board, whose job it was to inform the NHS about the tariff. It highlights 'weaknesses in the governance process, with a lack of clarity about the roles and responsibilities'.

It continues: 'Engagement [with the NHS] was by necessity seen as a lower priority than other work; this proved to be a mistake. The department used the project transition board and strategic health authorities to gather NHS views, but this was not sufficient and left people in the NHS confused and surprised.'

Lord Warner admitted that there had been 'unfortunate errors' in the initial tariff for the last financial year. 'We accept the recommendations made in this report and are going to try to give as much certainty as we can to next year's tariff to make it easier for trusts to plan ahead.'

Lord Warner said that this year the DoH planned to 'road test' the new tariff with the NHS in October before publishing the 2007-08 tariff in December.

He said that the DoH had brought in PbR experts from Ireland, Germany and Australia to help set the tariff for the next financial year but would not say whether it would be set outside the DoH in future.

'Ultimately you have to ensure that the tariff is compatible with the cash limit for your total spend. We have to have a decision-making process on the tariff which is compatible with that. We can't totally divorce our responsibility for the tariff from that over the total cash-limit,' Lord Warner claimed.