Monitor and NHS England are considering setting acute providers different efficiency targets based on their varying potential to achieve savings, the organisations have announced.
HSJ understands variable efficiency targets could be used to alleviate financial pressure on some trusts, which are currently struggling to deliver the required 4 per cent annual savings.
The proposal has been made in a document published by the two national organisations which sets out possible changes to the national tariff to help the NHS cope in an increasingly difficult financial environment.
In the document, the arm’s length bodies said they were considering “how to allocate financial risk optimally across the sector” so more risk is allocated to “those organisations best placed to manage it”.
This could mean acute trusts being given different efficiency targets from 2015-16 according to estimates of their “potential to improve their unit cost efficiency”. It would mean providers being paid different rates for the same procedures or services because tariff prices are calculated based on efficiency requirements.
The document, published late last month, explains the method for estimating efficiency potential “may consider providers in peer groups or apply different efficiency factors for different types of care”.
Monitor’s director of pricing Ric Marshall told HSJ the current tariff system was “not always sensitive enough to the particular circumstances in which some providers find themselves”, and that this contributed “to the financial strain that is beginning to show across the system”. Professor Marshall said giving acute providers different efficiency expectations in the 2015-16 tariff could “give a period of respite for hospitals which are being well managed but are still struggling”.
One acute foundation trust chief executive said he thought the plan was “very positive”. It was also welcomed by King’s Fund chief economist John Appleby. He said: “The efficiency factor that [the Department of Health and latterly Monitor] have always used is a rather crude sledgehammer. It makes huge assumptions about the capabilities of organisations to improve their productivity.”
“Surely it would be better to have a more tailored number; if you’re going to go for an [efficiency] target in the tariff system then why not make it more sophisticated?”
He added that the proposal could remove perverse incentives in the current system which encouraged some providers to restrict their productivity improvements to the national target figure.
However, the Foundation Trust Network warned variable efficiency targets would not help if the overall savings required were at an “unrealistic level”. A spokesman said: “Efficiency targets should not be based simply on the maximum level of financial risk a provider can bear over the course of a year before becoming unviable.”