Payment system 'could close services'

Hospital services will be allowed to close if managers cannot ensure their financial viability under payment by results, health minister John Hutton has warned.

His comments were made as the Department of Health released the tariff prices for 48 operations which will be used from April to pay provider trusts.

But Mr Hutton's stark warning has been questioned by those who say politicians will find it difficult not to intervene to save local services threatened by the harsh effects of the new tariff system.

Mr Hutton said: 'We are going to address concerns with the management of those units that are not providing services at the tariff, or that primary care trusts actually want to use.

'But where management is [continually] failing and the problems cannot be addressed... then, yes, services will move elsewhere.'

This did not amount to a hospital closure programme, he added.

Healthcare Financial Management Association chief executive Mark Knight said such closures would require a 'certain degree of political bravery'.

'[Service closures] are certainly a theoretical possibility under payment by results. But there are issues beyond the financial figures, ' he told HSJ. 'It is going to be difficult for politicians themselves to stand by and watch services in their own constituency close down.'

NHS Confederation policy director Nigel Edwards said: 'The problem is that the hidden hand of the market doesn't always allow you to shut down the services that should be shut.

'Services provided in out-ofthe-way, rural areas come under pressure even though they may be strategically important because of their very isolation.'

Avon could be the first region to feel the force of the new economic realities under payment by results.

Avon, Gloucestershire and Wiltshire strategic health authority is already battling to reduce debts, topping at one point last year an unprecedented£219m An Avon trust finance manager said: 'Payment by results will be a test of how independent the NHS will be from political interference.

Look what happened in Kidderminster when they tried to reconfigure services. The Labour MP lost his seat.'

He added: 'It is widely known that [what is] underlying the financial problems in Bristol is that there are simply too many services - there is one too many district general hospitals. If [payment by results] is allowed to work then it will probably result in service closures. But will it be allowed to work? I do not know.'

DoH figures published last week show that North Bristol trust has reference costs 27 per cent above the national average - the highest in the acute sector outside trusts providing specialist services.

The good news, Mr Hutton said, was that 70 per cent of acute trusts were within plus or minus 10 per cent of the national average reference costs - including high-cost specialist trusts. This, he said, showed the necessary efficiency savings were possible.

Children's services tariffs need further refinement

The Department of Health has acknowledged that introducing tariff prices for children's services is proving difficult.

Payment-by-results programme manager Bob Dredge - a former finance director of Birmingham Children's Hospital trust - said the healthcare resource groups for children's services, from which the tariff prices are calculated, needed further refinement.

The National Children's Hospital Alliance, whose members are children's trusts, warned that the current system would 'significantly undermine their [the trusts'] financial viability'.

'Children's specialist services are affected to an even greater extent as the HRGs for childcare are derived from the equivalent adult care in many cases.These are not appropriate. If implemented for children's hospitals, the HRGs would make a significant financial shortfall in these trusts.'

The alliance said it was starting discussions with the DoH to determine a way 'to work together to establish more reliable costs for specialist paediatric care'.