We now know the 'road test' phase of tariff setting for the English NHS begins on 8 December, when the draft tariff for 2009-10 will at last be published.

The launch of the final package is scheduled for 12 January. A few cost accountants working in hospitals may not have the relaxing Christmas break they have been longing for.

For this is the first payment by results tariff to use the new, more sophisticated HRG4 classifications of hospital activity. The delay (HRG4 was originally supposed to be published in December 2007) was beginning to seem ominous, especially after the rumours of non-existent data collection systems and cavalier approaches to reference costing that circulated in 2007.

Thankfully, NHS director general of finance, performance and operations David Flory assured the service in his letter of 7 November that the 2006-07 reference cost data, on which the new tariff will be based, "appears broadly consistent in quality to previous years".

An immense relief to all, even if local "sense checking" (dry runs) by nerds and pedants during the dark midwinter days may yet reveal the odd anomaly.

Rewards for improved outcomes

The jury is still, however, out on what may be a significant adjustment: rewards for improved outcomes. Back in June, Lord Darzi's next stage review announced the commissioning for quality and innovation scheme, commonly known as CQUIN, in which "payments will reward outcomes". In the first year, presumably 2009-10, providers will be rewarded simply for submitting data.

Sounds good? The catch is that, again to quote Lord Darzi's report, "funding will be freed up through reducing the tariff uplift from 2009 to give commissioners dedicated space to pay for improved outcomes". This "dedicated space", translates loosely as "some money".

But how much? The amount will, I suppose, be revealed on 8 December. Unofficial suggestions are that while the level of incentive may at first be relatively small, perhaps 0.5-1 per cent in the first year, it may grow to around 4 per cent. For most providers, that puts at risk a sum in excess of the annual efficiency target. Primary care trusts may pay some or all of the CQUIN money early, in anticipation of most goals being met, while maintaining cash flow and good relationships. But payments may later be recovered if goals are not achieved.


It is understood that in 2009-10 CQUIN will only be mandatory in the acute hospital sector. The Department of Health is concerned that also implementing it in community, mental health and ambulance services by April may stretch PCT commissioning capability and capacity too far. This is probably the right decision.

It will be tough enough for acute providers to take the metrics being developed for the 2009-10 NHS operating framework and have sound data collection systems ready. All of which is curiously similar to the difficulties experienced when HRG4 was originally introduced in 2006.

Non-anoraks - congratulations for reading this far. This column offers an exciting reward for the best witty one-liner involving the acronym CQUIN. References to Strictly may be judged a little passé.

CQUIN, meanwhile, is not to be extended to primary care. GP practices have their own financial inducement to perform better, in the quality and outcomes framework.

GP performance

Those designing CQUIN rewards would do well to reflect on the framework experience. Since 2004 about 14 per cent of GP practice remuneration, now amounting to around£1.1bn a year in England, has been determined by scores on more than 120 separate indicators. A total of 1,000 quality framework points are available annually, each worth£124.60. There is a system of adjustments for practice size and disease prevalence but even on raw framework scores, top performing GP practices can earn an extra£125,000 or thereabouts a year.

And they do, in large numbers. Even in the first year of the framework the average score was 91 per cent. The DH had allowed for 74 per cent performance within PCT funding allocations, leaving a£200m shortfall to be covered by commissioners. NHS Scotland had budgeted for 64 per cent performance but had to fund 92.5 per cent. In England, average performance has now risen to over 96 per cent.

This is excellent news for patients, if not for accountants. Most of the points for clinical performance reward the high quality management of patients with chronic conditions. A growing number of studies, including a well received article in the New England Journal of Medicine in July 2007, suggest the framework has triggered a remarkable improvement in the health of people with diabetes, asthma and chronic obstructive pulmonary disease. In the short term it has worked remarkably well.

Waning motivation

But the motivation that initially spurred GPs to improve their practice or administrative systems may now be starting to wane.

With GPs widely perceived to have done very well out of the new contract and government trying to claw back some of its early largesse, the rate of£124.60 per point has been frozen since 2005-06.

And there is also a growing realisation that as the extra 14 per cent becomes an expected part of the pay package it no longer works as a motivator. Improvements in care quality are slowing down. This is essentially why in October the DH opened a consultation on the National Institute for Health and Clinical Excellence assuming responsibility for reviewing framework indicators and proposing new ones.

Extra money quickly becomes seen as normal practice, so the threat of withdrawing it is virtually sure to provoke defensiveness and poor working relations. And as with individuals, so with organisations. It is a lesson the CQUIN architects would do well to heed.