The future, according to Monitor, will be the tariff, and the tariff will be more granular, with prices linked more precisely to thecosts of treating more narrowly defined case mixes.
As is the case now, prices will be based on average costs. But radically those average costs will, Monitor hopes, be based on actual average costs, as opposed to arbitrarily apportioned overheads.
It is a beautiful vision – one in which the need for cross-subsidisation is eliminated because every service line in a hospital is properly enumerated.
But before we get there, the scene is being set for some fun in an accounts department near you.
A significant part of Monitor’s granularity revolution will involve a push for more accurate and consistent allocation for that 50 per cent, or perhaps more, of cost that is related to overheads, fixed and infrastructure costs, which cannot be easily related to a single ward, let alone a single patient.
To achieve that, Monitor is likely to issue guidance setting out how fixed costs should be attributed to different service lines.
That guidance – which Monitor’s executive chair David Bennett describes as likely to involve an “approach” rather than a “formula” – could be the subject of heated debate when it finally emerges.
Monitor is already wise to the temptation some hypothetical private providers may feel to pass fixed costs associated with non-NHS provision over to their NHS data returns.
But lifting the private patient income cap will also bring new scrutiny to the private activity of NHS hospitals. The government has so far resisted accepting amendments to the Health Bill explicitly barring hospitals from pricing private treatments at “marginal cost” – that is, full cost minus fixed cost – a practice a number of foundation trusts believe is reasonable.
Indeed, an HSJ investigation in 2009 found that some 30 per cent of private patients treated in NHS hospitals were charged less than the trust’s full reference cost for that treatment.
But even as the Health Bill currently stands, organisations in future will be required to set out in their accounts the “impact” their private activities have had on their NHS services. Whether or not FT members and patients will be happy to see private patients treated for less than the local clinical commissioning group is charged remains to be seen.
Sally Gainsbury is a news reporter for the Financial Times.