Concrete evidence of the impact of the collapse of public finances on the health service is beginning to emerge.

As HSJ reveals this week the Department of Health is considering capping the number of patients for which a trust is paid the full tariff, and tying any tariff increase to quality and innovation (CQUIN) targets.

Making such a drastic change to health funding is an admission that PCTs have failed to get a grip on demand

The cap is designed to remove one of the major risks for the health economy as the recession hits - acute trusts crippling primary care trusts by trying to grow their way out of trouble through more activity. The fear was that a simple cash cut in the tariff would trigger a surge in hospital procedures.

This move effectively transfers the risk from the PCTs to the providers, but this is a blunt tool.

Making such a drastic change to health funding is an admission that PCTs have failed to get a grip on demand.

Over the last few weeks there has been plenty of anecdotal evidence that many trusts were relying on growing activity to keep their heads above water.

In recent years trust income has had a habit of soaking up all the extra cash flowing into PCTs. Despite all the talk of moving services into the community, demand management and disruptive innovation, it has been business as usual. The price for this is now that some trusts will be at serious risk of getting into difficulty.

For months now Monitor has been spelling out in increasingly bloodcurdling language that some foundation trusts have simply not grasped the height of the financial cliff they could fall off. And even many of these optimists are expecting severe staff cuts.

Before long the implications for individual trusts of the new tariff rules will become clear. But in the meantime the onus is on PCTs to demonstrate how they are going to exploit the headroom they have been given to raise their game in managing demand and shifting more care into the community.

Tariff cap may limit some trusts’ ability to survive the recession