Magazine article Public Finance

NHS Tariff Can Be Made to Work

Magazine article Public Finance

NHS Tariff Can Be Made to Work

Article excerpt

Unlike last year, a new national NHS tariff for 2016-17 has been set. The tariff, which governs how NHS services are paid for, is explained in more than 20 documents, covering around 2,000 national prices and is the product of at least a year's worth of work with NHS professionals.

If the tariff seems complicated, it's because it is. It needs to be if billions of pounds worth of NHS funding is to be spent effectively.

Many NHS leaders, though, view the tariff as unnecessarily complex. Each year, they see its web of rules become further detached from local care delivery. This perception was borne out in a recent survey of NHS Confederation members. When asked what should happen with the national tariff over the next five years, 65% of leaders called for the NHS to move away from it completely.

Of course, much of the animosity towards the tariff reflects its recent role in driving year-on-year savings. For the past five years, an efficiency factor of around 4% has pushed down the prices paid to providers, which has led to financial instability. This factor has now been reduced - at least for this year - and net prices will begin to increase once again.

There is also a belief that too much focus is unhelpfully put on activity-based objectives, despite the intention that there will be a greater emphasis on a continuum of care rather than specific episodes. If prices are set for acute services - and national prices affect hospitals in particular - then incentives are considered to be pulling patients into hospitals despite the vision of a more community-based care model.

In truth, squeezing providers and encouraging activities are neither inherent nor primary features of the tariff, so reform is certainly possible to help rebuild faith in its ability to distribute resources. Changes to the tariff have been on the cards for some time and discussions on long-term reform have looked at how the payment system might do more for patients; however, short-term difficulties have inhibited the national bodies in realising this ambition. …

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