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Plans for next year’s national tariff are set out

Providers asked to make 4% annual efficiency savings

Jo Carlowe

Friday, 04 October 2013

The two organisations that will take control of the NHS payment system have this week outlined the rules that will govern their first year.

Monitor and NHS England have set out detailed proposals for the national tariff for 2014/15. The organisations say the tariff will encourage providers and commissioners to develop local payment approaches “that enable better integration so services are less fragmented and easier for patients to access”.

New rules will come into force next year that will allow “local experiments” in ways of paying for NHS-funded services.

Local price setting (excluding block contracts) currently accounts for about a quarter of the £67bn covered by the NHS payment system. Monitor and NHS England’s draft proposals for 2014/15 encourage the widespread use of local approaches.

Responsibility for the national tariff has this year been passed from the Department of Health to joint arrangements in which Monitor, the sector regulator, sets the prices and rules for groups of health care services that are determined by NHS England, the NHS Commissioning Board.

The two organisations have stated that they expect providers to make annual efficiency savings of 4%.

“The national tariff of prices and rules for 2014/15 also takes account of rising NHS costs of 2.1%, so on average the prices providers are paid for services next year should go down by 1.9%. This releases funds for commissioners to buy more services for patients,” they state.

Monitor and NHS England plan to finalise their proposals for the national tariff in December and for these to come into effect in April 2014. 

The draft national tariff proposes to make two important changes relating to the rule under which providers are paid 30% of the tariff price for each emergency admission over an agreed baseline, with the remaining 70% being retained by commissioners to invest in keeping patients out of hospital.

First, where there have been significant local increases in emergency admissions outside the control of providers, commissioners will be required to agree a revised baseline before the marginal rate kicks in.

Second, NHS England states it will ensure that the money retained by commissioners through the application of the rule will be spent ‘transparently and effectively to enable more patients to be treated in community settings’.

Adrian Masters, Managing Director of Sector Development at Monitor said: "Our proposals for the payment system in 2014/15 are designed to help commissioners and providers address the key challenges facing NHS care in their localities.

"We are offering them more freedom to encourage the development of new service models, maintaining incentives to provide care more efficiently and providing greater financial certainty to underpin effective planning for patients."

Paul Baumann, Chief Financial Officer at NHS England, said: "Providers and commissioners face a major task in constructing robust plans for 2014/15 onward which secure clinical and financial sustainability in increasingly challenging circumstances.  

"To help them succeed in this task, we are proposing tariff arrangements for 2014/15 which provide the maximum possible continuity. Meanwhile we will be taking forward our work on longer-term pricing strategies to support our emerging strategic priorities and incentivise improved outcomes for patients."

Commenting on the proposals, NHS Confederation director of policy and GP Dr Johnny Marshall said: "We have long been calling for changes to the marginal tariff, so that the NHS payment system incentivises delivery of the best care for patients. Today's announcement from Monitor and NHS England recognises that the marginal tariff isn't yet right, and is a major step in the right direction.”

The 2014/15 National Tariff Payment System documents are available for consultation until October 31.

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