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Monitor hints at phased approach to tariff changes

Healthcare Finance May 2012

By Steve Brown

The 2014/15 national tariff will be based on 2011/12 reference costs, Monitor has confirmed.

In its future role as sector regulator, Monitor will take over responsibility for tariff setting, setting its first tariff for 2014/15. It has been exploring options for tariffs and how the costing information used to derive tariffs could be improved.

A report from PricewaterhouseCoopers, commissioned by Monitor, had suggested that reducing the three-year time lag in translating costs to prices would improve the ‘relevance’ of pricing data. And there have also been suggestions that the regulator could collect costs from a sample of providers rather than using all providers.

However, speaking at the HFMA costing conference at the end of April – used to launch the revised HFMA clinical costing standards (see page 25) – Jason Mann, Monitor’s director of transition policy, confirmed that the plan for the 2014/15 tariff was that it would be based on the 2011/12 reference cost data collected by the Department of Health.

Given the timescales and complexity of the issues, Mr Mann suggested there was a need to manage expectations. ‘There won’t be a revolution,’ he said. ‘This will take time and may require phased implementation.’

The regulator is working with the Department and the NHS Commissioning Board – which will be responsible for setting the payment by results currency – on the 2012/13 cost collection. This will inform the 2015/16 tariff. Monitor’s first costing guidance will be published in early 2013.

Mr Mann stressed that Monitor was taking a partnership approach with the Commissioning Board on tariff development and that it would continue to support industry-driven standards. For example, its allocation requirements could rely on existing industry standards such as the clinical costing standards, published by the HFMA (see page 25).

One option might be to require submitted costs to be broken down by cost pools – the standards identify a series of cost pool groups to support comparisons of component costs across organisations. Monitor is also interested in the potential to use a materiality and quality score (MAQS), also included with the standards, as a way of assuring the quality of submissions.

Mr Mann said the regulator was exploring the need for incentives if it went down the costing sample route.

However Sarah Butler, Department of Health deputy finance director, told the conference NHS bodies did not need to be incentivised to improve costing per se. ‘There is a difference between costing and cost collection,’ she said. ‘The incentive to get better at costing is broader than the requirement to submit costs.’

Miss Butler also stressed the importance of the 2011/12 cluster based reference cost collection for mental health trusts. She said this first full collection would be ‘important in informing moves towards a national tariff for mental health’.  Next year, 2013/14, was originally set as the earliest possible date for the introduction of a national tariff. She added that health secretary Andrew Lansley was ‘very keen’ to see progress with mental health payment by results.   

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