The national body published its payment scheme earlier this year covering both 2023/24 and 2024/25. The core of this system – describing four payment mechanisms covering all NHS funded secondary care services including the aligned payment and incentive scheme – will remain in place next year. However, some small amendments are being considered.
One of the key changes would see the clawback arrangements relating to the CQUIN scheme (commissioning for quality and innovation) halted. In the current year, the payment system asks commissioners to assume the full achievement of CQUIN metrics when setting contracts with an annual value above £10m – increasing the contract value by 1.25%. However, this payment is then decreased and an element clawed back if providers fail to deliver all the required targets.
In a briefing this week on plans for next year’s finance system, NHS England said it was considering removing the requirement for adjustments to be made if CQUIN criteria are not met – so providers would receive full CQUIN funding with no clawback. It said this was partly in response to feedback that the financial element is already not being applied in some systems, with integrated care boards (ICBs) and providers agreeing to work together to fix any shortfalls on quality metrics, rather than imposing financial penalties.
There have been growing concerns that the CQUIN scheme is not operating as originally intended, with finance practitioners suggesting that the bureaucracy around the system is not justified by the small relative value of the incentive. There is also a wider review of incentives for quality underway being led by NHS England’s medical and nursing directorate.
CQUIN indicators would continue to be published and local systems could choose to use them and operate a CQUIN-like scheme, but there would be no national requirement to adjust payment in line with the achievement of these indicators.
No changes are proposed to the mechanism for funding high-cost drugs and devices, however the list of drugs covered by passthrough payment arrangements – and those excluded, where payment must be agreed locally – is being reviewed.
Arrangements for low value activity (LVA) will broadly remain the same under the current proposals. The current system sees all contracts with an annual value of less than £500,000 covered by a block payment – with the payment calculated using a three-year average, cutting out on a huge amount of invoicing. However, the delegation of some services from NHS England to ICBs next year – including the commissioning of secondary dental care and some specialised activity – could push some provider contracts over the £500,000 threshold.
So NHS England is proposing to disregard delegated service values for the purposes of determining whether a contract is treated under the LVA system.
There are also proposals to introduce a new rule to avoid providers being penalised as a result of implementing the Getting It Right First Time right procedure right place programme guidance. And a minor change to how different inflation estimates are weighted when calculating the cost uplift factor is also under consideration. This would alter the pay weighting so that it aligns with the way education and training tariffs are calculated. But it would have a very minor overall impact – with the cost uplift factor unaffected to one decimal place.
It is also proposed to continue this year’s approach to the elective recovery fund (ERF). This involves commissioners receiving their fair share of ERF funding and being set an elective activity target for the year. Providers are then paid for all elective activity delivered at 100% of the set unit price.
However, practitioners have reported problems with the existing arrangements, particularly around the calculation of baselines against which performance is monitored. Activity targets have already been reduced this year to reflect the impact of doctors’ industrial action and further adjustments are expected. But there are also concerns about how rising levels of non-elective activity, paid for under fixed payment arrangements, can reduce capacity available to undertake elective activity, paid for using tariff prices – reducing overall income for providers.
The proposed changes to the payment scheme for 2024/25 would be subject to a 28-day consultation. But the relatively minor nature of the proposals means there would be no consultation on prices and LVA values, which would just be updated using the approach outlined in the existing guidance.
Slides and a recording of the NHS England briefing are available on the Future NHS platform
This event is for senior NHS finance and healthcare professionals and will provide delegates with the know-how to begin applying value in practice.
A delegate-led day tackling specific technical costing challenges and discussing some of the practicalities of implementing the costing standards.