Trusts raise concerns with blended payment baselines

NHS England and NHS Improvement published their tariff proposals at the end of 2019 and the consultation ran until the third week of January.

The tariff has reduced in importance in recent years as many health economies have reverted to simpler block contracts or introduced caps and collars and other risk-sharing arrangements. However, along with detailed planning guidance, due to be published as Healthcare Finance went to press, the cost uplift and efficiency requirement are key details in enabling systems to agree contracts for 2020/21.

The guidance proposes a 2.5% inflation cost uplift, offset by a 1.1% efficiency factor.

Price relativities will be rolled over from the 2019/20 tariff to minimise financial volatility with the tariff set for just one year. The move to new market forces factors – which adjust national prices to take account of unavoidable local costs incurred in different parts of the country – will continue, with 2020/21 the second year of a five-year ‘glide path’.

The consultation document also confirmed an expansion of a blended payments approach. Blended payments combine a fixed payment based on agreed activity with one or more of: an outcomes-based element; a risk-sharing element; and a variable payment. Already set as the default mechanism for emergency care and adult mental health services, this will now be extended to outpatients and maternity services, with a pilot scheme also run for adult critical care.

NHS Providers backed the one-year timeframe for the tariff as appropriate given the ‘lack of uniformity across payment systems’.

But policy officer Patrick Garratt said: ‘Over the long term, providers will require more certainty over their baseline allocations. NHS England and NHS Improvement should work towards setting the tariff for a longer period of time after 2020/21 to support the long-term ambitions of the sector as set out in the long-term plan.’

The representative body’s response to the consultation also raised issues with the blended payment approach, with trusts concerned about the difficulty in establishing baselines. ‘Trusts must be reassured that activity levels will be forecast on previous years’ outturns and continuing trends,’ the response said. ‘Commissioners should not place unrealistic expectations upon providers by setting ambitious forecasts.’

A report from The Strategy Unit at the Midlands and Lancashire Commissioning Support Unit – Establishing fair benchmark levels for the blended payment system – suggests that the financial implications of using inappropriate modelling approaches for setting planned activity levels within the blended payment system are not trivial. ‘Our analysis showed that a group of providers could see swings of up to £6m in their payments (for emergency admissions alone) depending on the method used,’ it said. The report calls for methods to set benchmarks to be set out in detail.

Despite the proposed expansion of blended payments, it is not clear how many systems have adopted the approach in 2019/20 for emergency care or mental health. A formal evaluation of the emergency care system is promised in the consultation paper. However, NHS England and NHS Improvement have suggested that the majority of commissioners and providers have something in place that follows the spirit of the blended payment policy.

The HFMA’s response has also raised concerns with the process to agree the fixed payment, specifically for outpatients.

‘We are concerned there is the potential for double-counting,’ said HFMA policy and research manager Andrew Monahan (pictured). ‘If reductions in face-to-face contacts are factored into the fixed payment and also included as an outcome measure, a trust could face a double penalty on any overactivity,’ he said.

He added that there were also concerns about the suitability of a blended payment approach for specialised services outpatients.