Twin track approach

There has been a relatively positive reaction to the announcement by NHS Improvement and NHS England of a new default payment system for urgent and emergency care (UEC). From 2019, the marginal rate emergency tariff is no more – disappearing along with the 30-day readmission penalty. In its place comes a ‘new’ blended payment system, including a fixed amount linked to expected activity and a volume related element.

I say ‘new’ but it looks quite familiar. In terms of mechanism, it works in a similar fashion to the existing marginal rate tariff – but, importantly, should allow the agreement of more realistic levels of activity in baselines. Topping up urgent and emergency care tariffs with funds from the Provider Sustainability Fund will also help to address the underfunding of emergency care tariffs.

But the new blended payment approach also looks rather like proposals for new UEC tariffs as long ago as 2014. That was when NHS England and Monitor first started talking about a three-part tariff for these crucial services to recognise their ‘always on’ nature. They followed this up with formal guidance over a year later, with the idea that the three-part approach – with elements for core funding, volume and performance – could become a local payment mechanism rather than the main default approach.

It is perhaps surprising that it has taken four years for this approach to be promoted to the mainstream, albeit with the performance element dropped – although that is included in the proposal for mental health services. And there are indications that this approach is the future for other services including elective.

Others might be thinking ‘why now?’. Aren’t we moving towards a system of system-based payment, with budgets set on the basis of capitation and gain/loss mechanisms to share risk across different providers and commissioners?

While clearly, the blended payment approach proposed in October’s tariff engagement document continues to support contracting between commissioners and acute providers, some believe it moves the NHS in the right direction. It arguably weakens the link between payment and activity for acute providers and, as Alex Gild says above, ‘starts to create the conditions and behaviours that will help the service work towards system payment mechanisms’.

It also perhaps underlines the fact that the centre continues to see a role for the tariff even as the NHS moves into a world of capitation-based payments and population health.

There are many possible reasons for this. First, it will take time to develop new payment approaches and the service needs to modernise its existing tariff in the meantime. Second, even with system-based payment approaches in place, local bodies will need prices and currencies to inform contract values and budgets. And third, our system leaders see the future as needing both a high-level and a very detailed approach. For example, there are proposals to develop prices for services such as IVF and smoking cessation.

There is understood to be a lot of excitement about how greater support in hospital for smoking cessation can have major benefits in terms of population health and future demand for services.

And specific tariffs – or at least a clear idea of the cost of an enhanced service – are seen as the right way to encourage providers to develop services.

So, while the broadbrush approach to paying for services in future might be all about system payments and capitation, don’t expect to see individual tariff prices disappearing anytime soon.