News / Association backs 2015/16 cost update for national tariff

By Steve Brown

The HFMA has backed Monitor and NHS England’s proposal to use more recent cost data as the basis for the 2015/16 tariff, rather than rolling forward tariff prices for a further year.

The two organisations responsible for price-setting published a national price methodology discussion paper at the end of April.

The 2014/15 tariff was based on last year’s tariff adjusted for cost and efficiency, meaning tariff prices continued to be based on 2010/11 reference costs. But the paper proposed updating the tariff basis to the 2011/12 reference costs.

However, the bodies stopped short of moving to the 2012/13 costs – which would have restored the original three-year lag between costs and prices – because this would have involved a switch to the revised HRG4+ currency.

The new version of healthcare resource groups is a major change from the current HRG4 currency, with far greater recognition of complexities and comorbidities, and was seen by Monitor and NHS England as ‘too risky’.

In its response to the discussion paper, the HFMA said it supported the move to the 2011/12 reference cost design. However, it identified ‘potentially significant benefits from the improved design represented in HRG4+’.

‘The HFMA would welcome a formal commitment to adopt and use HRG4+ data for 2016/17, so that local health economies can plan for the change and understand its potential impact,’ said the association’s response.

The discussion paper also raised the possibility of basing some tariff prices on an average of reference costs data drawn from multiple years, in part to counteract tariff volatility.

However, the HFMA said this benefit would need to be balanced against the fact that the most recent cost data should provide the best reflection of costs, taking account of changes in clinical practice and improvements in costing processes and efficiency.

The association also welcomed the proposal to consider tariff leakage.

Paul Briddock, the HFMA’s director of policy and technical, said: ‘Finance practitioners understand how the tariff works at a detailed level and the association is keen to be involved in any discussions around this issue and the identification of a realistic level of efficiency requirement.’