News / News analysis: Starting prices

The Department of Health has confirmed the tariffs that will be in place from April 2013 and issued final payment by results guidance. Steve Brown looks at what’s changed from 2012/13 and what hasn’t


The Department of Health published its final payment by results package – covering 2013/14 – at the end of February. As of next year, tariff-setting responsibilities in England transfer across to Monitor and the NHS Commissioning Board. There are ongoing discussions about new currency possibilities and new approaches to costing. But one glance at this year’s PBR guidance should prepare people for a slow pace of change.

Tariff setting, and the necessary rules and guidance that go with it, is a complex business – and increasingly so. As the tariff system has developed, it has not just expanded in scope but incorporated tweaks and refinements – specialist top-ups, short-term adjustments, marginal rates, for example – alongside more specific incentives such as those incorporated in best practice tariffs.

This year’s guidance weighs in with a sizeable 231 pages. Compare this with 2005/06 – the first full year when tariff prices covered all commissioned activity, not just a subset of healthcare resource groups – when the whole system could be described in a core of just 42 pages.

The Department said changes to PBR arrangements continue to be guided by four principles: incentivising quality and better outcomes for patients; embedding efficiency and value for money; promoting integration and patient responsiveness; and expanding scope. The new guidance highlights the changes in these areas.

Quality

The cornerstone approach to incentivising quality has been the development of best practice tariffs and this continues in 2013/14. There were 12 existing best practice tariff areas, including acute stroke, transient ischaemic attack and adult renal dialysis. Some of the tariff areas, such as day case procedures and interventional radiology, covered a number of different procedures. These are now joined by six new best practice tariffs, including endoscopy procedures, plural effusions and paediatric epilepsy. So, for example, with endoscopy services payment will be linked to accreditation.

There have also been some changes to the existing portfolio. The cataract surgery best practice tariff, for example, is now non-mandatory to relieve ‘undue administrative burden on those commissioners for whom the benefits are outweighed by the costs’.

However, also with quality in mind, the Department has unbundled some diagnostic imaging from outpatient tariffs. The guidance says this is a response to concerns that including the costs of diagnostic imaging in outpatient attendance tariffs was ‘hindering delivery of appropriate imaging activity, including direct access diagnostic imaging and integration of care’. It added that bundled tariffs may not have appropriately reimbursed providers with non-average casemixes in outpatients.

The Department has recognised that the new approach introduces financial risk in three areas: moving from payment based on average to actual activity; the risk to commissioners from providers actually increasing imaging activity; and the risk to commissioners of providers increasing the reporting of previously under-reported activity.

There is guidance on how to manage risk in all three of these scenarios. In the case of an increase in imaging, for example, providers and commissioners are told to agree a baseline for activity currently undertaken and then operate a 50% marginal rate above the baseline.

Efficiency/integration

In terms of efficiency, short stays in hospital will continue not to attract long-stay payments with the maintenance of a five-day minimum trim point. The Department also says it is incentivising care in less acute settings where appropriate, by setting prices for some HRGs at the same level, regardless of setting, and further increasing the number of mandatory outpatient procedure tariffs.

The integration goals are being furthered with the mandating of the maternity pathway payment system, following a shadow year in 2012/13. This system replaces payments for individual  interactions and care events with three pathway payments covering the antenatal, delivery and postnatal elements of a woman’s pregnancy and birth.

There has been significant political interest in the maternity pathway tariff – former health secretary Andrew Lansley was a big proponent – but there is broader interest (in the UK and abroad) in the idea of paying for whole journeys in healthcare, rather than for each component. So the impact of the pathway – which in part aims to incentivise more proactive care – is being watched keenly.

The Department again recognises the potential for major swings in finances for commissioners and providers as a result of the change. Health economies are urged to calculate the financial impact and share any gains or losses.

However, it has been less specific about the  basis for risk sharing than in other areas. There is no 50:50 recommendation as there broadly is with unbundled diagnostics or the move to national chemotherapy delivery tariffs. Instead the Department appears keen to allow different approaches across the country.

With greater integration between acute and community in mind, the policy of non-payment for some emergency readmissions continues. Savings are expected to be reinvested to support rehabilitation, reablement and the prevention of readmission.  After concerns raised in previous years about trusts being penalised for readmissions outside their control, the Department required local health economies to set thresholds for readmissions based on clinical reviews. No new reviews will be required this year, unless providers or commissioners want to do so – for instance, to reflect a change in trend.

Scope

There are no massive changes to the scope of tariff this year. However, the transition to a year-of-care tariff for cystic fibrosis will be completed following the use of mandatory currencies in 2012/13. Mandatory tariffs for chemotherapy delivery and external beam radiotherapy also come in, again with proposed risk-sharing arrangements.

Following the same ‘currency before tariff’ process, new mandatory currencies are introduced for HIV adult outpatient services, specialist rehabilitation, renal transplants and some health assessments for out-of-area looked-after children.

There are other changes too. A more granular accident and emergency tariff includes prices for all 11 HRGs rather than the previous approach of grouping them into five price bands. And a two-tier specialist top-up payment for children’s services – 64% and 44% – is being introduced, although the overall value of the children’s top-up will not change.

However, one thing that does not change – at least not in its core operation – is the marginal rate emergency tariff. Under the system, a 30% marginal rate will continue to be paid for emergency admissions above a 2008/09 baseline (in fact the financial value at 2013/14 prices of 2008/09 activity). But the guidance has been beefed up on this policy.

There is an acknowledgement of the increasing practical difficulty of setting the baseline (practitioners report the evolution of HRGs means running old activity through the new grouper returns increasing levels of unclassified activity).  The Department expects a ‘pragmatic approach’ to setting a ‘workable’ baseline. ‘Rather than reset the baseline,’ the guidance suggests, ‘it may be possible to apply a simple uplift to the baseline used in 2012/13.’

While many providers may have wanted to see more substantial changes to a policy they see as representing an unfair division of risk, there are some sweeteners, particularly around the use of the 70% balancing payment. The guidance calls for early engagement by commissioners on providers’ business case proposals for the use of savings. And reference to using the funds to ‘reduce the incidence of and/or the consequences arising from emergency admissions’ seems broader than using them in ‘relevant demand management schemes’. For example, it could open up the funds to use in incentivising appropriate earlier discharge rather than just eliminating avoidable admissions.

There is a very large amount of detail in the 230-plus pages of guidance. Armed with the final tariff prices, NHS finance teams can now start calculating firmer estimates for the financial impact of the 2013/14 tariff.