News / Project to review efficiency factor

Monitor and NHS England will launch a project in the new year to examine how the efficiency requirement is set as part of the annual price setting process.

Speaking at a workshop at the HFMA annual conference in London, NHS England's director of strategic finance Sam Higginson said the two organisations were keen to get the views of the sector. 'There is a a general view that we need to do a lot more in this area,' he told finance managers.

The project will examine how the efficiency factor is set and further examine what is achievable. '[We want to understand] how we create a methodology that injects greater certainty for providers and commissioners,' Mr Higginson said.

The national tariff document for 2014/15 is due to be published in December after Monitor revealed that the level of objections to the price setting methodology, as part of formal consultation in the autumn, had not reached the trigger point that would require a re-examination of the process.

But Mr Higginson said that Monitor and NHS England were already thinking about 2015/16 and that the focus on efficiency was one of six priority areas for the 2015 tariff. Other areas being prioritised include: specialised and complex care; benchmarking for community and mental health services; integrated care currencies; urgent and emergency care; and early diagnosis and pathway payments.

In terms of specialised and complex care, Mr Higginson said there was a 'big decision' over the introduction of HRG4+, the updated and more granular version of the healthcare resource group currency. The first phase of the new currency was used within reference costs for 2012/13 and would, if the usual practice was followed, form the basis for the tariff in 2015/16.

However the tariff in 2014/15 has broken this link with reference costs, at least temporarily. To provide a year of stability, 2014/15 prices are being uplifted from current year prices rather than refreshed with the latest reference cost information. This has created uncertainty over the introduction of HRG4+ as the basis for tariff prices. Mr Higginson said there has been a 'general assumption' that the new HRG4+ system would be implemented, but he said the two bodies needed to 'look at timeline and trajectory'.

Over the longer term, Mr Higginson said the two bodies were thinking about whether there would be benefits from rationalising existing incentive mechanisms to 'ensure they are all pointing in the right direction'. And he said that thought was also being given to how different pricing approaches could be applied to different segments. Activity-based pricing still had a role in paying for healthcare, but new approaches might be needed for some services.