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TRANSCRIPT
Contents
Please note:
Part A of this document is the statutory consultation notice. It starts on page 3.
Part B of this document is the proposed 2017/19 National Tariff Payment System. This is shown as it would appear in final form. It starts on page 78.
Part C of this document is the glossary. It starts on page 198.
1. About this document............................................................................................................3
2. Context.................................................................................................................................5
3. Responding to this consultation...........................................................................................7
4. How we worked with the sector to develop our proposals.................................................10
5. Setting a tariff for 2017/19..................................................................................................135.1. Proposal to set a two-year tariff.............................................................................................13
6. Currency design.................................................................................................................16
7. Proposed method for determining national prices.............................................................447.1. Introduction........................................................................................................................... 447.2. Modelling national prices for 2017/18....................................................................................467.3. Managing model inputs for 2017/18......................................................................................487.4. Setting prices for best practice tariffs for 2017/18.................................................................507.5. Setting national prices for 2018/19........................................................................................527.6. Making manual adjustments to prices...................................................................................537.7. Setting the efficiency factor...................................................................................................547.8. Cost uplifts............................................................................................................................ 567.9. Clinical Negligence Scheme for Trusts.................................................................................607.10. Managing volatility...............................................................................................................637.11. Setting the cost base...........................................................................................................65
8. National variations..............................................................................................................678.1. Updating top-up payment for specialised services................................................................68
9. Locally determined prices..................................................................................................719.1. Mental health payment proposals for adults and older people..............................................729.2. Mental health payment proposals IAPT................................................................................749.3. Proposed changes to rules for locally determined prices and payment................................75
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2017/18 and 2018/19 National Tariff Payment System: A consultation notice
Published by NHS England and NHS Improvement
October 2016
1. About this document 1. This is the statutory consultation notice for the 2017/18 and 2018/19 National
Tariff Payment System (2017/19 NTPS).
2. Since 1 April 2016, Monitor and the NHS Trust Development Authority have been operating as a single integrated organisation known as NHS Improvement. This notice is however issued in exercise of functions conferred on Monitor by Section 118 of the Health and Social Care Act 2012. In this notice, therefore, ‘NHS Improvement’ means Monitor, unless the context otherwise requires. References to ‘we’ refer usually to NHS Improvement and NHS England, who have agreed the proposals in this notice.
3. The document is in three parts:
a. Part A contains:
an introduction that sets the context for the 2017/19 NTPS and explains how you can respond to this consultation notice
a summary of how we have engaged with the sector
what we propose to change from the 2016/17 NTPS and what we propose to retain.
b. Part B contains a draft of the proposed 2017/19 NTPS. This is shown as it would appear in final form and includes sections on:
the scope of the tariff
the currencies that are the building block for national prices and some local prices
the method for determining national prices
national variations to national prices
locally determined prices
payment rules.
c. Part C contains the glossary.
4. This document should be read in conjunction with the annexes and the supporting documents. The annexes to part B form part of the proposed national tariff.
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Table 1: AnnexesPart TitleA Annex A1: A detailed summary of engagement and sector feedbackA Annex A2: A detailed explanation of how to respond to this consultation and
the statutory objection processB Annex B1: The national prices and national tariff workbook.B Annex B2: The models used to set national pricesB Annex B3: Technical guidance for mental health clustersB Annex B4: Guidance on currencies with a national priceB Annex B5: Guidance on currencies without national pricesB Annex B6: Guidance on best practice tariffs
Table 2: Supporting documentsTitle2017 to 2019 National Tariff Payment System proposals: Impact assessmentA guide to the market forces factorGuidance for commissioners on the marginal rate emergency rule and the 30 day readmission ruleNon-mandatory pricesInnovation and technology tariff
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2. Context5. For the 2016/17 NTPS we prioritised sector stability over payment system
progress. We did this by rolling over the prices from the 2015/16 Enhanced Tariff Option (ETO), adjusting them for efficiency, inflation and the Clinical Negligence Scheme for Trusts (CNST).
6. This created a firebreak for the sector to help with achieving financial stability but it meant we did not make significant progress on the objectives for the payment system set out in Reforming the payment for NHS services: Supporting the five year forward view.1 It also meant the costs used to set prices were from 2011/12 and increasingly do not reflect current clinical practice.
7. Given the ongoing financial challenges facing the sector, the next NTPS must continue to offer stability while creating the conditions necessary for the sector to move towards the goals set out in the Five Year Forward View. We propose to address this in four ways:
a. set a two-year tariff
b. make corrections and updates to currency design, top ups for specialised services and the data used to set prices
c. address the data concerns by using the latest available cost data
d. phasing in the transition to these new policies across a series of national tariffs.
8. As previously announced, we are proposing significant policy changes for this year including a move to the HRG4+ phase 3 currency design for national prices and alignment of top-up payments for specialised services with the list of prescribed specialised services. We are also proposing to introduce a small number of new best practice tariffs (BPTs) and make other minor changes to currency design. These changes would allow the use of more up-to-date cost and activity data from 2014/15 that better reflect changes in clinical practice and improvements.
9. As these new policies would involve significant changes, with a sizeable impact on many providers, particularly specialist orthopaedics and paediatrics, we propose to phase them in over more than one tariff period to reduce price volatility. Reducing price volatility will reduce the volatility of provider income and commissioner spend. This is key in ensuring continued service provision
10. We believe that setting a two-year tariff for 2017/18 and 2018/19 will give the sector greater certainty against which to plan and make the investment
1 www.gov.uk/government/uploads/system/uploads/attachment_data/file/381637/ReformingPaymentSystem_NHSEMonitor.pdf
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decisions necessary to deliver transformation to the service. Further, introducing a two-year tariff will reduce the burden on commissioners and providers that comes from annual contract rounds and allow the sector to focus on necessary improvements. While we accept that there are risks with this, particularly given the current economic uncertainty, we believe that offering certainty based on our current assumptions is of more value to the sector than the flexibility of changing the tariff each year.
11. We recognise that providers and commissioners in local areas may be able to work together to develop payment models that better meet the needs of their patients than the payment models set out in the tariff, and we have simplified the rules and guidance on local pricing to make it simpler to adopt these new approaches.
12. This tariff has been developed as part of the system wide response to the challenges facing the NHS. It sits alongside the development of the two year NHS planning framework, the changes to the NHS Standard Contract and the changes to the support offer for NHS Providers from NHS Improvement. Our proposals for the 2017/19 NTPS should be considered in the context of this package of initiatives.
13.
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3. Responding to this consultation3.1. Statutory consultation on the national tariff and the objection process
14. The proposals for the 2017/19 NTPS are subject to a statutory consultation process as required by the Health and Social Care Act 2012 (the 2012 Act). This offers stakeholders the chance to tell NHS Improvement and NHS England what they think about the proposals. It also allows clinical commissioning groups (CCGs) and ‘relevant providers’ to object to the method we have proposed for determining national prices. The consultation period begins on 8 November and ends on 6 December 2016. On 8 November we will publish the full suite of annexes and supporting documents. This will signal the beginning of the consultation.
15. We propose to introduce the 2017/19 NTPS from 1 April 2017.
16. You can find further information on the statutory consultation, objection process and relevant legislation in Annex A2.
3.1.1. Whose objections are relevant for the statutory objection process?
17. The 2012 Act provides a statutory process for challenging the proposed method for determining national prices. If the objection threshold is exceeded for either (i) CCGs or (ii) relevant providers then s.120 of the 2012 Act provides that Monitor cannot publish the national tariff without reference to the Competition and Markets Authority (or further statutory consultation).There are two categories of relevant provider:
a. Licence holders. This refers to providers holding an NHS Improvement licence, including NHS foundation trusts and independent providers.
b. Other relevant providers as defined in the National Health Service (Licensing and Pricing) Regulations 2013.
18. The definition of relevant provider includes all NHS trusts that provide nationally priced services, as well as all NHS foundation trusts.
19. Commissioners whose objections to the method are relevant for the statutory objections process are CCGs. NHS England, in its role as a commissioner of specialised services, is not included.
3.1.2. Objections to the method
20. Although we welcome comments on all our proposals, the 2012 Act makes it clear that the statutory objection process applies only to objections to the
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“method or methods Monitor proposes to use for determining the national prices” of NHS healthcare services.2
21. The method includes the data, method and calculations used to arrive at the proposed set of national prices, but not the prices themselves.
22. It does not include:
a. the proposed national currencies
b. the proposed national variations, such as the market forces factor, top-ups for specialised services and the marginal rate for emergency admissions
c. the rules for agreement of local variations
d. the methods for approving or granting local modifications
e. the rules for determining local prices.
3.2. Consequences of objections
23. The objection thresholds are:
a. 66% or more of commissioners (measured by number)
b. 66% or more of relevant providers (measured by number).
24. If either objection threshold is met NHS Improvement cannot publish the 2017/19 NTPS unless it undertakes a further statutory consultation or makes a reference to the Competition and Markets Authority (CMA).
25. If NHS Improvement reconsults, it will publish another consultation notice and the process will begin again. If NHS Improvement decides to refer to the CMA, objecting parties will have the opportunity to set out details of their objection.
26. In either case, the 2017/19 NTPS would be delayed. If the 2017/2019 NTPS is delayed beyond 1 April 2017, the 2016/17 NTPS would remain in effect until a new tariff is published. If this happens, NHS Improvement and NHS England would issue further guidance on interim arrangements.
3.3. Other responses to the consultation
27. As well as consulting on the method for setting national prices, NHS Improvement and NHS England are consulting on the entire package of proposals in the consultation notice. We welcome feedback on any of these proposals and will consider your responses before making a final decision on the policies for the 2017/19 NTPS.
2 Health and Social Care Act 2012, Sections 118(3)(b) and 120(1)
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28. Please submit your feedback through the online survey3 or via email to [email protected]
29. The deadline for submitting responses is 6 December 2016.
3 www.surveymonkey.co.uk/r/2017-2019TariffConsultation
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4. How we worked with the sector to develop our proposals30. During the development of our proposals for the 2017/19 NTPS we engaged
extensively with the sector. Further details can be found in Annex A1, which contains a list of events and the feedback we received on policy proposals .
4.1. New developments for 2017/19 NTPS
31. This year we have set up a national tariff webpage4 that allows stakeholders to see where we are in the development of the national tariff. Users can register for updates and stay informed of key developments in the national tariff development process.
32. In previous years some feedback suggested there had been a lack of transparency in how we develop national prices so we launched the metrics engine. This tool lists every step of the price modelling process to show how admitted patient care prices are developed. Users can view data at HRG, subchapter, chapter and total tariff level. We also examined the steps that regularly have a large effect on prices in a price modelling narrative. Both the tool and the narrative can be accessed here.5
4.2. This year’s engagement
33. To date, we have run or attended over 100 events to explain tariff proposals to stakeholders and gain feedback. The web pages containing our policy proposals were viewed around 6,500 times. Approximately 250 people attended the workshops to discuss proposals, which generated over 450 responses to our online consultation. The discussions and feedback have informed the policies on which we are now consulting.
4.3. Expert review of draft price relativities
34. For the 2017/19 NTPS, we used the clinical expertise of the National Casemix Office’s Expert Working Groups (EWGs). The EWGs are responsible for advising on the design of the casemix classifications known as healthcare resource groups (HRGs). They consist of clinicians nominated by their professional bodies and royal colleges. We discussed currency design and development, and then price relativities separately.
35. More details on this process, the outputs and how we incorporate this into prices can be found in Section 7.6 Making manual adjustments to prices. The manual adjustments we made to the tariff can be seen in Annex B2.
4 https://improvement.nhs.uk/resources/developing-201718-national-tariff/ 5 https://improvement.nhs.uk/resources/metrics-engine/
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4.4. Enhanced impact assessment
36. In developing the 2016/17 NTPS we ran our first Enhanced Impact Assessment process (EIA). This involved sharing draft prices with a group of providers and commissioners and asking them to model the impact using their data. This year we ran the process again while looking to improve it and made two changes.
37. The first change is the involvement of commissioners in the process: we involved three commissioners so we could get their perspective on impact assessment. The second change was a pre impact assessment discussion on price relativities (called the provider price check). This took place at the same time as the engagement with the EWGs and got us some feedback on price relativities that are not correct.
38. The process helped us to understand the differences between NHS Improvement’s impact assessment and those of individual providers, and to identify how we can resolve these differences to make future impact assessments more robust.
4.5. Mental health
39. We have continued to engage with the sector to develop the payment system for mental healthcare with workshops on proposals to move away from the current payment methods. Stakeholders told us that they would like more detailed guidance on implementing a new payment approach, so we have developed more information on this. For more details see Section 9 Locally determined prices.
4.6. Engagement on specialised services
40. For the 2016/17 NTPS we established the Specialised and Complex Care Advisory Group to provide advice on the review of specialised top-ups and followed this up by convening two groups to input on the development of specialist service reimbursement for 2017 to 2019. These were the specialised and complex care policy and technical groups, which consisted of representatives of large and small specialist providers, NHS England specialist commissioners and national representative bodies.
41. Further details on the input of these groups can be found in Section 8.1 Updating top-up payments for specialised services.
4.7. Policy publications and engagement
42. Once we had developed our initial policy proposals and price relativities, we published our engagement document to seek feedback from stakeholders. This was accompanied by documents on currency, best practice tariffs and the development of a two-year tariff. We followed this with workshops which were
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attended by around 350 stakeholders. We published the feedback we got from the workshops and a web-based survey. All the feedback can be found in Annex A1.
4.8. Conclusion
43. We would like to thank everyone who has given their time to work with us. Our engagement activities yielded a large amount of information and helped to improve the proposals contained in this statutory consultation.
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5. Setting a tariff for 2017/19 5.1. Proposal to set a two-year tariff
5.1.1. What we previously proposed6
44. During consultations on the previous national tariff, and at engagement events on the payment system, providers and commissioners have consistently told us that they would like more predictability to aid long-term planning and investment.
45. The proposals we published in August7 identified our preferred option as setting a national tariff for two years (2017/18 and 2018/19). This would provide stability and certainty to support long-term planning and investment. It would also remove the need for a separate consultation for the second year.
46. The two-year tariff would include two price lists, one for 2017/18 and another for 2018/19, and a set of currencies, national variations and rules which in most cases would apply to both years.
47. To determine national prices we propose to model the prices for 2017/18 and then roll them over to 2018/19 adjusting for cost uplifts, efficiency and the Clinical Negligence Scheme for Trusts (CNST). We were considering the implications of staged introductions of top-ups for specialised services and the new currency design.
48. The other rules and policies would remain the same for both years but we considered introducing a rule mandating a payment approach for IAPT from April 2018.
5.1.2. What you told us
Table 3: Breakdown of responses to the proposal to set a two-year tariff8 Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 56 166 75 54 68 39% 13% 40% 18% 13% 16%
Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19
49. The principal concerns were:
6 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
7 As note 6.8 We have published a summary of the response from the sector. For more detail about how the
responses were broken down please see Annex A1.
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a. This may not be the best time to introduce a two-year tariff when so many other changes, particularly the move to HRG4+, are happening.
b. Any errors in the reference cost data underpinning national prices will be carried over for two years. Also, the data will be out of date for the 2018/19 tariff year; more recent data should be used rather than rolling over data used for 2017/18 prices.
c. There is a risk of material changes outside the control of providers and commissioners during the two-year period such as:
the impact of Brexit
future NICE recommendations on drugs and devices
unforeseen consequences of the 2017/19 tariff rules, prices or currencies
inflation being materially different to current projections.
d. There are issues over how transitional arrangements for top-ups would be managed. It was felt that deferring these may be undesirable as it would delay necessary change.
e. There would need to be consistency across the system, eg the contracting framework should also be based on a two year framework, and pay awards and CNST premiums should be agreed for two years.
f. Impact of embedding any overfunding or underfunding for an extra year.
50. Some respondents suggested that for the second year (2018/19) the tariff should include a formula for determining the prices for 2018/19, into which data for 2018/19 inflation could be input at a later date, rather than the prices themselves. The legislation, however, requires that the national tariff includes national prices themselves and not just a formula or method for their calculation.
51. Among the main reasons for supporting a two-year tariff were that:
a. It should give commissioners and providers scope to put in place agreements for a longer period. There may be some changes to contracts during the period that could be agreed up front.
b. It should give providers and commissioners more capacity to agree service change.
c. It should reduce the administrative burden that comes from annual contracting.
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5.1.3. How this has influenced our proposals
52. We have based our assumptions on the best available evidence. There will always be challenges in setting forward-looking prices but these challenges are faced by other regulated industries and we feel that the advantages of greater planning certainty outweigh the risks.
53. Given the relative certainty of NHS funding at the current time, the fact that there is no planned revision of CCG allocations until 2019 and the wider planning being undertaken to support the sustainability and transformation plans we believe now is an opportune time to introduce a two-year tariff.
54. The proposed move to a two-year tariff is in conjunction with a number of other elements of the NHS financial framework including the development of a two year NHS Standard Contract and a two year planning round.
55. In relation to calculating the prices for the second year, we think the most practical, and simplest, approach would be to roll over the data used to set the 2017/18 tariff with appropriate uplifts for inflation, CNST and efficiency. This is because we would not have more recent cost and activity data with which to model the 2018/19 prices.
56. We have considered the implications of significant changes in our assumptions and we will continue to review any issues raised. While we could propose and consult on a new national tariff, our strong preference would be to retain the proposed national tariff for two years.
57. We see this as a chance to set a longer term tariff to facilitate longer term planning and learn from the process when we consider the best approach to the 2019/20 NTPS and beyond.
5.1.4. Final proposal
58. We propose to set a national tariff for two years: 2017/18 and 2018/19.
59. We propose that the 2018/19 price list takes effect from 1 April 2018.
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6. Currency design 60. To pay for healthcare, we need to group activity in a clinically meaningful way.
These groupings, or currencies, are used to set prices for healthcare services.
61. There are different currencies for different types of healthcare activity. In this section we explain our proposals on the currencies to be included in the 2017/19 NTPS.
6.1. Introducing HRG4+ currency design
6.1.1. What we previously proposed9
62. In our earlier engagement, we proposed to adopt a new design, HRG4+. It allows payment to better reflect the cost incurred in treating patients of differing levels of complexity. As HRG4+ was introduced in reference costs in three phases, we proposed to use the third phase as the basis of the reference cost collection in 2014/15. Further information on the proposed change from HRG4 to HRG4+ can be found here10
63. As well as the improvements in design, we think it is appropriate to move to HRG4+ because national prices set for HRG4 use cost and activity data from 2010/11. This means that prices set using HRG4 do not reflect recent changes in clinical practice.
6.1.2. What you told us
Table 4: Breakdown of responses for the introduction of HRG 4+Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 60 122 39 17 22 21% 23% 47% 15% 7% 8%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
64. Support for this policy was very high. It is seen as a substantial and necessary step forwards, particularly given the increasingly historical costs used to inform HRG4 price design.
9 In ‘2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19’ https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
10 www.hscic.gov.uk/media/11601/Summary-of-Changes/pdf/HRG4__RC12-13_Summary_of_Changes_v1.0.pdf
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65. Feedback included the following concerns:
a. While HRG 4+ better reflects complexity, it still does not fully explain it. The currency design and cost collections still do not adequately capture the cost of some services, for example orthopaedics.
b. The introduction of HRG4+ is likely to introduce volatility to provider and commissioner income and expenditure that needs to be managed.
c. Some commissioners believe it provides opportunities for up-coding of activity to higher complexity levels to increase provider income.
d. Moving to a two-year tariff with an untested currency design may lock in any design issues or instability that arises from the shifts in payments across service lines.
e. Some specific issues were identified around the design of some individual prices. These have been reviewed separately.
6.1.3. How this has influenced our proposals
66. Based on the positive feedback from the sector we still believe it is appropriate to introduce this policy. To address concerns about price volatility we propose to introduce measures to reduce this (see Section 7.10).
67. We currently do not have evidence that providers are systematically up-coding activity. If we are presented with this evidence we will investigate and may change our policies accordingly.
68. We have considered the implications of moving to a two-year tariff. More detail on this can be found in Section 5 Setting a tariff for 2017/19.
69. We have reviewed the comments on currency design: many of them reflect suggestions for manual adjustments. Where we feel it appropriate, we have made changes. More details on the manual adjustment processes can be found in Section 7.6 .
6.1.4. Final proposal
70. We propose to introduce HRG4+ phase 3.
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6.2. Changing the scope of currencies
6.2.1. What we previously proposed11
71. In our summer engagement we proposed to introduce four new national prices in the next tariff:
a. cochlear implants (CA41Z, CA42Z)
b. complex computerised tomography scans (RD28Z)
c. complex therapeutic endoscopic, upper or lower gastrointestinal procedures (FZ89Z)
d. photodynamic therapy (JC41Z, JC42A and JC42B).
72. We also explained that if we were to adopt a two-year tariff, we would not review the scope of prices for 2018/19. This means there would be no national prices added or removed in that year.
73. We had proposed prices for cochlear implants, complex computerised tomography scans and complex therapeutic endoscopy in early engagement on the 2016/17 NTPS to a broadly positive response. These were not introduced in 2016/17 because our final tariff proposals were based on the existing price list used by most of the sector to offer stability from one year to the next.
6.2.2. What you told us
Table 5: Breakdown of responses to the proposal to expand the scope of national prices
Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 24 107 72 35 0 36% 10% 45% 30% 15% 0%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
74. We had general support from the sector to these proposals from both providers and commissioners but some concerns were noted including:
a. Prices for some procedures were too low, particularly cochlear implants but also complex computerised tomography and photodynamic therapy.
b. One provider felt that the price for photodynamic therapy should be introduced as a non-mandatory price in the first instance.
11 In ‘2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19’ https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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c. Introducing these at the same time as a two-year tariff could generate unintended consequences.
6.2.3. How this has influenced our proposals
75. We have referred issues relating to price levels to the manual adjustment process for review. Adjustments have been made to the price relativities to reflect the sector feedback. More detail on this process can be found in Section 7.6 and the actual adjustments made in Annex B2.
76. The feedback from the sector was generally supportive. Taking this into account, we believe it is appropriate to introduce these prices at this time.
6.2.4. Final proposal
77. We propose to introduce the following national prices:
a. cochlear implants (CA41Z, CA42Z)
b. complex computerised tomography scans (RD28Z)
c. complex therapeutic endoscopic, upper or lower gastrointestinal procedures (FZ89Z)
d. photodynamic therapy (JC41Z, JC42A and JC42B).
6.3. Changes to the high cost drugs and devices list
6.3.1. What we previously proposed12
78. In our summer engagement document, we proposed to update the list of high cost drugs and devices reimbursed outside national prices, as shown in Annex A: 2016/17 National Prices and National Tariff Workbook of the 2016/17 NTPS.
79. For the high cost device list we proposed to:
a. remove 10 out of 28 categories of devices
b. remove all devices from the stents category, except for bifurcated stents
c. remove devices for percutaneous ablation procedure from the ‘radiofrequency, cryotherapy and microwave ablation probes and catheters’ category
d. clarify that the category for lengthening nails includes nails for limb reconstruction.
80. For the high cost drug list we proposed to:12 This was proposed in our summer engagement document National tariff proposals for 2017/18
and 2018/19 at https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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a. add two drugs to existing categories on the list
b. add nine new categories of drugs to the list: there are 10 drugs distributed across these categories
c. remove fibrin sealants from the blood products category.
81. We made these proposals to reflect changes in clinical practice, HRG design and the availability of drugs and devices. Our proposals were based on the recommendations of the high cost steering groups.
6.3.2. What you told us
Table 6: Breakdown of responses to changes to the high cost listQuestion Strongly
supportTend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
HC devices Number 10 52 81 47 34 34% 4% 23% 36% 21% 15%
HC drugs Number 11 63 105 23 14 41% 5% 29% 49% 11% 6%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
82. In general, respondents agreed with the proposal to incorporate the cost of extra drugs and devices into the tariff, but only if the relevant price covered the cost of the drug or device as well as any other intervention covered by the HRG. On the particular proposals:
a. There was a high volume of responses to the proposal to remove cochlear implants from the high cost device list with broad consensus that the price for cochlear implants did not cover the cost of the device and the service would not be viable.
b. Further concerns were raised regarding the other devices to be removed from the list.
c. There were some challenges to the proposal to remove fibrin sealants from the high cost drug list.
83. Some respondents raised concerns that if devices were removed from the list, they would no longer be considered for the central procurement programme. This would reduce the scope for savings as providers would need to procure them through local arrangements that would not realise economies of scale.
84. Particular concerns related to the proposal to fix the tariff for two years. Some respondents felt that fixing the high cost drugs list would mean that new drugs licensed for 2018/19 would not be included on the list. If the commissioner were
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unwilling to fund the costs of these drugs any clinical decision to use them would mean the provider would need to pay for them from national prices.
6.3.3. How this has influenced our proposals
85. Given concerns regarding the removal of devices from the list we are now only proposing to remove two devices from the list: cochlear implants and robotic consumables. The other devices would remain on the list for 2017/19 although we would reconsider these when developing policy for future tariffs.
86. We recognise the issues with prices for cochlear implants and robotic consumables and have made manual adjustments to the proposed prices to cover the costs of the devices. More details can be found in Section 7.6 and Annex B2.
87. We have reviewed the final prices and we consider that these address the feedback around fibrin sealants and propose no further adjustments.
88. In developing the proposal to move to a two-year tariff we considered the implications for several policy areas. Setting a tariff for two years means that all elements are fixed and we cannot make exceptions for any policy. We believe that the wider benefits to the sector of a two-year tariff outweigh the disadvantages in relation to any individual policy, but we will keep this under review as we go through the year.
6.3.4. Final proposal
89. We propose to update the high cost device list, removing two device categories and clarifying an existing category.
90. We propose to update the high cost drugs list by adding 12 drugs and removing fibrin sealants.
91. Annex B1 shows the high cost drugs and devices list with our proposed changes.
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6.4. Changes to the maternity pathway
6.4.1. What we previously proposed13
92. In our summer engagement document, we proposed to update the casemix assumptions for the antenatal stage of the maternity pathway to increase the activity allocated to intermediate and intensive levels. The allocation at standard level would be reduced.
93. This would change the relative weightings between the standard, intermediate and intensive prices. The policy would not increase or decrease the total amount of money allocated to the antenatal stage.
6.4.2. What you told us
Table 7: Breakdown of responses to changes to the maternity pathwayStrongly support
Tend to support
Neither support or
oppose
Tend to oppose
Strongly oppose
Don’t know
Number 19 82 71 14 13 62% 10% 41% 36% 7% 7%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
94. In general, respondents supported the proposed change but they did raise some concerns. In particular
a. It wasn’t clear how this fitted with the outputs of the National Maternity Review.14
b. Fixing the tariff for two years would not allow further development of the maternity pathway.
c. It appeared that less than 50% of costs were attributed to standard deliveries. There was a concern that this could lead to up-coding.
d. More information was needed at this stage: in particular the expected uplift for CNST.
95. We received feedback that the HRGs for caesarean sections and postpartum interventions had been incorrectly mapped to the lower payment level so were not being appropriately funded.
6.4.3. How this has influenced our proposals
96. We reviewed the outputs of the maternity review but did not feel we had a strong enough evidence base on which to propose new payment approaches
13 This was proposed in National tariff proposals for 2017/18 and 2018/19 at https://improvement.nhs.uk/uploads/documents/TED_final_1.pdf
14 www.england.nhs.uk/wp-content/uploads/2016/02/national-maternity-review-report.pdf
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between the completion of that review and the publication of this consultation. We are continuing to work with maternity experts to develop appropriate payment approaches for the 2019/20 national tariff.
97. We have reviewed the mapping of HRGs to the payment levels for delivery and we believe that we should change it so that more deliveries are mapped to the higher level. This would however mean that less cost is attributed to standard deliveries.
98. The prices we published in our earlier engagement were relative, and meant to show the distributional effect of new policies. At that stage it would not have been appropriate to include CNST, nor would it have been possible, as we did not have the correct data (see Section 7.9 for more information on CNST).
6.4.4. Final proposal
99. We propose to update the casemix assumptions
100. We propose to update the mapping of HRGs to the delivery pathway as set out in the table below.
Table 8: Mapping HRGs to the delivery pathway
HRG Description Current mapping Revised mapping
NZ30A Normal Delivery with CC Score 2+ with CC with CCNZ30B Normal Delivery with CC Score 1 with CC with CCNZ30C Normal Delivery with CC Score 0 without CC without CCNZ31A Normal Delivery, with Epidural or
Induction, with CC Score 2+with CC with CC
NZ31B Normal Delivery, with Epidural or Induction, with CC Score 1
with CC with CC
NZ31C Normal Delivery, with Epidural or Induction, with CC Score 0
without CC without CC
NZ32A Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 2+
with CC with CC
NZ32B Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ32C Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ33A Normal Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 2+
with CC with CC
NZ33B Normal Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ33C Normal Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ34A Normal Delivery, with Epidural, Induction with CC with CC
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and Post-Partum Surgical Intervention, with CC Score 2+
NZ34B Normal Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ34C Normal Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ40A Assisted Delivery with CC Score 2+ with CC with CCNZ40B Assisted Delivery with CC Score 1 with CC with CCNZ40C Assisted Delivery with CC Score 0 without CC without CCNZ41A Assisted Delivery, with Epidural or
Induction, with CC Score 2+with CC with CC
NZ41B Assisted Delivery, with Epidural or Induction, with CC Score 1
with CC with CC
NZ41C Assisted Delivery, with Epidural or Induction, with CC Score 0
without CC without CC
NZ42A Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 2+
with CC with CC
NZ42B Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ42C Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ43A Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 2+
with CC with CC
NZ43B Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ43C Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ44A Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 2+
with CC with CC
NZ44B Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 1
with CC with CC
NZ44C Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 0
without CC with CC
NZ50A Planned Caesarean Section with CC Score 4+
with CC with CC
NZ50B Planned Caesarean Section with CC Score 2-3
with CC with CC
NZ50C Planned Caesarean Section with CC Score 0-1
without CC with CC
NZ51A Emergency Caesarean Section with CC Score 4+
with CC with CC
NZ51B Emergency Caesarean Section with CC Score 2-3
with CC with CC
NZ51C Emergency Caesarean Section with CC Score 0-1
without CC With CC
23
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6.5. Creating incentives in outpatient follow ups
6.5.1. What we previously proposed
101. In our engagement document we proposed a change to the way that consultant-led follow ups were to be reimbursed. Our proposal was to remove all national prices for outpatient follow ups and replace them with non-mandatory prices. We would then introduce a local pricing rule under which providers and commissioners would agree a single annual payment (a ‘block’) for all outpatient follow ups; this would include consultant-led, non-consultant led and non-face-to-face follow-up activity with some small exclusions such as BPT and outpatient procedures.
102. In doing this our primary objective was to free up consultant capacity in outpatient services to increase the number of first attendances and so improve current referral to treatment times.
103. Providers are currently reimbursed for each consultant-led face-to-face first and follow-up outpatient attendance. There is no incentive to move to new ways of providing outpatient care, such as by telephone, using technology or using workforce in a different way or to reduce inappropriate attendances, as this would directly affect a provider’s income.
104. We also considered how payment mechanisms could support the increased use of the NHS e-Referral Service (ERS) for GP referrals.
6.5.2. What you told us
Table 9: Breakdown of sector responses to the proposed outpatient policyStrongly support
Tend to support
Neither support or
oppose
Tend to oppose
Strongly oppose
Don’t know
Number 19 32 49 46 86 31% 8% 14% 21% 20% 37%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
105. Overall, there was strong opposition from the sector through the engagement workshops and the online survey. The main points of concerns were:
a. This would make it more difficult for commissioners and providers to agree contracts. Given the national level intention to agree contracts by the end of December, this was seen as a major obstacle.
b. It would create incentives for increased or inappropriate discharges back to primary care to generate new first attendances.
c. There wasn’t enough information to make a fully informed assessment of how it would reduce follow-up attendances.
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106. There was some support for the policy intent but a feeling that this might not be the most appropriate solution, especially given the timescales involved. Specialist providers also raised concerns because of their unique casemix.
6.5.3. How this has influenced our proposals
107. Reflecting the feedback from the sector, both from providers and commissioners, we have amended our proposals.
108. We appreciate the pressures and challenges on the sector in relation to the timely agreement of contracts and have therefore removed the proposal to create a single annual payment (a ‘block’) for all outpatient follow ups.
109. We still wish to incentivise a change in the delivery of outpatient follow-up activity with a move to more efficient models and to freeing up consultant capacity.
6.5.4. Final proposal
110. The current outpatient prices include a fixed 10% transfer of follow-up costs into first attendances. This was introduced to create a financial incentive to undertake more first attendances with follow-up attendance prices slightly under-reimbursed.
111. To strengthen this incentive and to drive a further change we propose to increase this transfer of cost, at a treatment function code level, up to a maximum of 30%.
112. We propose an approach that takes into account the differences at specialty level with three levels:
30% for adult surgical specialties and some medical specialties
20% for other medical specialties
10% (ie no change) for oncology, haematology, paediatric specialties, nephrology and areas where we have a BPT.
113. We estimate the proposal would include 63% of all nationally priced outpatient follow-up activity in the 30% group. It would also limit the impact on specialist cancer and children’s providers by excluding these specialties from the extra transfer of cost.
114. The table below sets out the current and proposed bundling for each treatment function code:
Table 10: Changes to outpatient first attendance rates Treatment function code Current Proposed Change100 General surgery 10% 30% +20%
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Treatment function code Current Proposed Change
101 Urology 10% 30% +20%103 Breast surgery 10% 30% +20%104 Colorectal surgery 10% 30% +20%105 Hepatobiliary and pancreatic surgery 10% 30% +20%106 Upper gastrointestinal surgery 10% 30% +20%107 Vascular surgery 10% 30% +20%108 Spinal surgery service 10% 30% +20%110 Trauma and orthopaedics 10% 30% +20%120 ENT 10% 30% +20%130 Ophthalmology 10% 30% +20%140 Oral surgery 10% 30% +20%143 Orthodontics 10% 20% +10%144 Maxillo-facial surgery 10% 30% +20%160 Plastic surgery 10% 30% +20%170 Cardiothoracic surgery 10% 30% +20%171 Paediatric surgery 10% 10% 0%172 Cardiac surgery 10% 30% +20%173 Thoracic surgery 10% 30% +20%190 Anaesthetics 10% 30% +20%191 Pain management 10% 30% +20%211 Paediatric urology 10% 10% 0%214 Paediatric trauma and orthopaedics 10% 10% 0%215 Paediatric ear nose and throat 10% 10% 0%216 Paediatric ophthalmology 10% 10% 0%217 Paediatric maxillo-facial surgery 10% 10% 0%219 Paediatric plastic surgery 10% 10% 0%223 Paediatric epilepsy 10% 10% 0%251 Paediatric gastroenterology 10% 10% 0%252 Paediatric endocrinology 10% 10% 0%253 Paediatric clinical haematology 10% 10% 0%257 Paediatric dermatology 10% 10% 0%258 Paediatric respiratory medicine 10% 10% 0%263 Paediatric diabetic medicine 10% 10% 0%300 General medicine 10% 20% +10%301 Gastroenterology 10% 30% +20%302 Endocrinology 10% 20% +10%303 Clinical haematology 10% 10% 0%306 Hepatology 10% 20% +10%
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Treatment function code Current Proposed Change307 Diabetic medicine 10% 20% +10%320 Cardiology 10% 20% +10%321 Paediatric cardiology 10% 10% 0%329 Transient ischaemic attack 10% 10% 0%330 Dermatology 10% 30% +20%340 Respiratory medicine 10% 20% +10%341 Respiratory physiology 10% 20% +10%350 Infectious diseases 10% 20% +10%361 Nephrology 10% 10% 0%370 Medical oncology 10% 10% 0%410 Rheumatology 10% 20% +10%420 Paediatrics 10% 10% 0%430 Geriatric medicine 10% 20% +10%502 Gynaecology 10% 30% +20%503 Gynaecological oncology 10% 10% 0%800 Clinical oncology (previously radiotherapy) 10% 10% 0%812 Diagnostic imaging 10% 30% +20%
115. In September 2016, we published Proposed national tariff prices: for planning 2017/18 and 2018/1915. In response to the feedback we have revised the following treatment function codes:
cardiology from 30% to 20%
diabetic medicine from 30% to 20%
orthodontics from 30% to 20%
paediatric surgery from 30% to 10%.
116. The published prices above reflect these changes.
Non face-to-face activity
117. To further incentivise the use of new delivery models for follow-up appointments, increased use of non face-to-face appointments or wider adoption of technology, we want to encourage providers and commissioners to agree local prices for non-consultant led and non face-to-face activity. Reference costs are available as a reference point for local price setting. Any increase in local prices should deliver a reduction in consultant-led face-to-face attendances.
15 https://improvement.nhs.uk/resources/proposed-national-tariff-prices-1718-1819/
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118. To incentivise a shift in activity which is targeted and clinically appropriate, we recommend prices are set at a treatment function code level where there is clear evidence that care can be delivered in an alternative way and the current pricing structure is acting as a barrier.
119. We propose to remove the non-mandatory non face-to-face outpatient attendance price that has been published in previous years as we feel this did not provide an appropriate incentive to move to alternative care models. Once we understand any variation in reference cost submissions and the potential financial impact in greater detail we will consider whether to re-introduce prices for non face-to-face activity.
6.6. Best practice tariffs
120. We proposed some changes to BPT arrangements in National tariff proposals for 2017/18 and 2018/19.16
121. These included:
a. four new BPTs
b. revisions to four existing BPTs
c. the removal of one BPT.
122. We received feedback on these proposals and have considered this in the final development of policy. In the tables below we set out:
a. Table 10: The response from the sector to our proposals
b. Table 11: A breakdown of the final proposals for new, amended and removed BPTs for 2017/19.
123. We also propose further amendments to the acute stroke care BPT, set out in full below in the following tables.
124. The proposed introduction of HRG4+ will also lead to some changes to the currency design of applicable BPTs, for example pleural effusion. These will not affect the policy objectives, or the methods for collecting and validating data.
16 https://improvement.nhs.uk/uploads/documents/TED_final_1.pdf
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Table 11: Sector feedback on changes to BPTsQuestion Strongly
supportTend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
New BPT for straight-to-test for patients requiring lower gastrointestinal investigation
Number 19 72 49 11 4 35% 12% 46% 32% 7% 3%
New BPT for chronic obstructive pulmonary disease (COPD)
Number 17 62 60 12 3 37% 11% 40% 39% 8% 2%
New BPT for cardiac rehabilitation for myocardial infarction (MI)
Number 16 68 52 11 1 38% 11% 46% 35% 7% 1%
New BPT for non-ST segment elevation myocardial infarction (NSTEMI)
Number 12 64 53 11 4 42% 8% 44% 37% 8% 3%
Changes to existing BPTs (day case procedures, fragility hip fracture, primary hip and knee, same day emergency care)
Number 9 78 53 10 4 32% 6% 51% 34% 6% 3%
Removing the interventional radiology BPT
Number 17 50 65 12 4 36% 11% 34% 44% 8% 3%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
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Table 12: Changes to BPTsBPT Previous proposal Feedback – key points Final policyNewStraight-to-test for patients requiring lower gastrointestinal investigation
Introduce a pathway to offer diagnostic tests to patients without an initial outpatient appointment using an appropriate nurse-led triage mechanism.
Assign the BPT price against colonoscopy and flexible sigmoidoscopy HRGs.
This was based on examples of peer- reviewed best practice from several providers across the country.
General support but concerns including: the costs of implementing the
service may not be recovered by the BPT price
existing programmes with the same objectives but different delivery methods may be affected
lack of clarity over the currency
concerns about the burden of recording and validation
We propose to introduce this as a non-mandatory BPT for 2017/19. Any agreement to implement this must be made in conjunction with the local pricing rules in Section 6 of the national tariff.
Based on the concerns of the sector we will further develop this proposal with stakeholders before mandating it.
Chronic obstructive pulmonary disease (COPD)
Introduce a BPT that rewards providers when a percentage of patients with a primary diagnosis of COPD, admitted for an exacerbation of COPD, receive specialist input to their care within 24 hours of admission, and where they receive a discharge bundle before discharge
We did not propose a target rate as we were seeking sector feedback
General support but concerns including: patients may be admitted
unnecessarily to get the BPT
unclear cost impact of the BPT
the burden of recording and validation
Several providers were concerned that setting a target rate above 60% would be unachievable for a large part of the sector.
We propose to mandate this BPT.
To achieve this BPT, 60% of patients must receive specialist input within 24 hours of admission and a discharge bundle before discharge
We recognise the potential issues around recording and validation of data but as the RCP is producing a new tool to collect this data we believe that this will be appropriate.
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BPT Previous proposal Feedback – key points Final policyThis may require some service redesign but some providers have reported that this BPT is existing practice in some areas and so the costs should be minimal.
Cardiac rehabilitation for myocardial infarction (MI)
Introduce a BPT to encourage providers to refer appropriate post-MI patients to cardiac rehabilitation within 3 days of an initiating event, and before discharge.
Calculate the target population would be locally with referrals measured using the National Audit of Cardiac Rehabilitation (NACR). The target achievement rate would be 45%.
General support but concerns including: the data is collected annually
which is not timely enough for commissioner validation
the NACR dataset is not part of mandatory collection and may not be a complete dataset
where a local cardiac rehabilitation service is not available, providers could be penalised for a commissioning decision.
We propose to introduce a non-mandatory BPT for 2017/19. Any agreement to implement this must be made in conjunction with the local pricing rules in Section 6 of the national tariff.
Following feedback from the sector we do not believe we can mandate this BPT until we fully address the data collection and reporting concerns.
Non-ST segment elevation myocardial infarction (NSTEMI)
Introduce a BPT to improve the time from a patient being admitted to them receiving coronary angioplasty. Measure achievement through the MINAP database.
A target rate of 60% of NSTEMI patients having coronary angiography within 72 hours of admission.
For patients transferred from one hospital to another to have coronary angiography,
General support but concerns including: from commissioners that
achievement was not easy to validate: not all data collected through MINAP
the 72-hour limit for transfers would be affected by the performance of the other hospital which is outside their control
We propose to mandate this BPT. If accepted it would be introduced as set out in the original proposal.
We accept there is concern over the management of transfers but this is in line with NICE guidelines and we feel local systems need to be developed to manage this.
NICOR will publish a guide shortly to help with validation of this BPT
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BPT Previous proposal Feedback – key points Final policycalculate the time for achieving the BPT from the time of admission to the first hospital.
the 72-hour limit may require changes to working patterns to protect elective lists
more guidance needed on the management of payments for transfers
AmendedDay case Add 19 procedures to the day case BPT
based on the British Association of Day Surgery directory of procedures that could be provided as a day case.
Increase target rates for two existing day-case procedures where the sector had generally achieved the existing targets.
Some positive feedback for this policy from providers and commissioners but concerns that: dual chamber pacemakers
should be included in the scope of the BPT not just single chamber pacemakers
ability to deliver this procedure is based on the ability of providers to schedule activity early in the day. Where providers provide evening lists (eg paediatric tonsillectomy) releasing patients before midnight may not be appropriate
the casemix of the provider will determine their ability to meet the target rates
We propose to introduce the proposals as originally set out with one change.
We propose to introduce the proposals as originally set out with one change to the implantation of cardiac pacemaker category.
We propose to add EY06E - Implantation of Dual Chamber Pacemaker with CC Score 0-2and remove EY08D - Implantation of Single Chamber Pacemaker with CC Score 3-5
The implantation of cardiac pacemaker category would consist of the following HRGs:EY06E-Implantation of Dual Chamber Pacemaker with CC Score 0-2EY08E-Implantation of Single
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BPT Previous proposal Feedback – key points Final policyChamber Pacemaker with CC Score 0-2
Fragility hip fracture Remove three measures from the existing BPT and replace them with four new measures: a nutritional assessment during the
admission
persistence with bone treatment after discharge
delirium assessment during the admission
assessed by physiotherapist the day following surgery.
The full BPT price would only be paid if all criteria were met and a follow-up appointment takes place 120 (+/-60) days after discharge.
Providers and commissioners raised a number of concerns regarding this BPT including: this will create an additional
burden on providers to collect the data and commissioners to validate it for payment
The 120-day follow-up condition will create issues with the standard freeze-and-flex period after year end for payments.
Costs associated with delivering best practice do not disappear when criteria have been achieved so changing criteria may place an extra burden on providers.
We propose to remove the three measures and introduce three of the four new measures originally described.
Because of the feedback regarding the 120-day follow-up measure we are not proposing to include this as a condition for payment. We do however believe this is still an important element of best practice.
Primary hip and knee
Increase the rate at which providers were required to submit data to the National Joint Registry (NJR) from 85% to either 90% or 95%.
Change the significance criteria for health gain by changing the rate below which providers will not be paid from the lower 99.8% significance to the lower 95% significance. This would reduce the number of providers eligible for the BPT.
Some concerns were raised regarding these changes including: compliance rate data not always
available to commissioners for validation
raising the outlier target discriminates against trusts with more complex demographics
setting it at 95% will increase the number of outliers because of
We propose to leave the NJR submission rate at the current level of 85%.
We propose to change the health gain criteria BPT so that a provider will not be eligible if they are outside the 99.8% confidence interval in a single year (current criteria) or outside the 95% confidence interval over two
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BPT Previous proposal Feedback – key points Final policyrandom variation
ability to deliver the target where services are sub-contracted.
previous consecutive years.
We are proposing not to increase the NJR rate because of concerns from the sector regarding sub-contracted services.
We also recognise that 95% would increase the probability of being an outlier by chance and although it is statistically significant it may not be meaningful (probability of error is greater). To mitigate this we have set the threshold over two consecutive years.
Same day emergency care (SDEC)
Make seven more clinical scenarios eligible for the same day emergency care BPT. These are: abnormal liver function
acutely hot painful joint
chronic indwelling catheter-related problems
gastroenteritis
transient ischaemic attack
upper gastrointestinal haemorrhage
urinary tract infections
Some concerns were raised including: as some local areas are
developing/have developed local ambulatory care pathways this may undermine their development
lack of understanding of the link between this policy and the 30- day readmission rule.
We propose to amend the BPT as originally described.
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BPT Previous proposal Feedback – key points Final policy(This is based on the NHS Institute’s Directory of Ambulatory Emergency Care in Adults)
RemovedInterventional radiology (IR)
We proposed to remove the interventional radiology BPT.
This was proposed because HRG4+ contains the same currencies.
This was supported but there were concerns that: the removal of BPT for IR
procedures may mean more expensive, more invasive older surgical treatments will be used instead
areas previously covered by the BPT are not adequately reimbursed by the prices with the new HRGS, for example angioplasty, stenting for diabetic foot disease and uterine artery embolism, and that this runs the risk of more invasive and costly procedures being chosen.
We propose to remove this BPT.
With the introduction of HRG4+ we feel that this is necessary. To retain it could create confusion in payments by putting parallel payment approaches in place.
36
.
6.7. Amending the acute stroke care BPT
6.7.1. Background
125. Stroke is one of the first five conditions to be prioritised by NHS England as part of their work to improve urgent and emergency care.
126. The acute stroke care BPT is currently in place but does not meet all the criteria endorsed by NHS England.17
6.7.2. Our proposal
127. To address this we propose to amend the criteria as set out below:
Table 13: Changing the criteria for the stroke BPTCurrent criteria Revised criteriaa Patients are admitted directly to an
acute stroke unit by the ambulance service, from A&E or via brain imaging. Patients must not be admitted directly to a medical assessment unit. Patients must then also spend most of their stay in the acute stroke unit
Patients are admitted directly to an acute stroke unit by the ambulance service, from A&E or via brain imaging. Patients must not be admitted directly to a medical assessment unit. [Patients must be seen by a consultant with stroke specialist skills within 14 hours of admission.] Patients must then also spend most of their stay in the acute stroke unit
b Initial brain imaging is delivered within 12 hours of admission. The scan must not only be done in the stated timescales but immediately interpreted and acted on by a suitably experienced physician or radiologist
Initial brain imaging is delivered within 12 hours of admission. [For the purposes of the BPT, reporting times are not defined but access to skilled radiological and clinical interpretation must be available 24 hours a day, 7 days a week to provide timely reporting of brain imaging]
c Patients are assessed for thrombolysis, receiving alteplase if clinically indicated in accordance with the NICE technology appraisal TA264 ‘Alteplase for treating acute, ischaemic stroke’ guidance on this drug.
No change requested
6.7.3. Rationale
128. One of the standards NHS England has set for measuring performance is that all stroke patients should be seen within a maximum of 14 hours of arrival by a consultant with stroke specialist skills. This is supported by the National Clinical Guidelines for Stroke by the Intercollegiate Stroke Working Party18 and the NICE Acute Stroke and Transient Ischaemic Attack Guidelines19.
17 https://www.nice.org.uk/guidance/qs218 www.rcplondon.ac.uk/guidelines-policy/stroke-guidelines19 www.nice.org.uk/guidance/cg68?unlid=90678893420161141231
37 .
.
129. The statement “The scan must not only be done in the stated timescales but immediately interpreted and acted on by a suitably experienced physician or radiologist” is not something that is ever measured, and would therefore be impossible to report. We have removed this wording and replaced it with “For the purposes of the BPT, reporting times are not defined but access to skilled radiological and clinical interpretation must be available 24 hours a day, 7 days a week to provide timely reporting of brain imaging.” Changing it to access to skilled clinical interpretation makes it something commissioners can confirm compliance against.
130. We do know that all hospitals admitting acute stroke patients should have access to consultant stroke physicians and consultant radiologists 24 hours a day.
6.8. Introducing a tariff to promote the adoption of innovation and technology
6.8.1. What we previously proposed20
131. We proposed to introduce a tariff to encourage the uptake and spread of technology, applicable to services in the scope of the national tariff, by identifying potential innovations that we could encourage via the tariff.
132. We proposed that once potential innovations were identified, they would fit into one of the following five categories:
a. suitable for the high cost list
b. suitable for a BPT
c. suitable for an adjustment to a national price or group of prices
d. suitable for another tariff incentive
e. not suitable for inclusion in the tariff.
6.8.2. What you told us
Table 14: Breakdown of responses to the proposal to introduce an innovation and technology tariff
Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 22 74 37 14 2 33% 15% 50% 25% 9% 1%
Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19
133. Feedback to this policy was very positive but there were concerns that:
20 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 available at: https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
38 .
.
a. the policy was not clear enough to make an informed judgement
b. it was not clear how this would be paid for
c. introduction of innovation would be better done through other mechanisms, such as Commissioning for Quality and Innovation (CQUIN) payments, rather than national prices
d. there should be a formal link between NICE medical technology reviews and this policy.
134. Some providers were also concerned about how this policy would work in the framework of a fixed two-year tariff.
6.8.3. How this has influenced our proposals
135. We have further developed the policy using the innovations available in the Innovation Accelerator programme and created a list of innovations we believe can be added to the new national tariff.
136. We considered paying for these innovations through an adjustment to all prices (a top slice) but recognising the concerns of the sector it is proposed that NHS England will fund CCGs. We will continue to review the adoption of these innovations over the course of the two-year tariff to support further development of the policy.
137. We propose to ensure that all innovations recommended for inclusion in the tariff are reviewed, but recognising that innovation is not just the use of new devices, we are not willing at this stage to link it to medical technology reviews.
6.8.4. Final proposal
138. We propose to introduce a list of new innovations into the national tariff with recommended payment approaches. For the 2017/19 NTPS we propose to include the following innovations:
a. Acute angle episiotomy scissors
i. Approximately 15% of births in England require an episiotomy. Of these, around 25% experience obstetric anal sphincter injuries (OASIS). The angle of the cut is important and NICE Guidance recommends that cuts need to be between 45 and 60 degrees to reduce the incidence of poor patient outcomes, reconstructive surgery and litigation costs.
ii. The use of angled scissors in episiotomies therefore should improve patient experience and outcomes and reduce OASIS repair and litigation.
b. Non injectable arterial connector to reduce bacterial contamination and the accidental administration of medication
39 .
.
i. Arterial line placement is a common procedure in various critical care settings. Intra-arterial blood pressure (BP) measurement is more accurate than measurement of BP by non-invasive means, especially in the critically ill. Although rare, when wrong route drug administration occurs, it has the potential to cause serious damage to the vessel and surrounding tissue. Arterial cannulation is associated with complications including bacterial contamination, accidental intra-arterial injection and blood spillage.
ii. Needle-free connectors prevent blood spillage and through a one-way valve allow aspiration only thus preventing accidental administration of medication to the arterial line.
c. Pneumonia prevention systems which are designed to stop ventilator-associated pneumonia
i. Ventilator-associated pneumonia (VAP) is defined as pneumonia that occurs 48-72 hours or thereafter following endotracheal intubation, characterised by the presence of a new or progressive infiltrate, signs of systemic infection (fever, altered white blood cell count), changes in sputum characteristics, and detection of a causative agent. Approximately 100,000 patients are admitted for ventilation in critical care units in the UK each year. The risk for patients is highest during early ICU stay when it is estimated to be 3% per day during days 1–5 of ventilation, 2% per day during days 5–10 of ventilation and 1% per day thereafter (Masterton, 2008).
ii. On average 10 - 20% (10,000- 20,000) patients will be diagnosed with Ventilator Associated-Pneumonia (VAP) resulting in an attributable mortality rate of about 30% or between 3,000 and 6,000 deaths. Each episode of VAP has an estimated cost to the NHS of between £10,000 and £20,000.
iii. Improved airway management in critically ill patients who are having mechanical ventilation can prevent ventilator-associated pneumonia by minimising the risk of pulmonary aspiration and micro-aspiration in patients having ventilation for 24 hours or more. This could see a reduction in the length of time spent on ventilation and length of stay in ICU.
iv. There are available Pneumonia prevention systems which are designed to stop ventilator-associated pneumonia through the use of a cuffed ventilation tube and an electronic cuff monitoring and inflating device which prevents leakage of bacterial laden oral and stomach contents to the lung – a problem associated with standard tubes.
40 .
.
d. Web-based applications for the self-management of chronic obstructive pulmonary disease
i. Managing Chronic Obstructive Pulmonary Disease (COPD) costs the NHS more than £1bn each year. However, treatment is complex, with different inhalers needing to be used in different ways. Compliance with treatment is often extremely low, leading to poor outcomes and wasted prescribing. For this reason, improving self-management for patients with COPD is a key priority for the NHS.
ii. There is no cure for COPD and good symptom management is essential to stabilise disease and prevent recurrent flare-ups or exacerbations. Exacerbations often require intensive treatment and can be severe enough to require hospital admission.
iii. There is evidence from recent studies that disease-specific self-management improves health status and reduces hospital admissions in COPD patients. It is critical to implement health education programs in the continuum of care aimed at behaviour modification. Studies in COPD have shown that self-management increases knowledge and skills the patients require to treat their own illness.
iv. A number of a web based and iOS applications that help patients manage their condition more effectively are available. These platforms can interface with clinical dashboards to monitor and manage their patients remotely at an individual and population level.
v. These platforms can also be used by local health care providers and CCGs to monitor exacerbation burdens in real-time and review potential inequalities in health care to plan support services effectively.
e. Frozen faecal microbiota transplantation for recurrent Clostridium difficile infection rates
i. Clostridium difficile infection rates are climbing in frequency and severity, and the spectrum of susceptible patients is expanding beyond the traditional scope of hospitalized patients receiving antibiotics. There are over 3,000 new cases of chronic CDI across England per annum. Faecal microbiota transplantation is becoming increasingly accepted as an effective and safe intervention in patients with recurrent disease, likely due to the restoration of a disrupted microbiome. Cure rates of > 90% are being consistently reported from multiple centres. Faecal Microbiota Transplantation (FMT) is the provision of a screened specially prepared stool administers via a nasal tube into the intestine to restore the balance of bacteria in the gut. FMT is a NICE recommended treatment for Chronic CDI.
41 .
.
ii. To date nine trusts have performed FMTs on their own site via the frozen service.
f. Prostatic urethral lift systems to treat lower urinary tract symptoms of benign prostatic hyperplasia as a day case:
i. Benign prostatic hyperplasia (BPH) is a common and chronic condition where the enlarged prostate can make it difficult for a man to pass urine, leading to urinary tract infections, urinary retention, and in some cases renal failure. Existing treatments TURP (transurethral resection of the prostate) involve cutting away or removing existing tissue, require an average hospital stay of 3 days and often catheterisation for many days post-surgery.
ii. In people with benign prostatic hyperplasia, the prostate becomes enlarged. A prostatic urethral lift system uses adjustable, permanent implants to hold the enlarged prostate away from the urethra so that it isn’t blocked. In this way, the device can relieve lower urinary tract symptoms (such as pain or difficulty when urinating).
iii. Healthcare teams may want to use a prostatic urethral lift system as an alternative to transurethral resection of the prostate (TURP) and holmium laser enucleation of the prostate (HoLEP).
139. More details of these innovations can be found on the NHS Innovation Accelerator website21 and part B of this statutory consultation.
140. Part B of the statutory consultation also sets out in more details how the individual innovations should be reimbursed.
21 www.england.nhs.uk/ourwork/innovation/nia/
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7. Proposed method for determining national prices7.1. Introduction
141. This section is about how we propose to determine national prices for 2017/18 and 2018/19. We set out our proposals for setting price relativities for both years in National Tariff: Policy proposals for 2017/18 and 2018/19.22
7.1.1. Our principles
142. Our principles for setting national prices are that:
a. Prices should reflect efficient costs. This means that the prices set should:
i. reflect the costs a reasonably efficient provider ought to incur in supplying services at the quality expected by commissioners
ii. not provide full reimbursement for inefficient providers.
b. Prices should provide appropriate signals by:
i. giving commissioners the information needed to make the best use of their budgets and enabling them to make decisions about the mix of services that offer most value to their populations
ii. incentivising providers to reduce their unit costs by finding ways of working more efficiently
iii. encouraging providers to change from one delivery model to another where commissioners want this and where it is more efficient and effective.
7.1.2. Overview of the modelling approach
143. There are three stages to the proposed method for determining 2017/18 and 2018/19 prices.
a. Setting relative prices for 2017/18: For example, how the price of one procedure within a specialty differs from another, taking into account the level of resources required to perform each one.
b. Setting the level of prices for 2017/18: Setting the level of prices by reference to the costs of providing services incurred by reasonably efficient providers, and taking into account other relevant factors.
c. Setting the prices for 2018/19: both for relative and absolute levels.
144. The figure below shows the price setting process in summary form.
22 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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Figure 1: Stages in our method for setting national prices for 2017/19
145. NHS Improvement and NHS England consulted on proposals for setting relative prices over the summer. We did not consult on setting price levels. The main policy areas we have not previously engaged on are our proposals for setting the final cost base, uplifts for changes to provider costs and efficiency.
146. In the 2016/17 NTPS, we rolled over prices from the ETO with adjustments for inflation and efficiency. For 2017/18, we propose instead to model prices by taking a similar approach to that used by the Department of Health in modelling prices for 2013/14 Payment by Results (PbR).23
147. We propose to refresh the input data to use the latest information and we also propose to make a series of changes to the DH PbR method itself, including:
a. simplifying the approach to setting prices for BPTs
b. updating activity and cost inputs and adopting a method for cleaning costs to reduce some of the known issues with reference cost data
c. updating cost uplifts based on latest information
d. introducing a method to reduce the immediate impact of distributional changes from the new currency design
e. reviewing assumptions used to calculate the efficiency factor
f. explicitly setting a cost base
g. ensuring that manual adjustments are cost neutral
h. other more minor changes that are required because of the passage of time, lack of data sources or because they improve the transparency, efficiency and simplicity of the tariff model.
23 More detail on the 2013/14 PBR method can be found here: www.gov.uk/government/uploads/system/uploads/attachment_data/file/214905/Step-by-step-guide-to-calculating-the-2013-14-national-tariff.pdf
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7.2. Modelling national prices for 2017/18
7.2.1. What we previously proposed24
148. In National tariff: Policy proposals for 2017/18 and 2018/19 we proposed to set prices for the 2017/18 tariff year by modelling prices using the approach taken by DH for the 2013/14 PbR, with changes including ensuring that manual adjustments are cost neutral, allowing for up-to-date inputs and new calculation models and managing provider revenue volatility.
149. We proposed to set national prices for 2017/18 by using the currencies proposed in the currency section of this document and modelling national prices using the process set out in the figure above.
150. This was a change to the approach used for the 2016/17 NTPS, but reflected the approach we originally proposed in earlier consultations for the 2016/17 NTPS.25
151. We considered it would be more appropriate to model prices than to continue to roll prices forward. This would allow us to use up-to-date cost data that reflect changes in clinical practice, and to set prices for the proposed new currency design, HRG4+.
7.2.2. What you told us
Table 15: Breakdown of responses to the proposal to model pricesStrongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 12 95 30 24 20 12% 7% 52% 17% 13% 11%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
152. Responses to our proposals on the method for modelling prices focused mainly on the following areas.
a. data quality issues in the reference cost and Hospital Episode Statistics (HES) datasets
b. inappropriate proposed prices in specific areas: in particular orthopaedic and renal prices, and specialist services provider prices that are too low
24 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
25 This was proposed in our summer engagement document 2016/17 national tariff proposal: Currency design and relative prices at www.gov.uk/government/publications/201617-national-tariff-proposals-currency-design-and-relative-prices
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c. specific issues with the modelling approach: we should use spell-based reference costs rather than convert finished consultant episodes to spells in calculating prices.
7.2.3. How this has influenced our proposals
153. A clear majority (59%) of respondents supported our proposals.
154. Reference costs and HES for 2014/15 are the most comprehensive datasets available to us. There are no realistic alternatives to them for setting the 2017/18 tariff.
155. Issues with reference costs are well known and we propose to mitigate these shortcomings, for example through our proposed data cleaning and manual adjustment processes.
156. We propose to mitigate the impact on orthopaedic, renal and specialist providers through our approach to managing volatility (Section 7.10) and through specialist top-up payments.
157. We do not propose to use spell-based reference costs because the very tight timelines due to the later than- expected publication of the 2016/17 NTPS did not allow us to explore this option further.
7.2.4. Final proposal
158. We propose to adopt the approach to modelling 2017/18 national prices set out in National tariff: Policy proposals for 2017/18 and 2018/19. This means we propose to set 2017/18 prices using the modelling approach previously used by DH for the 2013/14 DH PbR tariff, with some method changes and adjustments to allow us to use up-to-date inputs and new calculation models, and to simplify other models.
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7.3. Managing model inputs for 2017/18
7.3.1. What we previously proposed26
159. In our summer engagement document, we proposed to model prices using 2014/15 reference costs and 2014/15 HES activity data. This is because the 2014/15 reference costs are designed to support the HRG4+ currency proposals for 2017/18, and the 2014/15 HES activity data is the activity dataset that is most compatible with the 2014/15 reference costs. When we started our modelling, these datasets were also the most recent available.
160. We also proposed to apply some data cleaning rules to clean reference cost data. We believe this would improve the quality of the reference cost dataset.
7.3.2. What you told us
Table 16: Breakdown of responses to our proposals for managing model inputs
Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 10 88 42 22 13 16% 6% 50% 24% 13% 7%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
161. A clear majority (56%) of respondents supported our proposals.
162. Respondents raised a few concerns, particularly that our data-cleaning approach could remove genuine outliers.
163. Some respondents also suggested alternatives to our proposed data-cleaning rules.
7.3.3. How this has influenced our proposals
164. We stated in our summer engagement that we would only apply data-cleaning rules to reference costs for admitted patient care. This would result in a small percentage of reference cost data records submitted by a small number of providers being removed to improve the quality of the dataset.
165. Our analysis shows that the data-cleaning rules do have a significant effect on a relatively small number of HRGs. However, we think we have put done enough to minimise the risk of a negative effect from an unintentional removal of genuine outliers, in particular:
26 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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a. our clinical review process for our modelled prices with the option for clinical experts to propose manual adjustments to prices that appear to be implausible
b. the ability for stakeholders to propose similar adjustments in response to our consultation in July.27 To aid this we published with our July consultation a readout tool that shows the impact of data cleaning on each HRG. An updated version can be found on the NHS Improvement 2017/19 national tariff page.28
166. We have not changed the way we propose to clean reference costs in response to the suggested alternative data-cleaning methods. This is because we still believe this method is appropriate and to do otherwise would require significant development work to assess the suitability of these alternative approaches relative to the effect of data cleaning on most HRGs.
7.3.4. Final proposal
Reference costs
167. We propose to adopt the approach to managing model inputs for 2017/18 prices as set out in our summer engagement paper. This means we propose to clean reference cost data by removing:
a. outliers from the raw reference cost dataset using a statistical outlier test known as the Grubbs test
b. providers submitting reference costs more than 50% below the national average for more than 25% of HRGs, who also submit reference costs more than 50% higher than the national average for more than 25% of HRGs
c. providers submitting reference costs containing more than 75% duplicate costs across HRGs and departments.
168. For the 2017/18 tariff we propose to clean only reference cost data for the admitted patient care model.
HES data
We intend to use 2014/15 HES data grouped by Monitor.
7.4. Setting prices for best practice tariffs for 2017/18
7.4.1. What we previously proposed29
27 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
28 https://improvement.nhs.uk/resources/national-tariff-1719-consultation
29
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169. In National Tariff: policy proposals for 2017/18 and 2018/19 we proposed to, where possible, simplify and standardise the method for setting prices for existing and new BPTs by:
a. using the modelled price without adjustments as the starting point
b. setting a fixed differential between the BPT and non-BPT price (either a percentage or absolute value)
c. setting an expected compliance rate that would be used to determine final prices
d. then calculating the BPT and non-BPT price so that the BPT would not add to or reduce the total amount paid to providers at an aggregate level.
170. These proposals would reduce the risk of BPTs creating an extra efficiency requirement, would be easier to understand and simpler to calculate.
7.4.2. What you told us
Table 17: Breakdown of responses to our proposals for managing model inputs
Strongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 10 79 59 12 4 23% 6% 48% 36% 7% 2%
Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19
171. 54% of respondents supported the proposed modelling approach and only 9% did not.
172. Responses to our proposals focused mainly on the following areas.
a. the need to expressly take into account the cost of complying when setting a BPT
b. lack of clarity on BPT criteria and payment rules and the associated processes causing an administrative burden on the sector.
7.4.3. How this has influenced our proposals
173. The pricing method for BPTs makes the assumption that the existing cost base already includes the cost of compliance with BPTs. We think this is a reasonable assumption for BPTs that have been in place for some time and have received no evidence that newer BPTs cause significant extra costs to providers.
ational tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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174. We do consider the administrative burden on providers when proposing the introduction of new BPTs but this needs to be weighed against the patient benefit. Where we have significant feedback on undue administrative burdens we have amended our BPT proposals to minimise the burden. We also have not received any specific evidence that the administrative burden for existing BPTs is disproportionately large.
175. As a result we do not currently have enough evidence to justify a change to our proposals for the BPT pricing method to account for the cost of compliance or the cost of administrative burden.
7.4.4. Final proposal
176. We are not amending our earlier proposals and so propose, where possible, to simplify and standardise the method for setting prices for existing and new BPTs by:
a. using the modelled price without adjustments as the starting point
b. setting a fixed differential between the BPT and non-BPT price (either a percentage or absolute value)
c. setting an expected compliance rate that would be used to determine final prices
d. calculating the BPT and non-BPT price so that the BPT would not add to or reduce the total amount paid to providers at an aggregate level.
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7.5. Setting national prices for 2018/19
7.5.1. What we previously proposed30
177. In National tariff: policy proposals for 2017/18 and 2018/19 we proposed to model national prices for 2018/19 using the 2017/18 price list as a base and then:
a. determine final price levels by applying adjustments for expected efficiency, inflation and CNST
b. adjust the method for setting inflation, efficiency and CNST to base them on longer term projections rather than the most recent available data.
7.5.2. What you told us
178. A majority of respondents (53%) supported the proposed modelling approach.
179. Responses to our proposals on the modelling approach for 2018/19 prices focused mainly on the limited flexibility that setting a two-year tariff imposes:
a. very limited flexibility to make changes in year 2 of the tariff poses a risk that undesirable effects of the tariff are present for an extended period
b. limited opportunity to accommodate innovation
c. limited ability to react to unexpected cost changes.
7.5.3. How this has influenced our proposals
180. We recognise that there are limitations on making price changes when setting a two-year tariff. We have addressed these concerns in Section 5 Setting a tariff for 2017/19.
181. We have not been told of any major concerns around our proposal to use a roll-over method for setting 2018/19 national prices. We are therefore not proposing any changes to these proposals in the National tariff: policy proposals for 2017/18 and 2018/19 document.
7.5.4. Final proposal
182. As set out above, we propose to model national prices for 2018/19 using the 2017/18 price list as a base and then:
a. determine final price levels by applying adjustments for expected efficiency, inflation and CNST
30 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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b. adjust the method for setting inflation, efficiency and CNST to base them on longer term projections rather than the most recent available data.
7.6. Making manual adjustments to prices
7.6.1. What we previously proposed31
183. In our summer engagement document we proposed to introduce some manual adjustments to price relativities based on the expert clinical feedback, for example, from workshops with clinicians and specialty groups.
184. We presented these adjustments to the wider sector in an annex to the engagement document32 and asked for further recommendations on these price relativities.
7.6.2. What you told us
Table 18: Breakdown of responses to the proposal to manually adjust pricesStrongly support
Tend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Number 8 75 55 13 14 24% 5% 45% 33% 8% 8%
Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19
185. Although feedback to this proposed approach was broadly positive, some respondents commented that the process should be more open and that particular groups, such as bariatric surgeons, had not been adequately engaged with.
186. There were also specific comments on price levels submitted through the survey as well as recommendations returned using the template in the manual adjustment annex.
7.6.3. How this has influenced our proposals
187. We have reviewed all comments on specific prices, accepted some feedback and made further recommendations. We are now proposing a new set of manual adjustments to price relativities.
188. These manual adjustments have already been factored into the prices proposed in Annex B1. We have included all the proposed manual adjustments in Annex B2.
31 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
32 https://improvement.nhs.uk/uploads/documents/Annex_B_Price_relativities_response_template.xlsx
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189. The manual adjustments proposed for the summer engagement were developed with a relatively narrow series of stakeholder groups but we are now releasing them to all stakeholders to get the widest possible range of views. We are also looking at ways to make sure the groups represent a wider range of views at the earliest stage of the manual adjustment process.
7.6.4. Final proposal
190. Following sector engagement we propose to introduce some manual adjustments to price relativities. Details of these are in Annex B2.
7.7. Setting the efficiency factor
7.7.1. Background
191. The efficiency factor is a mechanism used in sectors where prices are regulated centrally to incentivise providers to reduce costs. It measures the efficiency providers are expected to achieve by treating patients at lower cost over time, for example by introducing innovative healthcare pathways, technological changes or better use of the labour force.33
192. The objective of the efficiency factor is to set a challenging but achievable target to encourage trusts to continually improve their use of resources, so that patients receive as much high quality healthcare as possible.
193. Setting the efficiency factor inappropriately can have substantial and undesirable impacts on providers, commissioners and patients because:
a. Setting a too high efficiency factor (prices too low) may challenge providers’ financial position and sustainability. Providers may not be adequately reimbursed for the services they provide, which potentially could affect a service quality (eg increasing waiting times) and increase the risk of adverse impact on the quality of care for patients.
b. Setting a very low efficiency factor (prices too high) may reduce both the volume of services that commissioners can purchase with given budgets and reduce the incentive for providers to achieve cost savings.
7.7.2. What are we proposing?
194. We propose an efficiency factor of 2% for 2017/18 and 2% for 2018/19.
7.7.3. Rationale
195. We use evidence-based data to set the efficiency factor. The starting point is the Deloitte analysis produced to inform our decision on the efficiency factor for the 2015/16 national tariff. This initial analysis was based on an econometric
33 The Carter report has proposed ways providers can achieve efficiencies.
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model and a supporting case study.34 The model used data from 165 acute trusts between the 2008/09 and 2012/13 financial years. For the 2016/17 NTPS we developed the Deloitte econometric approach by changing our measurement of certain variables and incorporating 2013/14 data into the model.35
196. For the 2017/18 NTPS we considered how we might develop the existing econometric model, as well as whether any update to the evidence was needed. We updated the analysis prepared for the 2016/17 NTPS to include 2014/15 data.36 This allows us to account for the most recent changes in efficiency in our decision on the efficiency factor setting. We have also improved the measurement of deprivation in the model.37
197. We estimated two measures of efficiency: trend efficiency and variation in efficiency.
a. Trend efficiency is the average sector-wide efficiency gain we observe over time. This could arise from new technologies, improved hospital processes or less efficient trusts catching up with more efficient ones. We estimate trend efficiency as a percentage reduction in costs over time that does not vary by trust. Given the importance of achieving value for money in the NHS, we think it is reasonable to set an efficiency ask at least at the level of historical trend efficiency.
b. Variation in efficiency is the range of efficiency performance across trusts. This could arise from differences in use of technologies, or differences in hospital processes. We estimate variation in efficiency as a percentage difference in costs from the average trust that does not change over time. We use this to inform our understanding of what reasonable efficiency ask, over and above trend efficiency, would enable less efficient trusts to catch up with more efficient trusts.
198. The table below displays the results of the estimates of our model and suggests it would be reasonable for the efficiency factor to be at least 1% with catch up factor to reduce variations in efficiency. Given the financial pressures on the NHS, we believe that it is appropriate to set a challenging but achievable efficiency target for 2017/18. We are proposing an efficiency factor of 2%.
34 See Deloitte report for detailed description of the method.35 The report of the efficiency factor for the 2016/17 national tariff can be found here: Evidence on the efficiency
factor. 36 Where changes in data collections mean data is not available for variables, for instance certain disease’s
prevalence in the Quality Outcomes Framework, we have extrapolated based on historical data.37 In 2016/17 the estimate of the level of deprivation a trust faced was calculated using the area-level index of
multiple deprivation, mapped to trusts by the average patient flow. This was time-invariant. This year we have recalculated patient flow each year. This enables us to capture changes in the deprivation profile a trust may face due to changes in catchment area served over time.
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Table 19: Efficiency estimatesEstimate
Trend efficiency 1.0%Variation in efficiencyMedian to 60th centile 1.6%Median to 70th centile 3.0%Median to 80th centile 5.2%Median to 90th centile 6.9%
Notes: The econometric analysis is based on cost data on 170 providers for the period 2008/09-2014/15.
199. Our modelling suggests that trusts become 1% more efficient each year on average. Around this trend we estimate that there is substantial variation in efficiency, which could justify an efficiency factor greater than 1% as poorer performers can improve more than the average. For instance, if the average performer catches up to the 60th centile we estimate that this would release 1.6% efficiency in addition to trend efficiency. For the 2018/19 national tariff we assume trend efficiency will continue and this goes in line with the other government reviews.38 We therefore consider it appropriate to adopt an efficiency factor of 2% for 2018/19.
7.8. Cost uplifts
7.8.1. Background
200. To determine national prices for 2017/18 and 2018/19 we need to assess the cost pressures in those years taking into account the expected changes to the major components of provider costs.
Table 20: Cost uplift factor componentsCategory Description Source Frequency of
updateLabour cost inflation
Expected pay settlement, pay drift, apprenticeship levy, staff mix and pension changes
Department of Health
Annually
Drugs cost inflation
Cost increase of all drugs Department of Health
Monthly
Non-pay, non-drugs inflation
General inflation of other operating expenses using the latest forecast of the gross domestic product deflator
Office for Budget Responsibility
End of each quarter
Changes in capital costs
Anticipated changes in depreciation and private finance initiative (PFI) payments
Department of Health
Annually
CNST Expected increases in CNST contribution payments
NHS Litigation Authority
Annually (October/
38 A recent Carter review report on operational productivity and performance suggests the NHS is expected to deliver efficiencies of 2-3% per year, which could represent savings of 10-15% by 2021.
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Category Description Source Frequency of updateNovember)
Service development
Expected cost of new requirements set out in the government’s mandate to NHS England
NHS England Annually (November/December)
7.8.2. Our proposal
201. We propose to use broadly the same methodology for setting cost uplifts that we have used in previous years with the notable difference that we must estimate for two years rather than one.39 We are also making some adjustments to the DH figures for labour cost and drug cost inflation, as explained below. To estimate the appropriate cost uplift for 2017/18 and 2018/19, we propose to:
a. forecast the rate of inflation for each of the categories in the table above
b. combine these into a single cost uplift factor by weighting each category by its average share of providers’ expenditure
c. estimate cost weightings based on the actual weighting in the 2015/16 consolidated accounts and use the same weightings for 2017/18 and 2018/19.
202. Based on the approach we have developed for cost uplift and the latest available data, we propose to use an inflation cost uplift of 2.1% for 2017/18 and 2.1% for 2018/19. A breakdown of this estimate, calculated using the approach described above, is shown below.
203. For labour costs we propose to exclude estimates for pay inflation that lead to increased output on the basis that this activity growth would be paid for by reimbursement of that extra activity through national prices.
204. For drugs costs we propose to exclude estimates for inflation that relate to activity growth as this would be paid for by reimbursement of that extra activity through national prices. We also propose to exclude the estimates of inflation for high cost drugs.
Table 21: Summary of cost uplift factor estimatesCategory 2017/18
uplift %2018/19 uplift %
Category weight
Weighted estimate2017/18
Weighted estimate2018/19
Labour cost inflation 2.1% 2.0% 63.1% 1.3% 1.3%Drugs cost inflation 2.8% 2.1% 8.5% 0.2% 0.2%
39 Please see Section 4.2 of the 2016/17 National Tariff Payment System for more details on the previous methodology for setting cost uplifts
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Category 2017/18 uplift %
2018/19 uplift %
Category weight
Weighted estimate2017/18
Weighted estimate2018/19
Non-pay, non-drugs inflation
1.8% 2.1% 20.9% 0.4% 0.4%
Changes in capital costs 3.0% 2.9% 5.7% 0.2% 0.2%CNST cost inflation 0.9% 0.9% 1.8% 0.0% 0.0%Service development and other costs
0.0% 0.0% n/a 0.0% 0.0%
Overall 100.0% 2.1% 2.1%Note: calculations were done unrounded; only one decimal place is displayed
7.8.3. Rationale
205. Every year the efficient cost of providing healthcare changes because of changes in wages, prices and other inputs over which providers have limited control. We therefore make a forward-looking adjustment to the modelled prices to reflect expected cost pressures in future years. We refer to this as the cost uplift.
206. We have considered other methods of setting cost uplifts, including the inflation estimates from the OBR, but we feel that, because the current methodology includes estimates of changes to healthcare costs provided by the bodies best placed to estimate them (eg the Department of Health or the NHS Litigation Authority), it reflects our best understanding of changes to healthcare costs.
207. Labour cost inflation. We are projecting an increase in the pay bill of 2.1% in 2017/18 and 2.0% in 2018/19. Our estimate for labour cost inflation comprises:
1% pay award, in line with public sector-pay policy as set by HM Treasury
pay drift and group mix effects of 0.7% in 2017/18 and 1.0% in 2018/19. In arriving at these figures, we have made an adjustment of -0.3% to the DH projections to reduce or exclude elements of pay inflation that would lead to additional output and so are remunerated through activity rather than price
the apprenticeship levy, which is estimated to add a net 0.3% to the total wage bill in 2017/18 (with no further impact in 2018/19). This comprises 0.4% expected gross costs, offset by our estimate of 0.1% financial benefit, as employers are able to access funding for the training of apprentices
the immigration skills charge, which the Department of Health estimate will add 0.1% to the total wage bill in 2017/18 (with no further impact in 2018/19)
208. Drug cost inflation. Our estimate for drug cost inflation is 2.8% in 2017/18 and 2.1% in 2018/19. The approach is a development of that used in previous years to ensure that it better reflects actual price increases.
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209. The starting point for our approach is DH estimates of drug expenditure growth. These are based on long-term trends, DH’s expectation of new drugs coming to market and other drugs that will cease to be provided solely under patent in the coming 12 months. The figures are 5.8% in 2017/18 and 5.0% in 2018/19. We then adjust these to calculate a figure appropriate for use in the tariff, as follows:
a. calculating a revised figure for tariff drugs, by assuming 6.2% cost growth in the proportion of drugs expenditure accounted for by high cost drugs. As the cost of high cost drugs is paid outside the tariff, it is not correct to include expected price growth in our calculation of tariff inflation
b. removing assumed underlying activity growth of 2.5% in both years as this this activity growth would be paid for by reimbursement of that extra activity through national prices
c. recognising the uncertainty associated with these adjustments, particularly for pass-through drugs, and setting the growth figure to be at least the GDP deflator in each year.
210. Non pay non drugs inflation. For other operating costs, which include general costs such as medical, surgical and laboratory equipment and fuel, we have used the forecast of the GDP deflator estimated by the Office of Budget Responsibility (OBR) as the basis of the expected increase in costs. The latest available forecast of the GDP deflator is from June 2016.40 This is 1.8% in 2017/18 and 2.1% in 2018/19.
211. Capital costs. Providers’ costs typically include depreciation charges and private finance initiative (PFI) payments. As with increases in operating costs, providers should have an opportunity to recover an increase in these capital costs.
212. In previous years, DH reflected changes in these capital costs when calculating cost uplifts, and we have adopted the same approach for 2017/18 and 2018/19. Specifically, we have applied DH’s projection of changes in overall depreciation charges and PFI payments.
213. In aggregate, DH projects PFI and depreciation to grow by 3.0% in 2017/18 and 2.9% in 2018/19. These both translate to an 0.2% uplift on tariff prices.
214. CNST. As in previous years, most CNST costs are allocated to the relevant HRGs at a subchapter level. About 2% of CNST costs cannot be allocated to subchapters. Our proposed approach is that we apply this residual or unallocated CNST cost change to all HRGs by including an uplift to the cost uplift factor. We used data provided by the NHS Litigation Authority to calculate
40 Published at www.gov.uk/government/statistics/gdp-deflators-at-market-prices-and-money-gdp-june-2016-quarterly-national-accounts
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the uplift factor for unallocated CNST, and propose to adopt that approach for the final prices.
215. Service development and other costs. We also considered whether any extra allowance should be made for other identified costs, or to allow for expected service developments including major initiatives in NHS England’s mandate. We concluded that no further adjustments were necessary, having in particular considered the following potential areas of extra cost:
a. CQC inspection fees: the impact of announced extra CQC inspection fees is less than 0.1% and not considered material
b. Seven-day services: this will be considered as part of transformation funding and it is not therefore necessary to include an uplift in tariff.
7.9. Clinical Negligence Scheme for Trusts
7.9.1. Background
216. CNST is an indemnity scheme for clinical negligence claims. Providers contribute to the scheme to cover the legal and compensatory costs of clinical negligence.41 The NHS Litigation Authority (NHSLA) administers the scheme and sets the contribution each provider must make to ensure the scheme is fully funded each year.
217. Following the approach used in previous years, we propose to allocate the increase in CNST costs to core HRG subchapters (for admitted patient care), to the maternity delivery tariff and to A&E services, in line with the average increase that will be paid by providers. This approach to the CNST uplift is different to other cost uplifts. While other cost uplifts are estimated and applied across all prices, the estimate of the CNST increase can be different for each subchapter (within admitted patient care), A&E services and for the maternity delivery tariff.
218. Each relevant HRG has received an uplift based on the change in CNST cost across specialties mapped to HRG subchapters. This means that our proposed cost uplifts reflect, on average, each provider’s relative exposure to CNST cost growth, given their individual mix of services and procedures.42
219. As we are proposing to move to a two-year tariff we would set the CNST uplift for both years.
41 CCGs and NHS England are also members of the CNST scheme.42 For example, maternity services have been a major driver of CNST costs in recent years. For this
reason, a provider that delivers maternity services as a large proportion of its overall service mix would probably find its CNST contributions (set by the NHSLA) have increased more quickly than the contributions of other providers. However, the cost uplift reflects this, since the CNST uplift is higher for maternity services. This is consistent with the approach previously taken by DH.
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7.9.2. Proposal
220. We propose to set the same CNST uplifts for both years. These are in the table on the next page.
7.9.3. Rationale
221. We propose to use the same method we have used in previous years with minor adjustments to adapt it to HRG4+ and a two-year tariff.
222. As this is a tested model previously accepted by the sector we do not believe a redesign of the policy is required at this stage.
223. We believe that setting the same levels for two years makes sense given the information from the NHSLA and the rollover method we propose to adopt for setting prices in 2018/19.
224. The NHS Litigation Authority (NHS LA) provides NHS Improvement with a breakdown by treatment and staff specialty of the total amount to be collected from members of the scheme to cover projected litigation claims. For the 2017/19 tariff the NHS LA have provided two years’ worth of projections covering the 2017/18 and 2018/19 financial years. The increase from the 2016/17 and 2017/18 projections respectively is then allocated to the relevant areas of tariff using the same method.
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Table 22: CNST tariff impact by HRG subchapterHRG sub chapter
2017/18 uplift (%)
2018/19 uplift (%)
HRG sub chapter
2017/18 uplift (%)
2018/19 uplift (%)
HRG sub chapter
2017/18 uplift (%)
2018/19 uplift (%)
AA 0.72% 0.89% JC 0.67% 0.80% PP 1.25% 1.53%AB 0.41% 0.54% JD 0.40% 0.49% PQ 0.58% 0.71%BZ 0.54% 0.68% KA 0.48% 0.63% PR 1.14% 1.41%CA 0.34% 0.46% KB 0.22% 0.25% PV 1.08% 1.34%CB 0.36% 0.45% KC 0.20% 0.22% PW 1.33% 1.62%CD 0.16% 0.19% LA 0.18% 0.20% PX 1.10% 1.35%DZ 0.17% 0.20% LB 0.37% 0.45% SA 0.30% 0.37%EB 0.26% 0.31% MA 0.22% 0.37% VA 0.83% 1.08%EC 0.26% 0.33% MB 0.41% 0.58% WH 0.49% 0.61%ED 0.23% 0.32% PB 1.12% 1.38% WJ 0.22% 0.26%EY 0.29% 0.36% PC 1.18% 1.45% YA 2.71% 3.55%FZ 0.56% 0.71% PD 1.33% 1.63% YD 0.29% 0.33%GA 0.56% 0.72% PE 0.94% 1.15% YF 0.57% 0.73%GB 0.27% 0.34% PF 1.14% 1.40% YG 0.26% 0.31%GC 0.52% 0.65% PG 0.75% 0.92% YH 0.91% 1.17%HC 0.84% 1.10% PH 0.86% 1.07% YJ 0.72% 0.92%HD 0.49% 0.60% PJ 1.24% 1.51% YL 0.23% 0.28%HE 1.51% 1.92% PK 0.74% 0.91% YQ 0.71% 0.91%HN 0.83% 1.08% PL 0.79% 0.97% YR 0.75% 0.95%HT 0.92% 1.20% PM 0.24% 0.30% VB 1.94% 1.90%JA 0.84% 1.05% PN 0.70% 0.85% Maternity 6.36% 7.54%
Source: The NHS Litigation Authority. Note: * Maternity is delivery element only
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7.10. Managing volatility
7.10.1. Background
225. In proposing to set national prices based on the HRG4+ currency design underpinned by cost and activity data from 2014/15, we accept that this would change the distribution of provider income and commissioner expenditure. While this is one of the desired consequences of introducing an improved currency design based on more up-to-date cost data, the change may be destabilising for individual providers even though in aggregate the effect is neutral to the provider sector.
226. Delaying the introduction of the new currency design would reduce this volatility but it would mean that prices become increasingly removed from current costs and practice. It would also mean that when any new currency design is implemented the impact would be much greater.
227. This means that the impact from introducing the new currency design needs to be managed in a way that reduces the total impact on providers and commissioners to a manageable level in any year.
228. For the prices released with National tariff: Policy proposals for 2017/18 and 2018/19,43 we were concerned that some services had large gains and others significant losses: in particular orthopaedics (subchapters HC, HD, HE, HN and HT), neonatal disorders (PB), renal dialysis (LD), chemotherapy (SB) and radiotherapy (SC).
7.10.2. Proposal
229. We propose to continue to adjust prices in the subchapters mentioned above so that services recover 75% of the initial estimated loss. Tariff prices outside these subchapters have been reduced equally by 1.2% to pay for this revenue adjustment (top sliced). The table below displays the adjustments factors:
Table 23: Adjustments made to individual subchaptersSubchapter Subchapter description Uplift adjustmentHC Spinal Procedures and Disorders 3.9%HD Musculoskeletal and rheumatological
Disorders0.9%
HE Orthopaedic Disorders 11.1%HN Orthopaedic Non-Trauma Procedures 5.3%HT Orthopaedic Trauma Procedures 7.9%LD Renal Dialysis for Chronic Kidney
Disease10.4%
PB Neonatal disorders 15.0%
43 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
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Subchapter Subchapter description Uplift adjustmentSB Chemotherapy 4.1%SC Radiotherapy 6.3%
All remaining chapters -1.2%
230. We also propose a further change to the management of subchapter HD to separate it from the rest of chapter H for price calculation.
231. NHS England is making consequential adjustments as between CCG and specialist commissioners budgets to ensure the changes are purchasing-provider neutral between locally and nationally commissioned prices.
7.10.3. Rationale
232. Under the existing approach all prices in chapter H are calculated together which means that manual adjustments to prices in another H subchapter have a significant impact on prices within HD. Separating this sub-chapter means we can avoid a significant reduction to prices for musculoskeletal and rheumatological disorders.
233. However, this is not a perfect solution and would still leave 52 NHS providers facing a reduction of more than 0.5% of operating revenue. We do not collect data on operating revenue from independent providers and so are not able to provide this analysis for the independent sector.
234. This approach would allow the introduction of a new currency design while reducing some of the extreme reductions in payments for some services as a result of switching to HRG4+. The remaining issues may relate to casemix complexity that is not captured adequately by the HRG4 or HRG4+ currency designs and cannot be mitigated through the national tariff.
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7.11 Setting the cost base
7.11.1 Background
235. The cost base is the level of cost the tariff will allow providers to recover before adjustments are made for cost uplifts, CNST and the efficiency factor are applied. Therefore in setting national prices, after setting price relativities, we set prices at a level that will allow them to recover the cost base, and then we adjust those prices to allow for cost uplifts, and the efficiency factor.
7.11.2 What are we proposing?
236. For 2017/18, for the total activity with a national price, we are proposing to set the cost base equal to the revenue that would be received under 2016/17 national tariff.
237. Similarly, for 2018/19, we propose that the cost base should equal the revenue that would be received under 2017/18 prices (that is the 2016/17 cost base adjusted for 2017/18 cost uplifts and efficiency factor).
7.11.3 Rationale
238. As with many other parts of tariff setting, we use last year’s tariff as a starting point for the following tariff. Therefore, last year’s prices and last year’s revenue are used as a starting point.
239. After setting the starting point, we consider new information, and a number of factors to form a view whether an adjustment to the cost base is warranted.
240. Information and factors we considered include:
a. historical efficiency and cost uplift assumptions
b. latest cost data
c. additional funding outside the national tariff.
d. any other additional revenue providers use to pay for tariff services44
e. our pricing principles and the factors which legislation requires us to consider, including matters such as the importance of setting cost reflective prices, and the need to take into account the duties of commissioners in the context of the budget available for the NHS.
241. In using our judgement, we also consider the effect of setting the cost base too high or too low. This effect is asymmetric:
44 We commissioned a review into the cost base from FTI. This can be found at: improvement.nhs.uk/resources/national-tariff-1719-consultation
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a. If we set the cost base too low (ie we set too high an expectation that providers will be able to catch up to past undelivered efficiency), providers will be in deficit, service quality will decrease (eg waiting times will increase), and some providers may cease providing certain services.
b. However, if we set the cost base too high, commissioners, who have an obligation to stay within their budgets, are likely to restrict the volumes of commissioned services, and could cease commissioning certain services entirely. This would mean some patients may not be provided with the healthcare service they require.
242. Given the above, it is our judgement to keep the cost base equal to the revenue that would be received under 2016/17 prices.
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8 National variations 243. National variations refer to variations to national prices specified in the national
tariff (s116(4)(a) of the 2012 Act). They relate to circumstances where it is appropriate to make adjustments to national prices (as distinct from local variations agreed between commissioners and providers). National variations may reflect features of costs that are not fully captured in national prices or seek to share risk more appropriately between providers and commissioners. The national variations in the national tariff aim to do one of the following:
a. improve the extent to which prices reflect location-specific costs (eg the market forces factor (MFF))
b. improve the extent to which prices reflect patient complexity (eg top-ups for specialised services)
c. create incentives to share responsibility for preventing avoidable unplanned hospital stays (eg the marginal rate emergency rule)
d. share financial risk appropriately following (or during) a move to new payment approaches (eg national variation to support the implementation of the BPT for hip and knee replacements).
244. For 2017 to 2019 we are only proposing to adjust top-up payments for specialised services.
245. We propose to retain the current approach to the market forces factor:
a. Where there are mergers during the period in which the tariff has effect, as now, the existing MFF rate will continue to apply, but providers and commissioners may agree a local variation to national prices in accordance with the rules set out in Section 6 of the national tariff.
b. Where MFF rates are recalculated, for example where two trusts have merged before the end of March 2017, we will publish the rates and they will apply from April 2017.
246. We propose to retain the marginal rate emergency rule and the 30 day readmission rule. We believe that these still provide appropriate incentives to prevent avoidable admissions.
247. We propose to retain the transitional national variation for primary hip and knee replacements. This was introduced in 2014/15 to recognise that there are circumstances in which some providers will be unable to demonstrate that they meet all the best practice criteria, but where it would be inappropriate not to pay the full BPT price. We will continue to review this policy over the period of the tariff and may propose changes in 2019/20.
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8.11 Updating top-up payment for specialised services
8.11.1 What we previously proposed45
248. In our previous engagement, we proposed to:
a. Move to top-ups based on the Prescribed Specialised Services (PSS) definition of specialised services
b. Move to top-up payments for 2017/18 that adopt the recommendations from the University of York.46
249. We would mitigate the impact by transitioning to the new rates over four years for services that would lose income from the new rates. Other rates will be scaled pro-rata to maintain a total payment amount of around £416 million.
250. This change would use the latest reference costs and HES data, and a methodology developed by the University of York with input from the service and the Specialist and Complex Care Advisory Group.
251. Moving straight to the new top-up rates could destabilise providers. We are also analysing how complexity is captured by the national tariff. As we will not conclude this analysis in time for proposals to be included for the 2017 to 2019 national tariff, we believe that is appropriate to transition to the new top-up levels.
8.11.2 What you told us
Table 24: Response from the sector to updating top-up payment for specialised services
Strongly support
Tend to support
Neither support or
oppose
Tend to oppose
Strongly oppose
Don’t know
Number 17 62 48 14 24 22% 10% 38% 29% 8% 15%
Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19
252. Support for this policy was generally favourable. The update to the top-ups to line up with specialised commissioning rules and to reflect HRG4+ phase 3 was seen as a necessary change.
253. Concerns were raised that the PSS rules were not being evenly applied and the definitions were not in line with services being commissioned locally.
45 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/
46 www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP118_costs_prescribed_specialised_services.pdf
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254. Certain key stakeholders did have concerns about the impact of the policy particularly orthopaedic and paediatric providers.
255. We also had feedback suggesting that other issues with the payment of complex care were not fully addressed by this new policy.
8.11.3 How this has influenced our proposals
256. Based on the positive feedback from the sector we still believe that it is appropriate to introduce this policy. To address concerns regarding price volatility, the PSS definitions and complexity payments we are proposing to introduce measures to reduce this:
a. We have updated the top-ups to account for the latest PSS rules consultation carried out by NHS England specialised commissioning. This means that top-ups and our impact assessments will reflect an updated set of PSS rules due to be released in the payment grouper in April 2017.
b. To ensure greater stability for paediatric and orthopaedic providers we are not going to make further adjustment to rates for top-ups between the 2017/18 and 2018/19 prices. The top-up values will remain the same across both years.
c. We remain committed to investigating other areas of concern raised by our key stakeholders and are developing a work plan for the specialist and complex care group to review for 2017/19.
8.11.4 Final proposal
257. We propose to:
a. Move to top-ups based on the most up to date definitions of PSS available from NHS England specialised commissioning.
b. Move to top-up payments for 2017/18 that adopt the recommendations from the University of York.47
c. We would mitigate the impact by transitioning to the new rates over four national tariff periods. Other rates will be scaled pro-rata to maintain a total payment amount of around £478 million.
d. This change would use the latest reference costs, currency design and HES data, and a methodology developed by the University of York with input from the service and the Specialist and Complex Care Advisory Group.
258. The impact of the top-up values by specialty area and the changes between the values reported in the previous engagement are presented in the table below:
47 www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP118_costs_prescribed_specialised_services.pdf
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Table 25: Top-up impact by specialist areaTop-up area Rollover
of SSNDS top-ups
TED top-ups (no update to
PSS rules): no transition
S118 prices (with update to PSS): no
transition
TED top-ups (no update to
PSS rules): with
transition
S118 prices (with update
to PSS): with transition
All top-up areas
£322.5M £416.3M £478.5M £416.3M £478.5M
Spinal £18.5M 0 0 £13.7M £13.9MNeurosciences £60.8M £138.9M £165.6M £87.7M £117.7MOrthopaedics £5.3M £0.8M £1.0M £4.2M £4.2MChildren £237.9M £106.3M £124.8M £203.2M £209.6MCancer 0 £22.4M £23.6M £14.1M £16.7MRespiratory 0 £42.6M £45.5M £26.9M £32.3MCardiac 0 £93.5M £103.1M £59.1M £73.3MOther 0 £11.8M £15.0M £7.5M £10.7M
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9 Locally determined prices 259. Over half of the £70 billion of NHS activity covered by the national tariff is
subject to local pricing arrangements.
260. Subject to compliance with local pricing rules and methods, national prices can be adjusted, particularly if it will allow commissioners to innovate in the design of services for patients (local variations) or where they do not adequately reimburse efficient costs because of structural issues (local modifications). These changes must be published and, in the case of local modifications, NHS Improvement must agree to the proposals applying its methods.
261. Under the rules, in agreeing a local payment approach, commissioners and providers must adhere to three principles:
a. the approach must be in the best interests of patients
b. the approach must promote transparency to improve accountability and encourage the sharing of best practice
c. the provider and commissioner(s) must engage constructively with each other when trying to agree local payment approaches.
262. We are proposing to make some changes to the structure of the locally determined prices section of the proposed 2017/19 NTPS to reduce duplication and simplify the guidance. We have also moved guidance out of the supporting document48 and into the proposed 2017/19 NTPS. There will be no supporting document for locally determined prices for the 2017/19 NTPS.
263. Over the past two tariff cycles we have received feedback that the locally determined prices section and supporting guidance are repetitive and poorly written. We believe that these changes should make it easier for the sector to understand the rules and obligations.
264. For mental health we are proposing two changes:
a. the sector to move to episode of care, capitation models for mental health services or an alternative approach under local pricing Rule 4
b. the sector to adopt the IAPT payment model from 2018/19 or an alternative approach under local pricing Rule 4.
48 www.gov.uk/government/publications/nhs-national-tariff-payment-system-201617-supporting-documents
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9.11 Mental health payment proposals for adults and older people
9.11.1 What we previously proposed
265. We proposed to change the local payment rules to require mental health providers and commissioners to link prices to locally agreed quality and outcome measures and the delivery of access and waits standards. This applies regardless of the payment approach chosen.
266. We also proposed to change the rules to require local use of one of the following options:
a. episode of treatment or year of care, as appropriate to each mental healthcare cluster
b. capitation, informed by care cluster data and any other relevant data
c. an alternative payment approach consistent with the rules for local pricing.
267. Our payment proposals describe the use of mental health currencies known as care clusters to inform payment. Care clusters were developed to be needs based and to assist providers in the patient’s clinical assessment. Even though the care clusters cover not all but most mental health services for working-age adults and older people, they are the existing tool available to support clinical decision-making.
268. Going forward, NHS England will look to strengthen the clinical relevance of the care clusters and their relationship with diagnosis-based pathways to draw on the best evidence available. This work will have a patient-centred focus to improve quality and outcomes by bringing greater transparency to payment approaches in clinical decision-making as well as informing commissioners in improving investment decisions for mental health services.
9.11.2 What you told us
269. We originally consulted on these proposals in October 2015 and received support. Feedback to the summer engagement contained little negative comment, and several people felt that moving to a new approach was long overdue. The table below outlines the breakdown of responses received to the summer engagement.
Table 26: Response from the sector to mental health payment proposalsQuestion Strongly
supportTend to support
Neither support or oppose
Tend to oppose
Strongly oppose
Don’t know
Mental health
Number 6 36 63 6 6 69% 5% 31% 54% 5% 5%
Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’
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270. Feedback this year found that some commissioners felt that the data submitted by providers were not sufficiently robust to support payment. They were also concerned that they did not have sufficient time or resources to fully implement the proposals because of pressure related to the acute sector.
271. There were also requests for more detailed guidance to support the local implementation of the payment approaches. This is currently being prepared by NHS Improvement and NHS England. We are also considering the requests for more support on national benchmarking of quality and outcome metrics, and how this can be incorporated into local systems.
9.11.3 How this has influenced our proposals
272. We do not propose making any adjustments to the existing proposals.
273. Based on this and earlier feedback, we intend to publish further guidance to support local health economies develop and implement local payment approaches. We will also continue to work with NHS Digital to ensure data reporting supports this.
9.11.4 Final proposal
274. Our final proposals are to:
a. require mental health providers and commissioners to link prices to locally agreed quality and outcome measures from 2017/18
b. require local use of one of the three payment options outlined above from 2017/18.
275. These proposals are consistent with the work NHS Improvement and NHS England have been doing with the sector over the past few years to move to a more transparent and robust payment approach. Providers and commissioners must now put in place the building blocks for successful implementation of these proposals. Guidance and further support material are available via the payment development webpage.49
49 https://improvement.nhs.uk/resources/new-payment-approaches/
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9.12 Mental health payment proposals IAPT
9.12.1 What we previously proposed
276. In our summer engagement on mental health we proposed to mandate the IAPT payment model,50 as outlined previously in the local payment example, for use from 2018/19.
277. This model involves using the set of outcomes and process metrics routinely collected and reported by all IAPT providers as an integral part of payment.
9.12.2 What you told us
278. Overall, most providers and commissioners welcomed our proposal but wanted more support and guidance. This included:
a. the use of local flexibility and discretion
b. ensuring patient choice continues to be supported
c. appropriateness of the cluster tool for IAPT.
279. There were a number of requests for the evidence base for the payment approach. The IAPT care programme51 has already conducted reviews of benefits of the IAPT care programme nationally.52
9.12.3 How this has influenced our proposals
280. We recognise that the nationally developed IAPT payment model may not be appropriate in all cases and wish to encourage local flexibility and innovation while retaining a focus on linking payment to outcomes.
281. To this end we are no longer proposing to mandate the IAPT payment model for use but instead to introduce a rule mandating the use of an outcomes-based payment model for IAPT that uses the outcome measures that are collected nationally as part of the IAPT dataset. Local variations still apply.
9.12.4 Final proposal
282. Our final proposal is to introduce a new Rule 8, in Section 6 of the 2017/19 NTPS, which would mandate the use of an outcomes-based payment model for IAPT from 1 April 2018/19. This model would need to take into account the severity and complexity of a service user’s presenting problem. The 10 national outcome measures collected in the IAPT dataset must reflect the outcomes element of the payment model for IAPT services. NHS England and NHS
50 https://www.gov.uk/government/publications/local-payment-example-improving-access-to-psychological-therapies
51 https://www.england.nhs.uk/mentalhealth/adults/iapt/52 http://www.iapt.nhs.uk/silo/files/iapt-3-year-report.pdf
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Improvement would publish updated guidance on the use of this payment model for shadow testing in 2017/18.
283. Commissioners and providers may use a different payment approach under local pricing Rule 4. We propose that any alternative payment model must link prices to agreed quality and outcomes measures.
284. Commissioners and providers should consider shadow testing their chosen payment model in 2017/18 ahead of implementation.
9.13 Proposed changes to rules for locally determined prices and payment
9.13.1 Background
285. Section 6 of the 2016/17 NTPS sets out the current requirements for all locally determined prices. It contains the principles that apply to the rules for local variations, the method used by NHS Improvement to assess local modifications and rules on local prices.
286. Section 7 of the 2016/17 NTPS sets out the current payment rules. In particular it reflects the requirements for billing and activity reporting contained in the terms and conditions of the NHS standard contract.
287. In the consultation on the 2016/17 NTPS we received feedback53 that the locally determined prices section of the national tariff and the supporting guidance are repetitive and, in places, unclear.
288. Over the course of this year we have reviewed this guidance and we propose to simplify Sections 6 and 7 to reduce repetition and improve accessibility for the reader.
289. In doing this, we identified some rules that could be usefully changed.
9.13.2 What are we proposing?
290. We propose to:
a. remove Rule 5
b. amend Rule 3 and remove Rule 6
c. remove local pricing Rules 11a and 11c of the 2016/17 NTPS (rules for ambulance services)
d. change the rule relating to high cost drugs, devices and listed procedures so that prices reflect the actual supply cost, nominated supply cost or any national reference price, whichever is lower.
53 www.gov.uk/government/uploads/system/uploads/attachment_data/file/512795/1617_tariff_feedback_for_publication.xls
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291. We also propose drafting changes to:
a. more clearly distinguish mandatory requirements from guidance
b. provide some additional guidance
c. include guidance, which was previously published separately,54 in Section 6
d. remove duplication.
9.13.3 Rationale
Removal of local pricing Rule 5
292. Rule 5 of the 2016/17 NTPS applies to acute services without national currencies and required prices to be determined in accordance with the terms and service specifications set out in locally agreed commissioning contracts. We believe that the rule is unnecessary because we consider that Rules 1 and 2 of the 2016/17 NTPS (general rules for all services without a national price) are sufficient to ensure that prices are set in line with our objectives. Commissioning contracts also contain dispute resolution provisions that may be used. We feel it is inappropriate for us to become involved in such disputes and the removal of this rule would provide clarification.
Combining local pricing Rules 3 and 6
293. Local pricing Rule 3 of the 2016/17 NTPS applies to services with a national currency but no national price generally. Rule 6 applies specifically to acute services. Both rules require that national currencies are used unless an alternative payment approach is agreed in accordance with Rule 4. Rule 3(d) however refers only to the national currencies for mental health and ambulance services. Changing Rule 3 so that it more clearly applies to all services with a national price would remove the need for rule 6.
294. In addition, Rule 3(c) requires the completion of a local pricing template when national currencies are used. This applies to all services, although the lack of a reference to acute services in Rule 3(d) may have made this unclear.
295. We therefore propose to amend Rule 3(d) so that it refers to acute services and remove rule 6, which is no longer required.
Removing local pricing rules 11(a) and 11(c)
296. Local pricing rule 3 of the 2016/17 NTPS applies to all services with a national currency (but no national price) while rules 11(a) and 11(c) apply specifically to ambulance services. Both rule 3 and rule 11 require that the national currencies are used unless an alternative payment approach is agreed in accordance with
54 www.gov.uk/government/uploads/system/uploads/attachment_data/file/509771/Guidance_on_locally_determined_prices.pdf
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rule 4. They also require that local pricing templates are completed when national currencies are used. Rules 11(a) and 11(c) therefore duplicate rule 3 and are unnecessary. Their removal will simplify the rules.
Changing the rule relating to high cost drugs, devices and listed procedures so that prices reflect the actual supply cost, nominated supply cost or any national reference price, whichever is lower
297. Rule 7 of the 2016/17 NTPS concerns high-cost drugs and listed procedures. Rule 7(c) requires prices to reflect the actual cost to the provider or the nominated supply cost, whichever is the lower. NHS England intends to publish reference prices for high cost drugs (and possibly some high cost devices devices) during 2017/19. These references prices will be calculated using existing NHS framework prices as a basis. We are therefore proposing to amend rule 7(c) so that the price agreed should reflect the actual cost to the provider, the nominated supply cost or the published reference price, whichever is the lower. NHS England would contact providers in advance of publishing reference prices to give them sufficient time to prepare. The rationale for this approach is that it will encourage providers to behave economically when purchasing high cost drugs and devices.
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