Tariff and provider guidance

26-01-2016

Monitor issued draft prices for 2016/17 on 11 January. The long-awaited move to the new tariff currency, HRG4+, has been postponed until 2017/18. On its website, Monitor gives the following explanation: ‘Given the overwhelming need to focus on returning the provider sector to financial balance in 2016/17 and the fact that this requires the greatest possible level of stability and support for providers in the overall financial framework, Monitor and NHS England have announced their proposal that the move to HRG 4+ would now start in 2017/18, rather than in 2016/17.’

This means that prices continue to be based on the reference cost submissions made in 2011/12 (earlier for some specialties), leaving many people to argue that they are now wildly out of date with changes in technology and service delivery. It also means the planned changes to specialist top-ups which were due to help re-align some areas such as cardiothoracic services has been postponed.

During 2015/16 a new set of prices formed the Enhanced Tariff Option (ETO) which were adopted by 80% of providers due to the mix of incentives offered regarding marginal rates and access to CQUIN (quality and innovation) monies. The new prices for 2016/17 are based on the ETO, and it therefore remains to be seen how those providers who chose to remain on the default tariff option in 2015/16 will be affected.

The good news is that tariff prices are subject to inflation rather than deflation for the first time since 2009/10. A 1.1% increase is being promised, which represents 3.1% cost pressures less 2% efficiency requirement, a significant reduction in efficiency requirement compared with recent years and closer to the levels which the NHS has been able to deliver.

The following table ( included in Monitor’s draft prices announcement ) summarises the cost pressures included in the tariff uplift calculation.

Increase in pay and prices

2016/17 item uplift % estimate final

Tariff cost weighting

2016/17 weighted average estimate

Pay (including changes in pension costs)

3.3%

65.4%

2.2%

HCHS Drugs

4.5%

8.2%

0.4%

Non-pay, non-drugs inflation

1.7%

20.2%

0.3%

CNST (not allocated to individual HRG sub-chapters)

1.1%

1.5%

0.0%

Revenue cost consequences of capital

3.1%

4.8%

0.1%

Total


100%

3.1%