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“2020health is an important and thoughtful contributor to the health debate”

Dr Sarah Wollaston MP, Chairman, Health Select Committee


Intelligence Exchange: Can Monitor achieve efficiencies and improve the standard of care through the National Tariff?”

Mar 19. till Mar 19.

Invitation Only Event

Host: Stephen Dorrell MP, Chair of the Health Select Committee

Speaker: Dr David Bennett, Chief Executive, Monitor

March 19, 20132013-03-19T12:30:00 - March 19, 2013 2013-03-19T02:00:00
12:30 PM 2013-03-19T12:30:00 - 2:00 PM 2013-03-19T02:00:00
Portcullis House, Westminster

Monitor’s Goals
Monitor’s key objective is to improve the data which informs the tariff. It is anticipated that these reforms will improve the payment systems and be a mechanism for increasing efficiency and improving outcomes.

Identifying Challenges
Developing the payment system is an ongoing project which will conceivably take many years before working effectively and efficiently. Monitor has defended ambitions to modify tariffs, and there is a sentiment that there are many positive opportunities in doing so, though it is a risky enterprise with unintended outcomes.

Responding to the Challenges
Monitor will need to engage stakeholders to actively take up more advanced financing and monitoring systems. There will need to be effective leadership and change management to ensure Monitor achieves intended outcomes.

Incentivising Change

Reprioritising health as an outcome that pays will be an important part of future payment systems.


  • During 2013 and 2014 Monitor will introduce a license for those who provide NHS care. Foundation trusts will be required to hold a license from April 2013, and other eligible NHS providers are expected to need to hold one from April 2014. Key in this license will be to regulate how providers of NHS care are funded in order to address the challenge of improving effectiveness and efficiency.
  • The introduction of the new ‘provider licenses’ will make it compulsory for providers of NHS care to supply information that will feed into the development of the tariffs. The national tariff has been the method by which NHS providers of care have been paid for the care they deliver. The amount paid to providers under the tariff varies depending on the treatment, health and age of the person being treated.
  • Monitor will lead on developing the methodology for price setting, calculating prices, enforcing the pricing regime (through the provider license), approving local modifications to national prices and setting rules for local pricing.

Driving Efficiencies and Service Improvement Through the Tariff

  • Can Monitor achieve efficiencies through the tariff? The simple answer is ‘No’. The tariff alone will not drive efficiencies. The tariff system is also unlikely to drive innovation in health services.
  • The tariff system is however, predictable, and will contribute to greater financial sustainability throughout the NHS. The tariff shares the risk with the supplier and provider. Combined with improved budget performance this will achieve a more financially sustainable service. The tariff could ensure the maintenance of supply, and manage some of the risks involved when paying for health services at scale. The tariff may also be a tool for improving quality of care.
  • Innovation can take long periods of time with no defined cost. It is not a concept that easily fits with a tariff system. To begin to do this one must standardise what innovation is. This would clearly not be an easy undertaking, and may take years or decades to develop a standard cost.
  • Ultimately, payment systems are just one component to achieving efficiencies and in the NHS and they will not be able to achieve these objectives alone.
  • The payment system is a lever (but not the only lever) to achieving improvements. The tariff is predictable, can be designed to measure effects, and contribute to financial sustainability. It can drive improvement through competition and patient choice where the full average cost follows the patient.

The Challenges Facing Monitor

  • Monitor is under a great deal of pressure to achieve their stated objectives and achieve positive outcomes. However, during this period of transition Monitor is reluctant to micromanage and risk diminished returns from the implementation of new processes and systems.
  • When one looks at the historical context of the tariff, it was designed in an era of economic growth, with objectives to reduce waiting times and remunerate providers to do extra work. The tariff was not designed for long term care, and was designed for episodic services. For example: How the tariff deals with emergency, can be very complex. Elective care earns more money so emergency care suffers. These are some of the failings of the current system. Questions have been raised as to how we deal with that and reprioritise the service so that it meets evolving patient needs and results in the best health outcomes.

Overcoming the Challenges

  • Developing a live understanding of costs through data feedback linked to licenses will play an important part in developing future payment systems to reprioritise healthcare and drive improvements. This is Monitor’s most central objective. It will however require the active participation and contribution from providers.
  • Currently very little is known about true costs as the data is not available to a single authority. Patient Level Information and Costing Systems are not employed by all providers to the same standards. Monitor anticipates that this will be achieved; shifting the paradigm can take a long time and culture changes are difficult to implement. Finance Directors must take greater leadership to know and develop their financing systems to new standards. 
  • Obtaining first class data collection is still a challenge across the NHS. Finance Directors should know the individual cost of everything and a value of everything. However there are questions over how this can be ensured. There must be a strong determination to achieve these objectives by the end of 2013.
  • There are many examples of payment systems around the world. Organisations often go through periods of transition and change. The Mayo Clinic is an example of an organisation that once had a highly organised financing system and now has little knowledge of detailed breakdowns. The NHS intends to move in the opposite direction. Detailed costing will be achieved.
  • “How can you have a system that spends such a huge amount of public money, where we do not know how much anything costs?”

However, there is a risk we end up increasing detail without looking at the outcomes. This is an important priority that can be overlooked during restructuring.

Stakeholder Engagement

  • Modifications to the payment system in any health organisation are only useful if a cost for treatment is matched to the clinical outcome, i.e. better healthcare pays. This is an important argument for clinicians in winning them over to change, and an incentive to drive improvement. However, although we know what quality healthcare looks like, it appears to be a challenge to bring the necessary degree of change to improve health outcomes. Clinicians could play a valuable role in feeding this information in to future tariff development. Monitor will also have to work closely with the Care Quality Commission. How this relationship will operate, and how close it will be is not clear.
  • Clinicians feel that there is not enough transparency to prioritising outcomes in new payment systems and more effort will need to be made to win clinicians over to restructuring.
  • The role of clinicians in new commissioning is also subject to debate. It has been argued that clinicians should not be involved as they do not understand the financing structures and they will always do what is best for the patient and set their priorities irrespective of costs. Should we open the doors to clinicians deciding on spending? How much of this can be done centrally? Can we reform local decision making to take greater accountability on this? Potentially, local decision making and greater financial responsibility for health budgets will achieve better health outcomes.
  • Services costs different amounts across the country as the means by which services are provided can vary greatly. One tariff may not be suitable for all areas. Consequently there is a need to engage local clinicians in this process in order to improve outcomes nationally.

Incentivising Change

  • Integration is a project that will be difficult to reverse. Changing the system architecture must be coordinated carefully with the changing tariff. This is an important responsibility for Monitor and how this will operate is not entirely clear.
  • Do we use the tariff to drive the price down (will the tariff force change where clinical commissioning is ambivalent)?
  • There is an opportunity to incentivise risk and reward. This has been achieved with CQUINs today. (The CQUIN payment framework enables commissioners to reward excellence, by linking a proportion of English healthcare providers' income to the achievement of local quality improvement goals. Since the first year of the CQUIN framework (2009/10), many CQUIN schemes have been developed and agreed. This is a developmental process for everyone and you are encouraged to share your schemes (and any supporting information on the process you used) to meet the requirement for transparency and support improvement in schemes over time. (NHS Institute for Improvement and Innovation))

  • It has been argued that incentives need to link to margins and overheads rather than cost of delivery. However, there are questions over whether local health authorities in a position to implement such a complex arrangement. This is yet to be determined.
  • A new payment system could be designed to ensure that poor quality care loses money. Additionally, there are ranges of ways one can obtain best quality care for the same money. One of the great challenges is finding where money is wasted and bringing it back to where it can be used for better purposes. Some argue the national budget constraints push the drive to find better value healthcare, and remove parts of the service that waste money in the medium and long-term.
  • A key challenge for the tariff will be in placing a value of care in the community. Preventative care in some circumstances is difficult to value and therefore difficult to incentivise but placing a value on care in the community will incentivise support to the community with social care. This may be a means to allow for flexibility for local innovation, in a way that also reduces waste. We have technical expertise we can provide. Innovation will occur locally.
  • Later on we will have the evidence to say what a standard year of care looks like, then we can standardise the system. Local providers have to develop innovative ways to produce best Value care.
  • Payment methods can promote innovation – or can be a disabler of innovation. It cannot be all things to all men. Innovation is not a key priority for Monitor, and it is unlikely that Monitor will make a contribution to achieving this. The tariff takes years to be implemented. It cannot solve the problems of the NHS throughout. If one aspect of the tariff is adjusted it can have unintended consequences and this will be challenge to developing effective new systems.

1 Dame Helena Shovelton, Chair, 2020health
2 Rt Hon Stephen Dorrell, Chair of the Health Select Committee, MP
3 Tony Whitfield, President, Healthcare Financial Management Association
4 David Stout, Managing Director, Essex CSU and Hertfordshire Integrated CSU
5 Henry Featherstone, Director of Public Affairs, Genzyme
6 Alison Scott, Assistant Director, Policy and Technical, Chartered Institute of Public Finance & Accountancy
7 Prof Robert Harris, Director of Strategy, NHS Commissioning Board
8 Prof Norman Williams, President, Royal College Surgeons
9 Victoria Bates, National Policy Lead, Pfizer
10 Will Huxter, Director of Contracting & Quality, North and East London Commissioning Support Unit
11 Adrian Masters, Managing Director of Sector Development, Monitor
12 Ian Wootton, Partner, UK Healthcare Leader PricewaterhouseCoopers
13 David Worskett, Director, NHS Partners Network
14 Sir Richard Thompson, President, Royal College Physicians
15 George MacGinnis, Health Team Lead, PA Consulting
16 Dr David Paynton, National Clinical Lead, Royal College of General Practitioners

Discussion Notes (PDF, 258 KB)

Includes key points, main discussion and list of attendees