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Encouraging better NHS efficiency and improved care

Proposed changes to the NHS payment system for 2015/16 aim to incentivise the efficient provision of high quality care while also encouraging the better management of increasing demand for services.

The package of proposals is an early opportunity to put into practice the commitment in the Five Year Forward View to encourage the NHS to innovate and change local patterns of care in response to the needs of patients.

Monitor and NHS England have listened to the views of NHS organisations, and propose significant adjustments to the National Tariff to support providers and commissioners as they work together to meet the significant challenges they face.

Among the new proposals are:

  • Revising the Marginal Rate Rule from 30:70 to 50:50, so that providers and commissioners share equal responsibility for managing increases in the number of emergency admissions. This will give acute providers about £70 million extra to invest in patient care. Attendances at A&E are already fully paid for through the tariff.
  • Providing a strong financial incentive for NHS trusts and foundation trusts to find new and improved ways to deliver care more cost effectively, while recognising the financial challenges they face. This is done through setting a stretching but achievable efficiency factor of 3.8 per cent, compared to 4% last year. Based on previous experience this headline efficiency target for providers is consistent with achieving the net 2% efficiency requirement for the whole of the NHS as described in the Five Year Forward View;
  • Ensuring parity of esteem for physical and mental health under the payment system, to which NHS England has committed a further £80 million. This includes £40 million funding for early intervention in psychosis, equivalent to an increase in funding of 15% nationally for these services, and amounts to an uplift of 0.35% for all mental health services.
  • Introducing a new mechanism for sharing between providers and commissioners the risk associated with an increase in spending on acute specialised services above planned levels. This will help commissioners spend their budgets in ways that most benefit patients. NHS England will establish a panel comprising providers of specialised care, clinical commissioners and patient groups to help drive further improvements in specialised commissioning efficiency over the coming year;
  • Promoting best practice models of care, with the introduction of a new “best practice tariff” to drive better care for patients admitted in an emergency with heart failure.

David Bennett, Chief Executive of Monitor, said:

The NHS is facing unprecedented operational and financial pressures and our proposals for the payment system in 2015/16 will provide incentives for NHS organisations- providers and commissioners -to manage their resources better while meeting increasing demand for services.

We believe the National Tariff offers a realistic balance between the need for providers to maintain quality services and the ability of commissioners to pay for them.

The national tariff itself is not designed to balance the books, but we are doing as much as we can through the payment system to support this objective. For example, the efficiency factor is a stretch target that reflects our expectation that all parts of the NHS will have to make an exceptional effort in 15/16.

Simon Stevens, Chief Executive of NHS England, said:

These changes represent four important steps towards the Five Year Forward View. First, we’re rebalancing the payment system to help support smaller and middle sized hospitals - where the funding pressures are greater, partly because they have a higher share of patients funded from the tariff and as emergencies.

Second, we’re moving to more equally balanced risk-sharing between commissioners and providers on both emergencies and specialised services to drive the integrated partnership working we need across health economies. Third, we’re injecting purchasing power into mental health services to support the move to parity of esteem.

And fourth, we’re explicitly signaling a willingness to work with local areas who want to get started next year on testing new payment models to support the new care models set out in the Forward View. So while next year is going to be tough financially, these changes move us in the right direction.


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