Review of Multi-year Tariff Cycles
Recommendation for NHS England and Monitor
Under the 2012 Health and Social Care Act (the “2012 Act”), Monitor and NHS England have joint responsibility for the national tariff. The national tariff is a major part of the NHS payment system and is a key element of the overall framework under which providers and commissioners contract. Monitor published its first national tariff, applying to the 2014/15 fiscal year, in December 20131.
The current cycle for setting the national tariff is annual – an approach based on the method previously used by the Department of Health. This annual cycle has created a number of identified problems – in particular, it leads to changes in prices from year to year that make it difficult for providers and commissioners to plan against.
In this context, Monitor and NHS England are currently developing their joint long term pricing strategy and an input to this long term pricing strategy will be a view as to whether the duration of the national tariff should be extended beyond one year, and, if so, by how long. Monitor has asked us to make an independent assessment of this. This report, together with a summary slide pack, presents our findings.
Our approach consists of four main elements:
- First, we assess the current (yearly) cycle of the national tariff and the strengths and weaknesses of that approach, in light of stakeholder feedback.
- Second, we develop and implement a framework to assess the merits of moving to a different (longer) national tariff cycle, where cycle lengths potentially vary according to type of health care services provided.
- Third, we provide recommendations on the optimum duration of the national tariff cycle (including within-cycle adjustments).
- Fourth, we recommend a transition path.
This report has been prepared by reference to Monitor’s invitation to tender dated 15 November 2013 and FTI Consulting’s subsequent tender dated 28 November 2013.
1 This document was entitled the “2014/15 National Tariff Payment System”.