National Health Service (Licensing and Pricing) (Amendment) Regulations 2015 — House of Lords, 2015-12-01
Topic: Health
David Prior (Conservative, Centre-right): My Lords, I am grateful to the noble Lord, Lord Hunt, for his interest in this matter, and I know he has great knowledge through his work at the NHS Confederation, in healthcare and as a Minister. Naturally, I am disappointed to understand from his amendment that he feels that the draft regulations are fundamentally unfair and in contradiction to the assurances given by my predecessor, my noble friend Lord Howe. I will take this opportunity today to reassure him—I hope—and wider stakeholders that this is not the case I want to begin by giving some context to the regulations. They seek to rebalance the objection mechanism that exists within the statutory processes of setting the national tariff for healthcare services. They increase the objection percentages for clinical commissioning groups and relevant providers of services. They will also remove the prescribed objection percentage for providers weighted according to their share of the supply in England of such services as may be prescribed Everyone knows the scale of the financial challenge facing the NHS. That is why the Government have committed to investing £10 billion by 2020-21 to fund the NHS’s own plan for the future, with £6 billion frontloaded in the first two years of the six-year period Along with the implementation of a range of provider support measures we have available, this will help to ensure the health and care system remains on a sustainable footing over the longer term. But as Simon Stevens made clear in the Five Year Forward View, the NHS must play its part in delivering these efficiencies Delivering a financially stable NHS is a key priority for the new chief executive of NHS Improvement, Jim Mackey, working closely with the department and NHS England to support the system at a local level to deliver the transformational changes needed to drive efficiencies Nevertheless, we do not underestimate the challenges facing the system from an increasingly ageing population with more complex needs, which I am sure all noble Lords are aware of. This is why we support the ambition of the Five Year Forward View set out by NHS England to ensure we protect the model of universal coverage free at the point of delivery for future generations But to realise this vision, we need to support the whole health system. This will not be easy, but this principle lies at the heart of the regulations, which we believe will ensure sufficient stability and timeliness in publication of the national tariff but also ensure that as much as possible of the additional funding that this Government have provided for the NHS reaches patient services, rather than being tied up in processes or reinforcing acknowledged barriers to transforming health and care Let me give noble Lords some background to the regulation—where this refers to statutory duties, I will use the name Monitor rather than NHS Improvement. The Health and Social Care Act 2012 introduced a new independent, transparent and fair pricing system that requires Monitor and NHS England to collaborate to set prices and further develop new payment models across different services. The intention of this system was to create a more stable, predictable environment, allowing providers and commissioners to invest in technology and innovative service models to improve patient care Monitor has the specific duty of promoting healthcare services that represent value for money and maintain or improve quality. It achieves this by working with NHS England to regulate prices and establish rules for local pricing and flexibilities. NHS England defines the "units of service" for which prices or rules will be specified. Units of service include, for example, the pregnancy-related services that a woman may need through antenatal, delivery and postnatal care, with levels of payment aligned to clinical factors—often complexity. At all stages, Monitor and NHS England have to agree elements of the tariff with each other The Act also includes a statutory basis for providers and commissioners to raise formal objections to the methodology that Monitor proposes for calculating national prices rather than the price itself. It is vital that tariff proposals reflect wider views across the sector but, as NHS providers acknowledge: "The ultimate responsibility for setting NHS tariffs must lie with Monitor … and NHS England as the statutory price-setting bodies" Following comprehensive engagement with commissioners and providers, Monitor is required to publish a final draft of the national tariff and allow 28 days for commissioners and providers to consider the proposals. Commissioners and providers may formally object to the proposed methodology for calculating tariff prices for specified services. This draft instrument seeks to amend regulations made in 2013. Those regulations exercise a duty to prescribe two objection thresholds and a power to prescribe a third. Thus, under the current rules, Monitor will calculate the following after the consultation: the percentage of commissioners objecting; the percentage of providers objecting; and the percentage share of supply held by the objecting providers, which allows the objections of providers to be weighted proportionate to the nationally-priced services Each threshold is currently set at 51%. If any of these are met, the unexpired tariff remains in force. Monitor cannot publish the national tariff and has to either put forward alternative proposals and publish them for consultation, or refer the method and the objections received to the Competition and Markets Authority. I shall now explain the outcome of the two tariff processes that took place in 2014-15 and 2015-16 under these new arrangements. No objection threshold was met when the first proposed national tariff was consulted on in 2014-15 and the tariff was published on time. For 2015-16, the objection tariff mechanism was triggered as the share of supply objection threshold was met as 73.7% of providers by share of supply objected. As a result, the unexpired 2014-15 tariff remained in place A key motivation for providers’ objections to the tariff proposals was the efficiency requirement of 3.8%. A further significant trigger for formal objections related to a variation to the payment of national prices for specialised services rather than the underlying method for the price, which is the only ground on which objections can be made. As a result of the objection mechanism being triggered, the 2015-16 tariff was not published and the unexpired 2014-15 tariff remained in place at a potential considerable cost to the health service Following further engagement, a large majority of providers agreed a local variation to the 2014-15 tariff prices while a minority have continued to be paid the unvaried 2014-15 tariff prices. Overall for 2015-16, this has meant an additional cost pressure estimated at £0.5 billion. We cannot afford this and any repetition would ultimately affect patient care and prevent crucial investment in front-line care. This cannot be right. It would also distract the system from implementing the five-year forward view which would place the NHS on a sustainable footing The objection mechanism is intended to be a process that is triggered in exceptional circumstances. When the thresholds were prescribed in 2013, it was made clear in the Explanatory Memorandum: "The Department also intends to review the objections thresholds in due course once the new system beds down" The circumstance that national prices in the tariff are set predominantly for acute care rather than mental health and community services means that objections from acute providers then carry most weight in calculations against the share of supply threshold. While the larger acute providers have perhaps exercised their own role in using the objection mechanism in a broadly reasonable manner, the share of supply mechanism cannot fairly reflect the balance of wider interests across the healthcare sector. This should not be read as the Government placing less value on the crucial role played by the acute sector, but as a greater emphasis on the interests of the NHS as a whole. Indeed, we welcome the role that the acute sector is playing in new collaborative roles within its health economies.