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2017/18 and 2018/19 National Tariff Payment System: A consultation notice Published by NHS England and NHS Improvement November 2016 Contents Please note: Part A of this document is the statutory consultation notice. It starts on page 4. Part B of this document is the proposed 2017/19 National Tariff Payment System. This is shown as it would appear in final form. It starts on page 80. Part C of this document is the glossary. It starts on page 198. 1. About this document ......................................................................................................... 4 2. Context ............................................................................................................................. 6 3. Responding to this consultation......................................................................................... 8 3.1. Statutory consultation on the national tariff and the objection process .................................... 8 3.2. Consequences of objections .................................................................................................... 9 3.3. Other responses to the consultation ........................................................................................ 9 4. How we worked with the sector to develop our proposals ............................................... 11 4.1. New developments for 2017/19 NTPS ................................................................................... 11 4.2. This year’s engagement ......................................................................................................... 11 4.3. Expert review of draft price relativities ................................................................................... 11 4.4. Enhanced impact assessment ............................................................................................... 12 4.5. Mental health .......................................................................................................................... 12 4.6. Engagement on specialised services ..................................................................................... 12 4.7. Policy publications and engagement ...................................................................................... 12 4.8. Conclusion .............................................................................................................................. 13 5. Setting a tariff for 2017/19 ............................................................................................... 14 5.1. Proposal to set a two-year tariff.............................................................................................. 14 6. Currency design .............................................................................................................. 17 6.1. Introducing HRG4+ currency design ...................................................................................... 17 6.2. Changing the scope of currencies .......................................................................................... 19 6.3. Changes to the high cost drugs and devices list .................................................................... 20 6.4. Changes to the maternity pathway ......................................................................................... 23 6.5. Creating incentives in outpatient follow ups ........................................................................... 26 6.6. Best practice tariffs ................................................................................................................. 30 6.7. Amending the acute stroke care BPT .................................................................................... 39 6.8. Introducing a tariff to promote the adoption of innovation and technology ............................ 40 7. Proposed method for determining national prices ........................................................... 46 7.1. Introduction ............................................................................................................................. 46 7.2. Modelling national prices for 2017/18 .................................................................................... 48 7.3. Managing model inputs for 2017/18 ....................................................................................... 50 7.4. Setting prices for best practice tariffs for 2017/18 .................................................................. 52 7.5. Setting national prices for 2018/19 ......................................................................................... 53 7.6. Making manual adjustments to prices .................................................................................... 55 7.7. Setting the efficiency factor .................................................................................................... 56 7.8. Cost uplifts .............................................................................................................................. 58 2 7.9. Clinical Negligence Scheme for Trusts .................................................................................. 62 7.10. Managing volatility ................................................................................................................ 65 7.11 Setting the cost base ....................................................................................... 66 8 National variations ........................................................................................................ 69 8.11 9 Updating top-up payment for specialised services ......................................... 70 Locally determined prices ............................................................................................. 73 9.11 9.12 9.13 Mental health payment proposals for adults and older people ....................... 74 Mental health payment proposals IAPT .......................................................... 76 Proposed changes to rules for locally determined prices and payment ......... 77 3 1. About this document 1. This is the statutory consultation notice for the 2017/18 and 2018/19 National Tariff Payment System (2017/19 NTPS). 2. Since 1 April 2016, Monitor and the NHS Trust Development Authority have been operating as a single integrated organisation known as NHS Improvement. This notice is however issued in exercise of functions conferred on Monitor by Section 118 of the Health and Social Care Act 2012. In this notice, therefore, ‘NHS Improvement’ means Monitor, unless the context otherwise requires. References to ‘we’ refer usually to NHS Improvement and NHS England, who have agreed the proposals in this notice. 3. The document is in three parts: a. Part A contains: an introduction that sets the context for the 2017/19 NTPS and explains how you can respond to this consultation notice a summary of how we have engaged with the sector what we propose to change from the 2016/17 NTPS and what we propose to retain. b. Part B contains a draft of the proposed 2017/19 NTPS. This is shown as it would appear in final form and includes sections on: the scope of the tariff the currencies that are the building block for national prices and some local prices the method for determining national prices national variations to national prices locally determined prices payment rules. c. Part C contains the glossary. 4. This document should be read in conjunction with the annexes and the supporting documents. The annexes to part B form part of the proposed national tariff. 4 Table 1: Annexes Part Title A Annex A1: A detailed summary of engagement and sector feedback A Annex A2: A detailed explanation of how to respond to this consultation and the statutory objection process B Annex B1: The national prices and national tariff workbook. B Annex B2: The models used to set national prices B Annex B3: Technical guidance for mental health clusters B Annex B4: Guidance on currencies with a national price B Annex B5: Guidance on currencies without national prices B Annex B6: Guidance on best practice tariffs Table 2: Supporting documents Title 2017 to 2019 National Tariff Payment System proposals: Impact assessment A guide to the market forces factor Guidance for commissioners on the marginal rate emergency rule and the 30 day readmission rule Non-mandatory prices Innovation and technology tariff 5 2. Context 5. For the 2016/17 NTPS we prioritised sector stability over payment system progress. We did this by rolling over the prices from the 2015/16 Enhanced Tariff Option (ETO), adjusting them for efficiency, inflation and the Clinical Negligence Scheme for Trusts (CNST). 6. This created a firebreak for the sector to help with achieving financial stability but it meant we did not make significant progress on the objectives for the payment system set out in Reforming the payment for NHS services: Supporting the five year forward view.1 It also meant the costs used to set prices were from 2011/12 and increasingly do not reflect current clinical practice. 7. Given the ongoing financial challenges facing the sector, the next NTPS must continue to offer stability while creating the conditions necessary for the sector to move towards the goals set out in the Five Year Forward View. We propose to address this in four ways: a. set a two-year tariff b. make corrections and updates to currency design, top ups for specialised services and the data used to set prices c. address the data concerns by using the latest available cost data d. phasing in the transition to these new policies across a series of national tariffs. 8. As previously announced, we are proposing significant policy changes for this year including a move to the HRG4+ phase 3 currency design for national prices and alignment of top-up payments for specialised services with the list of prescribed specialised services. We are also proposing to introduce a small number of new best practice tariffs (BPTs) and make other minor changes to currency design. These changes would allow the use of more up-to-date cost and activity data from 2014/15 that better reflect changes in clinical practice and improvements. 9. As these new policies would involve significant changes, with a sizeable impact on many providers, particularly specialist orthopaedics and paediatrics, we propose to phase them in over more than one tariff period to reduce price volatility. Reducing price volatility will reduce the volatility of provider income and commissioner spend. This is key in ensuring continued service provision 1 www.gov.uk/government/uploads/system/uploads/attachment_data/file/381637/ ReformingPaymentSystem_NHSEMonitor.pdf 6 10. We believe that setting a two-year tariff for 2017/18 and 2018/19 will give the sector greater certainty against which to plan and make the investment decisions necessary to deliver transformation to the service. Further, introducing a two-year tariff will reduce the burden on commissioners and providers that comes from annual contract rounds and allow the sector to focus on necessary improvements. While we accept that there are risks with this, particularly given the current economic uncertainty, we believe that offering certainty based on our current assumptions is of more value to the sector than the flexibility of changing the tariff each year. 11. We recognise that providers and commissioners in local areas may be able to work together to develop payment models that better meet the needs of their patients than the payment models set out in the tariff, and we have simplified the rules and guidance on local pricing to make it simpler to adopt these new approaches. 12. This tariff has been developed as part of the system wide response to the challenges facing the NHS. It sits alongside the development of the two year NHS planning framework, the changes to the NHS Standard Contract and the changes to the support offer for NHS Providers from NHS Improvement. Our proposals for the 2017/19 NTPS should be considered in the context of this package of initiatives. 7 3. Responding to this consultation 3.1. Statutory consultation on the national tariff and the objection process 14. The proposals for the 2017/19 NTPS are subject to a statutory consultation process as required by the Health and Social Care Act 2012 (the 2012 Act). This offers stakeholders the chance to tell NHS Improvement and NHS England what they think about the proposals. It also allows clinical commissioning groups (CCGs) and ‘relevant providers’ to object to the method we have proposed for determining national prices. The consultation period begins on 8 November and ends on 6 December 2016. On 8 November we will publish the full suite of annexes and supporting documents. This will signal the beginning of the consultation. 15. We propose to introduce the 2017/19 NTPS from 1 April 2017. 16. You can find further information on the statutory consultation, objection process and relevant legislation in Annex A2. 3.1.1. Whose objections are relevant for the statutory objection process? 17. The 2012 Act provides a statutory process for challenging the proposed method for determining national prices. If the objection threshold is exceeded for either (i) CCGs or (ii) relevant providers then s.120 of the 2012 Act provides that Monitor cannot publish the national tariff without reference to the Competition and Markets Authority (or further statutory consultation).There are two categories of relevant provider: a. Licence holders. This refers to providers holding an NHS Improvement licence, including NHS foundation trusts and independent providers. b. Other relevant providers as defined in the National Health Service (Licensing and Pricing) Regulations 2013. 18. The definition of relevant provider includes all NHS trusts that provide nationally priced services, as well as all NHS foundation trusts. 19. Commissioners whose objections to the method are relevant for the statutory objections process are CCGs. NHS England, in its role as a commissioner of specialised services, is not included. 3.1.2. Objections to the method 20. Although we welcome comments on all our proposals, the 2012 Act makes it clear that the statutory objection process applies only to objections to the 8 “method or methods Monitor proposes to use for determining the national prices” of NHS healthcare services.2 21. The method includes the data, method and calculations used to arrive at the proposed set of national prices, but not the prices themselves. 22. It does not include: a. the proposed national currencies b. the proposed national variations, such as the market forces factor, top-ups for specialised services and the marginal rate for emergency admissions c. the rules for agreement of local variations d. the methods for approving or granting local modifications e. the rules for determining local prices. 3.2. Consequences of objections 23. The objection thresholds are: a. 66% or more of commissioners (measured by number) b. 66% or more of relevant providers (measured by number). 24. If either objection threshold is met NHS Improvement cannot publish the 2017/19 NTPS unless it undertakes a further statutory consultation or makes a reference to the Competition and Markets Authority (CMA). 25. If NHS Improvement reconsults, it will publish another consultation notice and the process will begin again. If NHS Improvement decides to refer to the CMA, objecting parties will have the opportunity to set out details of their objection. 26. In either case, the 2017/19 NTPS would be delayed. If the 2017/2019 NTPS is delayed beyond 1 April 2017, the 2016/17 NTPS would remain in effect until a new tariff is published. If this happens, NHS Improvement and NHS England would issue further guidance on interim arrangements. 3.3. Other responses to the consultation 27. As well as consulting on the method for setting national prices, NHS Improvement and NHS England are consulting on the entire package of proposals in the consultation notice. We welcome feedback on any of these proposals and will consider your responses before making a final decision on the policies for the 2017/19 NTPS. 2 Health and Social Care Act 2012, Sections 118(3)(b) and 120(1) 9 28. Please submit your feedback through the online survey3 or via email to [email protected] 29. The deadline for submitting responses is 6 December 2016. 3 www.surveymonkey.co.uk/r/2017-2019TariffConsultation 10 4. How we worked with the sector to develop our proposals 30. During the development of our proposals for the 2017/19 NTPS we engaged extensively with the sector. Further details can be found in Annex A1, which contains a list of events and the feedback we received on policy proposals . 4.1. New developments for 2017/19 NTPS 31. This year we have set up a national tariff webpage4 that allows stakeholders to see where we are in the development of the national tariff. Users can register for updates and stay informed of key developments in the national tariff development process. 32. In previous years some feedback suggested there had been a lack of transparency in how we develop national prices so we launched the metrics engine. This tool lists every step of the price modelling process to show how admitted patient care prices are developed. Users can view data at HRG, subchapter, chapter and total tariff level. We also examined the steps that regularly have a large effect on prices in a price modelling narrative. Both the tool and the narrative can be accessed here.5 4.2. This year’s engagement 33. To date, we have run or attended over 100 events to explain tariff proposals to stakeholders and gain feedback. The web pages containing our policy proposals were viewed around 6,500 times. Approximately 250 people attended the workshops to discuss proposals, which generated over 450 responses to our online consultation. The discussions and feedback have informed the policies on which we are now consulting. 4.3. Expert review of draft price relativities 34. For the 2017/19 NTPS, we used the clinical expertise of the National Casemix Office’s Expert Working Groups (EWGs). The EWGs are responsible for advising on the design of the casemix classifications known as healthcare resource groups (HRGs). They consist of clinicians nominated by their professional bodies and royal colleges. We discussed currency design and development, and then price relativities separately. 35. More details on this process, the outputs and how we incorporate this into prices can be found in Section 7.6 Making manual adjustments to prices. The manual adjustments we made to the tariff can be seen in Annex B2. 4 5 https://improvement.nhs.uk/resources/developing-201718-national-tariff/ https://improvement.nhs.uk/resources/metrics-engine/ 11 4.4. Enhanced impact assessment 36. In developing the 2016/17 NTPS we ran our first Enhanced Impact Assessment process (EIA). This involved sharing draft prices with a group of providers and commissioners and asking them to model the impact using their data. This year we ran the process again while looking to improve it and made two changes. 37. The first change is the involvement of commissioners in the process: we involved three commissioners so we could get their perspective on impact assessment. The second change was a pre impact assessment discussion on price relativities (called the provider price check). This took place at the same time as the engagement with the EWGs and got us some feedback on price relativities that are not correct. 38. The process helped us to understand the differences between NHS Improvement’s impact assessment and those of individual providers, and to identify how we can resolve these differences to make future impact assessments more robust. 4.5. Mental health 39. We have continued to engage with the sector to develop the payment system for mental healthcare with workshops on proposals to move away from the current payment methods. Stakeholders told us that they would like more detailed guidance on implementing a new payment approach, so we have developed more information on this. For more details see Section 9 Locally determined prices. 4.6. Engagement on specialised services 40. For the 2016/17 NTPS we established the Specialised and Complex Care Advisory Group to provide advice on the review of specialised top-ups and followed this up by convening two groups to input on the development of specialist service reimbursement for 2017 to 2019. These were the specialised and complex care policy and technical groups, which consisted of representatives of large and small specialist providers, NHS England specialist commissioners and national representative bodies. 41. Further details on the input of these groups can be found in Section 8.1 Updating top-up payments for specialised services. 4.7. Policy publications and engagement 42. Once we had developed our initial policy proposals and price relativities, we published our engagement document to seek feedback from stakeholders. This was accompanied by documents on currency, best practice tariffs and the development of a two-year tariff. We followed this with workshops which were 12 attended by around 350 stakeholders. We published the feedback we got from the workshops and a web-based survey. All the feedback can be found in Annex A1. 4.8. Conclusion 43. We would like to thank everyone who has given their time to work with us. Our engagement activities yielded a large amount of information and helped to improve the proposals contained in this statutory consultation. 13 5. Setting a tariff for 2017/19 5.1. Proposal to set a two-year tariff 5.1.1. What we previously proposed6 44. During consultations on the previous national tariff, and at engagement events on the payment system, providers and commissioners have consistently told us that they would like more predictability to aid long-term planning and investment. 45. The proposals we published in August7 identified our preferred option as setting a national tariff for two years (2017/18 and 2018/19). This would provide stability and certainty to support long-term planning and investment. It would also remove the need for a separate consultation for the second year. 46. The two-year tariff would include two price lists, one for 2017/18 and another for 2018/19, and a set of currencies, national variations and rules which in most cases would apply to both years. 47. To determine national prices we propose to model the prices for 2017/18 and then roll them over to 2018/19 adjusting for cost uplifts, efficiency and the Clinical Negligence Scheme for Trusts (CNST). We were considering the implications of staged introductions of top-ups for specialised services and the new currency design. 48. The other rules and policies would remain the same for both years but we considered introducing a rule mandating a payment approach for IAPT from April 2018. 5.1.2. What you told us Table 3: Breakdown of responses to the proposal to set a two-year tariff8 Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 56 166 75 54 68 13% 40% 18% 13% 16% Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19 6 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 7 As note 6. 8 We have published a summary of the response from the sector. For more detail about how the responses were broken down please see Annex A1. 14 39 49. The principal concerns were: a. This may not be the best time to introduce a two-year tariff when so many other changes, particularly the move to HRG4+, are happening. b. Any errors in the reference cost data underpinning national prices will be carried over for two years. Also, the data will be out of date for the 2018/19 tariff year; more recent data should be used rather than rolling over data used for 2017/18 prices. c. There is a risk of material changes outside the control of providers and commissioners during the two-year period such as: the impact of Brexit future NICE recommendations on drugs and devices unforeseen consequences of the 2017/19 tariff rules, prices or currencies inflation being materially different to current projections. d. There are issues over how transitional arrangements for top-ups would be managed. It was felt that deferring these may be undesirable as it would delay necessary change. e. There would need to be consistency across the system, eg the contracting framework should also be based on a two year framework, and pay awards and CNST premiums should be agreed for two years. f. Impact of embedding any overfunding or underfunding for an extra year. 50. Some respondents suggested that for the second year (2018/19) the tariff should include a formula for determining the prices for 2018/19, into which data for 2018/19 inflation could be input at a later date, rather than the prices themselves. The legislation, however, requires that the national tariff includes national prices themselves and not just a formula or method for their calculation. 51. Among the main reasons for supporting a two-year tariff were that: a. It should give commissioners and providers scope to put in place agreements for a longer period. There may be some changes to contracts during the period that could be agreed up front. b. It should give providers and commissioners more capacity to agree service change. c. It should reduce the administrative burden that comes from annual contracting. 15 5.1.3. How this has influenced our proposals 52. We have based our assumptions on the best available evidence. There will always be challenges in setting forward-looking prices but these challenges are faced by other regulated industries and we feel that the advantages of greater planning certainty outweigh the risks. 53. Given the relative certainty of NHS funding at the current time, the fact that there is no planned revision of CCG allocations until 2019 and the wider planning being undertaken to support the sustainability and transformation plans we believe now is an opportune time to introduce a two-year tariff. 54. The proposed move to a two-year tariff is in conjunction with a number of other elements of the NHS financial framework including the development of a two year NHS Standard Contract and a two year planning round. 55. In relation to calculating the prices for the second year, we think the most practical, and simplest, approach would be to roll over the data used to set the 2017/18 tariff with appropriate uplifts for inflation, CNST and efficiency. This is because we would not have more recent cost and activity data with which to model the 2018/19 prices. 56. We have considered the implications of significant changes in our assumptions and we will continue to review any issues raised. While we could propose and consult on a new national tariff, our strong preference would be to retain the proposed national tariff for two years. 57. We see this as a chance to set a longer term tariff to facilitate longer term planning and learn from the process when we consider the best approach to the 2019/20 NTPS and beyond. 5.1.4. Final proposal 58. We propose to set a national tariff for two years: 2017/18 and 2018/19. 59. We propose that the 2018/19 price list takes effect from 1 April 2018. 16 6. Currency design 60. To pay for healthcare, we need to group activity in a clinically meaningful way. These groupings, or currencies, are used to set prices for healthcare services. 61. There are different currencies for different types of healthcare activity. In this section we explain our proposals on the currencies to be included in the 2017/19 NTPS. 6.1. Introducing HRG4+ currency design 6.1.1. What we previously proposed9 62. In our earlier engagement, we proposed to adopt a new design, HRG4+. It allows payment to better reflect the cost incurred in treating patients of differing levels of complexity. As HRG4+ was introduced in reference costs in three phases, we proposed to use the third phase as the basis of the reference cost collection in 2014/15. Further information on the proposed change from HRG4 to HRG4+ can be found here10 63. As well as the improvements in design, we think it is appropriate to move to HRG4+ because national prices set for HRG4 use cost and activity data from 2010/11. This means that prices set using HRG4 do not reflect recent changes in clinical practice. 6.1.2. What you told us Table 4: Breakdown of responses for the introduction of HRG 4+ Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose 60 122 39 17 22 23% 47% 15% 7% 8% Don’t know 21 Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 64. Support for this policy was very high. It is seen as a substantial and necessary step forwards, particularly given the increasingly historical costs used to inform HRG4 price design. 9 In ‘2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19’ https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 10 www.hscic.gov.uk/media/11601/Summary-of-Changes/pdf/HRG4__RC1213_Summary_of_Changes_v1.0.pdf 17 65. Feedback included the following concerns: a. While HRG 4+ better reflects complexity, it still does not fully explain it. The currency design and cost collections still do not adequately capture the cost of some services, for example orthopaedics. b. The introduction of HRG4+ is likely to introduce volatility to provider and commissioner income and expenditure that needs to be managed. c. Some commissioners believe it provides opportunities for up-coding of activity to higher complexity levels to increase provider income. d. Moving to a two-year tariff with an untested currency design may lock in any design issues or instability that arises from the shifts in payments across service lines. e. Some specific issues were identified around the design of some individual prices. These have been reviewed separately. 6.1.3. How this has influenced our proposals 66. Based on the positive feedback from the sector we still believe it is appropriate to introduce this policy. To address concerns about price volatility we propose to introduce measures to reduce this (see Section 7.10). 67. We currently do not have evidence that providers are systematically up-coding activity. If we are presented with this evidence we will investigate and may change our policies accordingly. 68. We have considered the implications of moving to a two-year tariff. More detail on this can be found in Section 5 Setting a tariff for 2017/19. 69. We have reviewed the comments on currency design: many of them reflect suggestions for manual adjustments. Where we feel it appropriate, we have made changes. More details on the manual adjustment processes can be found in Section 7.6 . 6.1.4. Final proposal 70. We propose to introduce HRG4+ phase 3. 18 6.2. Changing the scope of currencies 6.2.1. What we previously proposed11 71. In our summer engagement we proposed to introduce four new national prices in the next tariff: a. cochlear implants (CA41Z, CA42Z) b. complex computerised tomography scans (RD28Z) c. complex therapeutic endoscopic, upper or lower gastrointestinal procedures (FZ89Z) d. photodynamic therapy (JC41Z, JC42A and JC42B). 72. We also explained that if we were to adopt a two-year tariff, we would not review the scope of prices for 2018/19. This means there would be no national prices added or removed in that year. 73. We had proposed prices for cochlear implants, complex computerised tomography scans and complex therapeutic endoscopy in early engagement on the 2016/17 NTPS to a broadly positive response. These were not introduced in 2016/17 because our final tariff proposals were based on the existing price list used by most of the sector to offer stability from one year to the next. 6.2.2. What you told us Table 5: Breakdown of responses to the proposal to expand the scope of national prices Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 24 107 72 35 0 10% 45% 30% 15% 0% 36 Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 74. We had general support from the sector to these proposals from both providers and commissioners but some concerns were noted including: a. Prices for some procedures were too low, particularly cochlear implants but also complex computerised tomography and photodynamic therapy. b. One provider felt that the price for photodynamic therapy should be introduced as a non-mandatory price in the first instance. 11 In ‘2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19’ https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 19 c. Introducing these at the same time as a two-year tariff could generate unintended consequences. 6.2.3. How this has influenced our proposals 75. We have referred issues relating to price levels to the manual adjustment process for review. Adjustments have been made to the price relativities to reflect the sector feedback. More detail on this process can be found in Section 7.6 and the actual adjustments made in Annex B2. 76. The feedback from the sector was generally supportive. Taking this into account, we believe it is appropriate to introduce these prices at this time. 6.2.4. Final proposal 77. We propose to introduce the following national prices: a. cochlear implants (CA41Z, CA42Z) b. complex computerised tomography scans (RD28Z) c. complex therapeutic endoscopic, upper or lower gastrointestinal procedures (FZ89Z) d. photodynamic therapy (JC41Z, JC42A and JC42B). 6.3. Changes to the high cost drugs and devices list 6.3.1. What we previously proposed12 78. In our summer engagement document, we proposed to update the list of high cost drugs and devices reimbursed outside national prices, as shown in Annex A: 2016/17 National Prices and National Tariff Workbook of the 2016/17 NTPS. 79. For the high cost device list we proposed to: a. remove 10 out of 28 categories of devices b. remove all devices from the stents category, except for bifurcated stents c. remove devices for percutaneous ablation procedure from the ‘radiofrequency, cryotherapy and microwave ablation probes and catheters’ category d. clarify that the category for lengthening nails includes nails for limb reconstruction. 12 This was proposed in our summer engagement document National tariff proposals for 2017/18 and 2018/19 at https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 20 80. For the high cost drug list we proposed to: a. add two drugs to existing categories on the list b. add nine new categories of drugs to the list: there are 10 drugs distributed across these categories c. remove fibrin sealants from the blood products category. 81. We made these proposals to reflect changes in clinical practice, HRG design and the availability of drugs and devices. Our proposals were based on the recommendations of the high cost steering groups. 6.3.2. What you told us Table 6: Breakdown of responses to changes to the high cost list Question HC devices HC drugs Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 34 Number 10 52 81 47 34 % 4% 23% 36% 21% 15% Number 11 63 105 23 14 % 5% 29% 49% 11% 6% 41 Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 82. In general, respondents agreed with the proposal to incorporate the cost of extra drugs and devices into the tariff, but only if the relevant price covered the cost of the drug or device as well as any other intervention covered by the HRG. On the particular proposals: a. There was a high volume of responses to the proposal to remove cochlear implants from the high cost device list with broad consensus that the price for cochlear implants did not cover the cost of the device and the service would not be viable. b. Further concerns were raised regarding the other devices to be removed from the list. c. There were some challenges to the proposal to remove fibrin sealants from the high cost drug list. 83. Some respondents raised concerns that if devices were removed from the list, they would no longer be considered for the central procurement programme. This would reduce the scope for savings as providers would need to procure them through local arrangements that would not realise economies of scale. 84. Particular concerns related to the proposal to fix the tariff for two years. Some respondents felt that fixing the high cost drugs list would mean that new drugs 21 licensed for 2018/19 would not be included on the list. If the commissioner were unwilling to fund the costs of these drugs any clinical decision to use them would mean the provider would need to pay for them from national prices. 6.3.3. How this has influenced our proposals 85. Given concerns regarding the removal of devices from the list we are now only proposing to remove two devices from the list: cochlear implants and robotic consumables. The other devices would remain on the list for 2017/19 although we would reconsider these when developing policy for future tariffs. 86. We recognise the issues with prices for cochlear implants and robotic consumables and have made manual adjustments to the proposed prices to cover the costs of the devices. More details can be found in Section 7.6 and Annex B2. 87. We have reviewed the final prices and we consider that these address the feedback around fibrin sealants and propose no further adjustments. 88. In developing the proposal to move to a two-year tariff we considered the implications for several policy areas. Setting a tariff for two years means that all elements are fixed and we cannot make exceptions for any policy. We believe that the wider benefits to the sector of a two-year tariff outweigh the disadvantages in relation to any individual policy, but we will keep this under review as we go through the year. 6.3.4. Final proposal 89. We propose to update the high cost device list, removing two device categories and clarifying an existing category. 90. We propose to update the high cost drugs list by adding 12 drugs and removing fibrin sealants. 91. Annex B1 shows the high cost drugs and devices list with our proposed changes. 22 6.4. Changes to the maternity pathway 6.4.1. What we previously proposed13 92. In our summer engagement document, we proposed to update the casemix assumptions for the antenatal stage of the maternity pathway to increase the activity allocated to intermediate and intensive levels. The allocation at standard level would be reduced. 93. This would change the relative weightings between the standard, intermediate and intensive prices. The policy would not increase or decrease the total amount of money allocated to the antenatal stage. 6.4.2. What you told us Table 7: Breakdown of responses to changes to the maternity pathway Number % Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 19 82 71 14 13 62 10% 41% 36% 7% 7% Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 94. In general, respondents supported the proposed change but they did raise some concerns. In particular a. It wasn’t clear how this fitted with the outputs of the National Maternity Review.14 b. Fixing the tariff for two years would not allow further development of the maternity pathway. c. It appeared that less than 50% of costs were attributed to standard deliveries. There was a concern that this could lead to up-coding. d. More information was needed at this stage: in particular the expected uplift for CNST. 95. We received feedback that the HRGs for caesarean sections and postpartum interventions had been incorrectly mapped to the lower payment level so were not being appropriately funded. 13 This was proposed in National tariff proposals for 2017/18 and 2018/19 at https://improvement.nhs.uk/uploads/documents/TED_final_1.pdf 14 www.england.nhs.uk/wp-content/uploads/2016/02/national-maternity-review-report.pdf 23 6.4.3. How this has influenced our proposals 96. We reviewed the outputs of the maternity review but did not feel we had a strong enough evidence base on which to propose new payment approaches between the completion of that review and the publication of this consultation. We are continuing to work with maternity experts to develop appropriate payment approaches for the 2019/20 national tariff. 97. We have reviewed the mapping of HRGs to the payment levels for delivery and we believe that we should change it so that more deliveries are mapped to the higher level. This would however mean that less cost is attributed to standard deliveries. 98. The prices we published in our earlier engagement were relative, and meant to show the distributional effect of new policies. At that stage it would not have been appropriate to include CNST, nor would it have been possible, as we did not have the correct data (see Section 7.9 for more information on CNST). 6.4.4. Final proposal 99. We propose to update the casemix assumptions 100. We propose to update the mapping of HRGs to the delivery pathway as set out in the table below. Table 8: Mapping HRGs to the delivery pathway HRG Description Current mapping Revised mapping NZ30A Normal Delivery with CC Score 2+ with CC with CC NZ30B Normal Delivery with CC Score 1 with CC with CC NZ30C Normal Delivery with CC Score 0 without CC without CC NZ31A Normal Delivery, with Epidural or Induction, with CC Score 2+ Normal Delivery, with Epidural or Induction, with CC Score 1 Normal Delivery, with Epidural or Induction, with CC Score 0 Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 2+ Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 1 Normal Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 0 Normal Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 2+ Normal Delivery, with Epidural or with CC with CC with CC with CC without CC without CC with CC with CC with CC with CC without CC with CC with CC with CC with CC with CC NZ31B NZ31C NZ32A NZ32B NZ32C NZ33A NZ33B 24 NZ40A Induction, and with Post-Partum Surgical Intervention, with CC Score 1 Normal Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 0 Normal Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 2+ Normal Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 1 Normal Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 0 Assisted Delivery with CC Score 2+ with CC with CC NZ40B Assisted Delivery with CC Score 1 with CC with CC NZ40C Assisted Delivery with CC Score 0 without CC without CC NZ41A Assisted Delivery, with Epidural or Induction, with CC Score 2+ Assisted Delivery, with Epidural or Induction, with CC Score 1 Assisted Delivery, with Epidural or Induction, with CC Score 0 Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 2+ Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 1 Assisted Delivery, with Epidural and Induction, or with Post-Partum Surgical Intervention, with CC Score 0 Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 2+ Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 1 Assisted Delivery, with Epidural or Induction, and with Post-Partum Surgical Intervention, with CC Score 0 Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 2+ Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 1 Assisted Delivery, with Epidural, Induction and Post-Partum Surgical Intervention, with CC Score 0 Planned Caesarean Section with CC Score 4+ Planned Caesarean Section with CC Score 2-3 Planned Caesarean Section with CC Score 0-1 Emergency Caesarean Section with CC with CC with CC with CC with CC without CC without CC with CC with CC with CC with CC without CC with CC with CC with CC with CC with CC without CC with CC with CC with CC with CC with CC without CC with CC with CC with CC with CC with CC without CC with CC with CC with CC NZ33C NZ34A NZ34B NZ34C NZ41B NZ41C NZ42A NZ42B NZ42C NZ43A NZ43B NZ43C NZ44A NZ44B NZ44C NZ50A NZ50B NZ50C NZ51A 25 without CC with CC with CC with CC with CC with CC without CC with CC Score 4+ NZ51B NZ51C Emergency Caesarean Section with CC Score 2-3 Emergency Caesarean Section with CC Score 0-1 with CC with CC without CC With CC 6.5. Creating incentives in outpatient follow ups 6.5.1. What we previously proposed 101. In our engagement document we proposed a change to the way that consultantled follow ups were to be reimbursed. Our proposal was to remove all national prices for outpatient follow ups and replace them with non-mandatory prices. We would then introduce a local pricing rule under which providers and commissioners would agree a single annual payment (a ‘block’) for all outpatient follow ups; this would include consultant-led, non-consultant led and non-faceto-face follow-up activity with some small exclusions such as BPT and outpatient procedures. 102. In doing this our primary objective was to free up consultant capacity in outpatient services to increase the number of first attendances and so improve current referral to treatment times. 103. Providers are currently reimbursed for each consultant-led face-to-face first and follow-up outpatient attendance. There is no incentive to move to new ways of providing outpatient care, such as by telephone, using technology or using workforce in a different way or to reduce inappropriate attendances, as this would directly affect a provider’s income. 104. We also considered how payment mechanisms could support the increased use of the NHS e-Referral Service (ERS) for GP referrals. 6.5.2. What you told us Table 9: Breakdown of sector responses to the proposed outpatient policy Number % Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 19 32 49 46 86 31 8% 14% 21% 20% 37% Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 105. Overall, there was strong opposition from the sector through the engagement workshops and the online survey. The main points of concerns were: 26 a. This would make it more difficult for commissioners and providers to agree contracts. Given the national level intention to agree contracts by the end of December, this was seen as a major obstacle. b. It would create incentives for increased or inappropriate discharges back to primary care to generate new first attendances. c. There wasn’t enough information to make a fully informed assessment of how it would reduce follow-up attendances. 106. There was some support for the policy intent but a feeling that this might not be the most appropriate solution, especially given the timescales involved. Specialist providers also raised concerns because of their unique casemix. 6.5.3. How this has influenced our proposals 107. Reflecting the feedback from the sector, both from providers and commissioners, we have amended our proposals. 108. We appreciate the pressures and challenges on the sector in relation to the timely agreement of contracts and have therefore removed the proposal to create a single annual payment (a ‘block’) for all outpatient follow ups. 109. We still wish to incentivise a change in the delivery of outpatient follow-up activity with a move to more efficient models and to freeing up consultant capacity. 6.5.4. Final proposal 110. The current outpatient prices include a fixed 10% transfer of follow-up costs into first attendances. This was introduced to create a financial incentive to undertake more first attendances with follow-up attendance prices slightly under-reimbursed. 111. To strengthen this incentive and to drive a further change we propose to increase this transfer of cost, at a treatment function code level, up to a maximum of 30%. 112. We propose an approach that takes into account the differences at specialty level with three levels: 30% for adult surgical specialties and some medical specialties 20% for other medical specialties 10% (ie no change) for oncology, haematology, paediatric specialties, nephrology and areas where we have a BPT. 27 113. We estimate the proposal would include 63% of all nationally priced outpatient follow-up activity in the 30% group. It would also limit the impact on specialist cancer and children’s providers by excluding these specialties from the extra transfer of cost. 114. The table below sets out the current and proposed bundling for each treatment function code: Table 10: Changes to outpatient first attendance rates Current Treatment function code Proposed Change 100 General surgery 10% 30% +20% 101 Urology 10% 30% +20% 103 Breast surgery 10% 30% +20% 104 Colorectal surgery 10% 30% +20% 105 Hepatobiliary and pancreatic surgery 10% 30% +20% 106 Upper gastrointestinal surgery 10% 30% +20% 107 Vascular surgery 10% 30% +20% 108 Spinal surgery service 10% 30% +20% 110 Trauma and orthopaedics 10% 30% +20% 120 ENT 10% 30% +20% 130 Ophthalmology 10% 30% +20% 140 Oral surgery 10% 30% +20% 143 Orthodontics 10% 20% +10% 144 Maxillo-facial surgery 10% 30% +20% 160 Plastic surgery 10% 30% +20% 170 Cardiothoracic surgery 10% 30% +20% 171 Paediatric surgery 10% 10% 0% 172 Cardiac surgery 10% 30% +20% 173 Thoracic surgery 10% 30% +20% 190 Anaesthetics 10% 30% +20% 191 Pain management 10% 30% +20% 211 Paediatric urology 10% 10% 0% 214 Paediatric trauma and orthopaedics 10% 10% 0% 215 Paediatric ear nose and throat 10% 10% 0% 216 Paediatric ophthalmology 10% 10% 0% 217 Paediatric maxillo-facial surgery 10% 10% 0% 219 Paediatric plastic surgery 10% 10% 0% 223 Paediatric epilepsy 10% 10% 0% 251 Paediatric gastroenterology 10% 10% 0% 252 Paediatric endocrinology 10% 10% 0% 253 Paediatric clinical haematology 10% 10% 0% 28 Current Treatment function code Proposed Change 257 Paediatric dermatology 10% 10% 0% 258 Paediatric respiratory medicine 10% 10% 0% 263 Paediatric diabetic medicine 10% 10% 0% 300 General medicine 10% 20% +10% 301 Gastroenterology 10% 30% +20% 302 Endocrinology 10% 20% +10% 303 Clinical haematology 10% 10% 0% 306 Hepatology 10% 20% +10% 307 Diabetic medicine 10% 20% +10% 320 Cardiology 10% 20% +10% 321 Paediatric cardiology 10% 10% 0% 329 Transient ischaemic attack 10% 10% 0% 330 Dermatology 10% 30% +20% 340 Respiratory medicine 10% 20% +10% 341 Respiratory physiology 10% 20% +10% 350 Infectious diseases 10% 20% +10% 361 Nephrology 10% 10% 0% 370 Medical oncology 10% 10% 0% 410 Rheumatology 10% 20% +10% 420 Paediatrics 10% 10% 0% 430 Geriatric medicine 10% 20% +10% 502 Gynaecology 10% 30% +20% 503 Gynaecological oncology 10% 10% 0% 800 Clinical oncology (previously radiotherapy) 10% 10% 0% 812 Diagnostic imaging 10% 30% +20% 115. In September 2016, we published Proposed national tariff prices: for planning 2017/18 and 2018/1915. In response to the feedback we have revised the following treatment function codes: 15 cardiology from 30% to 20% diabetic medicine from 30% to 20% orthodontics from 30% to 20% paediatric surgery from 30% to 10%. https://improvement.nhs.uk/resources/proposed-national-tariff-prices-1718-1819/ 29 116. The published prices above reflect these changes. Non face-to-face activity 117. To further incentivise the use of new delivery models for follow-up appointments, increased use of non face-to-face appointments or wider adoption of technology, we want to encourage providers and commissioners to agree local prices for non-consultant led and non face-to-face activity. Reference costs are available as a reference point for local price setting. Any increase in local prices should deliver a reduction in consultant-led face-to-face attendances. 118. To incentivise a shift in activity which is targeted and clinically appropriate, we recommend prices are set at a treatment function code level where there is clear evidence that care can be delivered in an alternative way and the current pricing structure is acting as a barrier. 119. We propose to remove the non-mandatory non face-to-face outpatient attendance price that has been published in previous years as we feel this did not provide an appropriate incentive to move to alternative care models. Once we understand any variation in reference cost submissions and the potential financial impact in greater detail we will consider whether to re-introduce prices for non face-to-face activity. 6.6. Best practice tariffs 120. We proposed some changes to BPT arrangements in National tariff proposals for 2017/18 and 2018/19.16 121. These included: a. four new BPTs b. revisions to four existing BPTs c. the removal of one BPT. 122. We received feedback on these proposals and have considered this in the final development of policy. In the tables below we set out: a. Table 10: The response from the sector to our proposals b. Table 11: A breakdown of the final proposals for new, amended and removed BPTs for 2017/19. 16 https://improvement.nhs.uk/uploads/documents/TED_final_1.pdf 30 123. We also propose further amendments to the acute stroke care BPT, set out in full below in the following tables. 124. The proposed introduction of HRG4+ will also lead to some changes to the currency design of applicable BPTs, for example pleural effusion. These will not affect the policy objectives, or the methods for collecting and validating data. 31 Table 11: Sector feedback on changes to BPTs Question Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know New BPT for straight-to-test for patients requiring lower gastrointestinal investigation Number 19 72 49 11 4 % 12% 46% 32% 7% 3% New BPT for chronic obstructive pulmonary disease (COPD) Number 17 62 60 12 3 % 11% 40% 39% 8% 2% New BPT for cardiac rehabilitation for myocardial infarction (MI) Number 16 68 52 11 1 % 11% 46% 35% 7% 1% New BPT for non-ST segment elevation myocardial infarction (NSTEMI) Number 12 64 53 11 4 % 8% 44% 37% 8% 3% Changes to existing BPTs (day case procedures, fragility hip fracture, primary hip and knee, same day emergency care) Number 9 78 53 10 4 % 6% 51% 34% 6% 3% Removing the interventional radiology BPT Number 17 50 65 12 4 % 11% 34% 44% 8% 3% Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 32 35 37 38 42 32 36 Table 12: Changes to BPTs BPT Previous proposal Feedback – key points Final policy Introduce a pathway to offer diagnostic tests to patients without an initial outpatient appointment using an appropriate nurse-led triage mechanism. General support but concerns including: the costs of implementing the service may not be recovered by the BPT price We propose to introduce this as a non-mandatory BPT for 2017/19. Any agreement to implement this must be made in conjunction with the local pricing rules in Section 6 of the national tariff. New Straight-to-test for patients requiring lower gastrointestinal investigation Assign the BPT price against colonoscopy and flexible sigmoidoscopy HRGs. This was based on examples of peerreviewed best practice from several providers across the country. existing programmes with the same objectives but different delivery methods may be affected lack of clarity over the currency Based on the concerns of the sector we will further develop this proposal with stakeholders before mandating it. concerns about the burden of recording and validation Chronic obstructive pulmonary disease (COPD) Introduce a BPT that rewards providers when a percentage of patients with a primary diagnosis of COPD, admitted for an exacerbation of COPD, receive specialist input to their care within 24 hours of admission, and where they receive a discharge bundle before discharge We did not propose a target rate as we were seeking sector feedback 33 General support but concerns including: patients may be admitted unnecessarily to get the BPT unclear cost impact of the BPT the burden of recording and validation Several providers were concerned that setting a target rate above 60% would be unachievable for a large part of the sector. We propose to mandate this BPT. To achieve this BPT, 60% of patients must receive specialist input within 24 hours of admission and a discharge bundle before discharge We recognise the potential issues around recording and validation of data but as the RCP is producing a new tool to collect this data we believe that this will be appropriate. BPT Previous proposal Feedback – key points Final policy This may require some service redesign but some providers have reported that this BPT is existing practice in some areas and so the costs should be minimal. Cardiac rehabilitation for myocardial infarction (MI) Introduce a BPT to encourage providers to refer appropriate post-MI patients to cardiac rehabilitation within 3 days of an initiating event, and before discharge. General support but concerns including: the data is collected annually which is not timely enough for commissioner validation We propose to introduce a nonmandatory BPT for 2017/19. Any agreement to implement this must be made in conjunction with the local pricing rules in Section 6 of the national tariff. Calculate the target population would be locally with referrals measured using the National Audit of Cardiac Rehabilitation (NACR). The target achievement rate would be 45%. Non-ST segment elevation myocardial infarction (NSTEMI) Introduce a BPT to improve the time from a patient being admitted to them receiving coronary angioplasty. Measure achievement through the MINAP database. A target rate of 60% of NSTEMI patients having coronary angiography within 72 hours of admission. For patients transferred from one hospital to another to have coronary angiography, 34 the NACR dataset is not part of mandatory collection and may not be a complete dataset where a local cardiac rehabilitation service is not available, providers could be penalised for a commissioning decision. General support but concerns including: from commissioners that achievement was not easy to validate: not all data collected through MINAP the 72-hour limit for transfers would be affected by the performance of the other hospital which is outside their control Following feedback from the sector we do not believe we can mandate this BPT until we fully address the data collection and reporting concerns. We propose to mandate this BPT. If accepted it would be introduced as set out in the original proposal. We accept there is concern over the management of transfers but this is in line with NICE guidelines and we feel local systems need to be developed to manage this. NICOR will publish a guide shortly to help with validation of this BPT BPT Previous proposal calculate the time for achieving the BPT from the time of admission to the first hospital. Feedback – key points the 72-hour limit may require changes to working patterns to protect elective lists Final policy more guidance needed on the management of payments for transfers Amended Day case Add 19 procedures to the day case BPT based on the British Association of Day Surgery directory of procedures that could be provided as a day case. Increase target rates for two existing daycase procedures where the sector had generally achieved the existing targets. Some positive feedback for this policy from providers and commissioners but concerns that: dual chamber pacemakers should be included in the scope of the BPT not just single chamber pacemakers ability to deliver this procedure is based on the ability of providers to schedule activity early in the day. Where providers provide evening lists (eg paediatric tonsillectomy) releasing patients before midnight may not be appropriate the casemix of the provider will determine their ability to meet the target rates 35 We propose to introduce the proposals as originally set out with one change. We propose to introduce the proposals as originally set out with one change to the implantation of cardiac pacemaker category. We propose to add EY06E Implantation of Dual Chamber Pacemaker with CC Score 0-2 and remove EY08D - Implantation of Single Chamber Pacemaker with CC Score 3-5 The implantation of cardiac pacemaker category would consist of the following HRGs: EY06E-Implantation of Dual Chamber Pacemaker with CC Score 0-2 EY08E-Implantation of Single BPT Previous proposal Feedback – key points Final policy Chamber Pacemaker with CC Score 0-2 Fragility hip fracture Remove three measures from the existing BPT and replace them with four new measures: a nutritional assessment during the admission Providers and commissioners raised a number of concerns regarding this BPT including: this will create an additional burden on providers to collect the data and commissioners to validate it for payment We propose to remove the three measures and introduce three of the four new measures originally described. persistence with bone treatment after discharge delirium assessment during the admission assessed by physiotherapist the day following surgery. The full BPT price would only be paid if all criteria were met and a follow-up appointment takes place 120 (+/-60) days after discharge. Primary hip and knee Increase the rate at which providers were required to submit data to the National Joint Registry (NJR) from 85% to either 90% or 95%. Change the significance criteria for health gain by changing the rate below which providers will not be paid from the lower 99.8% significance to the lower 95% significance. This would reduce the number of providers eligible for the BPT. 36 The 120-day follow-up condition will create issues with the standard freeze-and-flex period after year end for payments. Because of the feedback regarding the 120-day follow-up measure we are not proposing to include this as a condition for payment. We do however believe this is still an important element of best practice. Costs associated with delivering best practice do not disappear when criteria have been achieved so changing criteria may place an extra burden on providers. Some concerns were raised regarding these changes including: compliance rate data not always available to commissioners for validation raising the outlier target discriminates against trusts with more complex demographics setting it at 95% will increase We propose to leave the NJR submission rate at the current level of 85%. We propose to change the health gain criteria BPT so that a provider will not be eligible if they are outside the 99.8% confidence interval in a single year (current criteria) or outside the 95% confidence interval over two BPT Previous proposal Feedback – key points the number of outliers because of random variation ability to deliver the target where services are subcontracted. Final policy previous consecutive years. We are proposing not to increase the NJR rate because of concerns from the sector regarding subcontracted services. We also recognise that 95% would increase the probability of being an outlier by chance and although it is statistically significant it may not be meaningful (probability of error is greater). To mitigate this we have set the threshold over two consecutive years. Same day emergency care (SDEC) Make seven more clinical scenarios eligible for the same day emergency care BPT. These are: abnormal liver function acutely hot painful joint chronic indwelling catheter-related problems gastroenteritis transient ischaemic attack upper gastrointestinal haemorrhage urinary tract infections 37 Some concerns were raised including: as some local areas are developing/have developed local ambulatory care pathways this may undermine their development lack of understanding of the link between this policy and the 30day readmission rule. We propose to amend the BPT as originally described. BPT Previous proposal Feedback – key points Final policy This was supported but there were concerns that: the removal of BPT for IR procedures may mean more expensive, more invasive older surgical treatments will be used instead We propose to remove this BPT. (This is based on the NHS Institute’s Directory of Ambulatory Emergency Care in Adults) Removed Interventional radiology (IR) We proposed to remove the interventional radiology BPT. This was proposed because HRG4+ contains the same currencies. areas previously covered by the BPT are not adequately reimbursed by the prices with the new HRGS, for example angioplasty, stenting for diabetic foot disease and uterine artery embolism, and that this runs the risk of more invasive and costly procedures being chosen. 38 With the introduction of HRG4+ we feel that this is necessary. To retain it could create confusion in payments by putting parallel payment approaches in place. . 6.7. Amending the acute stroke care BPT 6.7.1. Background 125. Stroke is one of the first five conditions to be prioritised by NHS England as part of their work to improve urgent and emergency care. 126. The acute stroke care BPT is currently in place but does not meet all the criteria endorsed by NHS England.17 6.7.2. Our proposal 127. To address this we propose to amend the criteria as set out below: Table 13: Changing the criteria for the stroke BPT Current criteria Revised criteria a Patients are admitted directly to an acute stroke unit by the ambulance service, from A&E or via brain imaging. Patients must not be admitted directly to a medical assessment unit. Patients must then also spend most of their stay in the acute stroke unit Patients are admitted directly to an acute stroke unit by the ambulance service, from A&E or via brain imaging. Patients must not be admitted directly to a medical assessment unit. [Patients must be seen by a consultant with stroke specialist skills within 14 hours of admission.] Patients must then also spend most of their stay in the acute stroke unit b Initial brain imaging is delivered within 12 hours of admission. The scan must not only be done in the stated timescales but immediately interpreted and acted on by a suitably experienced physician or radiologist Initial brain imaging is delivered within 12 hours of admission. [For the purposes of the BPT, reporting times are not defined but access to skilled radiological and clinical interpretation must be available 24 hours a day, 7 days a week to provide timely reporting of brain imaging] c No change requested Patients are assessed for thrombolysis, receiving alteplase if clinically indicated in accordance with the NICE technology appraisal TA264 ‘Alteplase for treating acute, ischaemic stroke’ guidance on this drug. 6.7.3. Rationale 128. One of the standards NHS England has set for measuring performance is that all stroke patients should be seen within a maximum of 14 hours of arrival by a consultant with stroke specialist skills. This is supported by the National Clinical 17 https://www.nice.org.uk/guidance/qs2 39 . . Guidelines for Stroke by the Intercollegiate Stroke Working Party18 and the NICE Acute Stroke and Transient Ischaemic Attack Guidelines19. 129. The statement “The scan must not only be done in the stated timescales but immediately interpreted and acted on by a suitably experienced physician or radiologist” is not something that is ever measured, and would therefore be impossible to report. We have removed this wording and replaced it with “For the purposes of the BPT, reporting times are not defined but access to skilled radiological and clinical interpretation must be available 24 hours a day, 7 days a week to provide timely reporting of brain imaging.” Changing it to access to skilled clinical interpretation makes it something commissioners can confirm compliance against. 130. We do know that all hospitals admitting acute stroke patients should have access to consultant stroke physicians and consultant radiologists 24 hours a day. 6.8. Introducing a tariff to promote the adoption of innovation and technology 6.8.1. What we previously proposed20 131. We proposed to introduce new arrangements to encourage the uptake and spread of technology, applicable to services in the scope of the national tariff. 132. We proposed that once potential innovations were identified, we would consider whether they are:: a. suitable for the high cost list b. suitable for a BPT c. suitable for an adjustment to a national price or group of prices d. suitable for another tariff incentive e. not suitable for inclusion in the tariff. 18 www.rcplondon.ac.uk/guidelines-policy/stroke-guidelines www.nice.org.uk/guidance/cg68?unlid=90678893420161141231 20 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 available at: https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 19 40 . . 6.8.2. What you told us Table 14: Breakdown of responses to the proposal to introduce an innovation and technology tariff Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 22 74 37 14 2 15% 50% 25% 9% 1% 33 Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19 133. Feedback to this policy was very positive but there were concerns that: a. the policy was not clear enough to make an informed judgement b. it was not clear how payments would be made c. introduction of innovation would be better done through other mechanisms, such as Commissioning for Quality and Innovation (CQUIN) payments, rather than national prices d. there should be a formal link between NICE medical technology reviews and this policy. 134. Some providers were also concerned about how this policy would work in the context of a fixed two-year tariff. 6.8.3. How this has influenced our proposals 135. We have further developed the policy by reference to the innovations available through the Innovation Accelerator programme and created a list of innovation types we believe should be addressed in the 2017/19 NTPS. 136. We considered paying for these innovations through an adjustment to all prices (a top slice) but recognising the concerns expressed by the sector it is now proposed that NHS England will provide additional funding to CCGs. We will continue to review the adoption of these innovation types over the course of the two-year tariff to further support development of the policy. 137. We propose to ensure that all innovation types recommended for inclusion in the tariff are reviewed, but recognising that innovation is not just the use of new devices, at this stage we are not willing to link it to medical technology reviews. 6.8.4. Final proposal 138. We propose to support six specific innovation types. For five of the six innovation categories, providers would be reimbursed a fixed price through local pricing. NHS England is proposing to agree these fixed prices with manufacturers of these products. We would expect that these prices would form 41 . . the basis for local agreement between providers and commissioners so there should be no need for further local negotiation of the price. This approach is similar to that currently adopted for high cost drugs and devices which are also subject to the local pricing rules. NHS England would reimburse commissioners for the full cost in addition to its commissioner allocations. 139. The sixth category, treatment of lower urinary tract symptoms of benign prostatic hyperplasia as a day case, is already included in national prices. 140. For the 2017/19 NTPS we propose to include the following innovation types: a. Guided mediolateral episiotomy to minimise the risk of obstetric anal sphincter injury i. Approximately 15% of births in England require an episiotomy. Of these, around 25% experience obstetric anal sphincter injuries (OASIS). The angle of the cut is important and NICE Guidance recommends that cuts need to be between 45 and 60 degrees to reduce the incidence of poor patient outcomes, reconstructive surgery and litigation costs. ii. The use of angled scissors in episiotomies therefore should improve patient experience and outcomes and reduce OASIS repair and litigation. b. Arterial connecting systems to reduce bacterial contamination and the accidental administration of medication i. Arterial line placement is a common procedure in various critical care settings. Intra-arterial blood pressure (BP) measurement is more accurate than measurement of BP by non-invasive means, especially in the critically ill. Although rare, when wrong route drug administration occurs, it has the potential to cause serious damage to the vessel and surrounding tissue. Arterial cannulation is associated with complications including bacterial contamination, accidental intra-arterial injection and blood spillage. ii. Needle-free connectors prevent blood spillage and through a one-way valve allow aspiration only thus preventing accidental administration of medication to the arterial line. c. Pneumonia prevention systems which are designed to stop ventilatorassociated pneumonia i. Ventilator-associated pneumonia (VAP) is defined as pneumonia that occurs 48-72 hours or thereafter following endotracheal intubation, characterised by the presence of a new or progressive infiltrate, signs of systemic infection (fever, altered white blood cell count), changes in sputum characteristics, and detection of a causative agent. 42 . . Approximately 100,000 patients are admitted for ventilation in critical care units in the UK each year. The risk for patients is highest during early ICU stay when it is estimated to be 3% per day during days 1–5 of ventilation, 2% per day during days 5–10 of ventilation and 1% per day thereafter (Masterton, 2008). ii. On average 10 - 20% (10,000- 20,000) patients will be diagnosed with Ventilator Associated-Pneumonia (VAP) resulting in an attributable mortality rate of about 30% or between 3,000 and 6,000 deaths. Each episode of VAP has an estimated cost to the NHS of between £10,000 and £20,000. iii. Improved airway management in critically ill patients who are having mechanical ventilation can prevent ventilator-associated pneumonia by minimising the risk of pulmonary aspiration and micro-aspiration in patients having ventilation for 24 hours or more. This could see a reduction in the length of time spent on ventilation and length of stay in ICU. iv. There are available Pneumonia prevention systems which are designed to stop ventilator-associated pneumonia through the use of a cuffed ventilation tube and an electronic cuff monitoring and inflating device which prevents leakage of bacterial laden oral and stomach contents to the lung – a problem associated with standard tubes. d. Web-based applications for the self-management of chronic obstructive pulmonary disease i. Managing Chronic Obstructive Pulmonary Disease (COPD) costs the NHS more than £1bn each year. However, treatment is complex, with different inhalers needing to be used in different ways. Compliance with treatment is often extremely low, leading to poor outcomes and wasted prescribing. For this reason, improving self-management for patients with COPD is a key priority for the NHS. ii. There is no cure for COPD and good symptom management is essential to stabilise disease and prevent recurrent flare-ups or exacerbations. Exacerbations often require intensive treatment and can be severe enough to require hospital admission. iii. There is evidence from recent studies that disease-specific selfmanagement improves health status and reduces hospital admissions in COPD patients. It is critical to implement health education programs in the continuum of care aimed at behaviour modification. Studies in COPD have shown that self-management increases knowledge and skills the patients require to treat their own illness. 43 . . iv. A number of a web based and iOS applications that help patients manage their condition more effectively are available. These platforms can interface with clinical dashboards to monitor and manage their patients remotely at an individual and population level. v. These platforms can also be used by local health care providers and CCGs to monitor exacerbation burdens in real-time and review potential inequalities in health care to plan support services effectively. e. Frozen faecal microbiota transplantation for recurrent Clostridium difficile infection rates i. Clostridium difficile infection rates are climbing in frequency and severity, and the spectrum of susceptible patients is expanding beyond the traditional scope of hospitalized patients receiving antibiotics. There are over 3,000 new cases of chronic CDI across England per annum. Faecal microbiota transplantation is becoming increasingly accepted as an effective and safe intervention in patients with recurrent disease, likely due to the restoration of a disrupted microbiome. Cure rates of > 90% are being consistently reported from multiple centres. Faecal Microbiota Transplantation (FMT) is the provision of a screened specially prepared stool administers via a nasal tube into the intestine to restore the balance of bacteria in the gut. FMT is a NICE recommended treatment for Chronic CDI. ii. To date nine trusts have performed FMTs on their own site via the frozen service. f. Prostatic urethral lift systems to treat lower urinary tract symptoms of benign prostatic hyperplasia as a day case: i. Benign prostatic hyperplasia (BPH) is a common and chronic condition where the enlarged prostate can make it difficult for a man to pass urine, leading to urinary tract infections, urinary retention, and in some cases renal failure. Existing treatments TURP (transurethral resection of the prostate) involve cutting away or removing existing tissue, require an average hospital stay of 3 days and often catheterisation for many days post-surgery. ii. In people with benign prostatic hyperplasia, the prostate becomes enlarged. A prostatic urethral lift system uses adjustable, permanent implants to hold the enlarged prostate away from the urethra so that it isn’t blocked. In this way, the device can relieve lower urinary tract symptoms (such as pain or difficulty when urinating). 44 . . iii. Healthcare teams may want to use a prostatic urethral lift system as an alternative to transurethral resection of the prostate (TURP) and holmium laser enucleation of the prostate (HoLEP). 141. More details of these innovations can be found on the NHS Innovation Accelerator website21 and part B of this statutory consultation. 21 www.england.nhs.uk/ourwork/innovation/nia/ 45 . 7. Proposed method for determining national prices 7.1. Introduction 142. This section is about how we propose to determine national prices for 2017/18 and 2018/19. We set out our proposals for setting price relativities for both years in National Tariff: Policy proposals for 2017/18 and 2018/19.22 7.1.1. Our principles 143. Our principles for setting national prices are that: a. Prices should reflect efficient costs. This means that the prices set should: i. reflect the costs a reasonably efficient provider ought to incur in supplying services at the quality expected by commissioners ii. not provide full reimbursement for inefficient providers. b. Prices should provide appropriate signals by: i. giving commissioners the information needed to make the best use of their budgets and enabling them to make decisions about the mix of services that offer most value to their populations ii. incentivising providers to reduce their unit costs by finding ways of working more efficiently iii. encouraging providers to change from one delivery model to another where commissioners want this and where it is more efficient and effective. 7.1.2. Overview of the modelling approach 144. There are three stages to the proposed method for determining 2017/18 and 2018/19 prices. a. Setting relative prices for 2017/18: For example, how the price of one procedure within a specialty differs from another, taking into account the level of resources required to perform each one. b. Setting the level of prices for 2017/18: Setting the level of prices by reference to the costs of providing services incurred by reasonably efficient providers, and taking into account other relevant factors. c. Setting the prices for 2018/19: both for relative and absolute levels. 22 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 46 145. The figure below shows the price setting process in summary form. Figure 1: Stages in our method for setting national prices for 2017/19 2014/15 Reference costs Determine price relativities (relationship between average unit costs) Set prices to 2016/17 levels (current year) Adjust to 2016/17 base using 15/16 and 16/17 efficiency, cost uplifts and CNST Adjust relativities using expert advice Adjust subchapters to manage volatility Apply cost base adjustment 2017/18 Price levels 2018/19 price levels Adjust for forward looking 2017/18 efficiency, cost uplifts and CNST Adjust for forward looking 2018/19 efficiency, cost uplifts and CNST 146. NHS Improvement and NHS England consulted on proposals for setting relative prices over the summer. We did not consult on setting price levels. The main policy areas we have not previously engaged on are our proposals for setting the final cost base, uplifts for changes to provider costs and efficiency. 147. In the 2016/17 NTPS, we rolled over prices from the ETO with adjustments for inflation and efficiency. For 2017/18, we propose instead to model prices by taking a similar approach to that used by the Department of Health in modelling prices for 2013/14 Payment by Results (PbR).23 148. We propose to refresh the input data to use the latest information and we also propose to make a series of changes to the DH PbR method itself, including: a. simplifying the approach to setting prices for BPTs b. updating activity and cost inputs and adopting a method for cleaning costs to reduce some of the known issues with reference cost data c. updating cost uplifts based on latest information d. introducing a method to reduce the immediate impact of distributional changes from the new currency design e. reviewing assumptions used to calculate the efficiency factor f. explicitly setting a cost base g. ensuring that manual adjustments are cost neutral h. other more minor changes that are required because of the passage of time, lack of data sources or because they improve the transparency, efficiency and simplicity of the tariff model. 23 More detail on the 2013/14 PBR method can be found here: www.gov.uk/government/uploads/system/uploads/attachment_data/file/214905/Step-by-stepguide-to-calculating-the-2013-14-national-tariff.pdf 47 7.2. Modelling national prices for 2017/18 7.2.1. What we previously proposed24 149. In National tariff: Policy proposals for 2017/18 and 2018/19 we proposed to set prices for the 2017/18 tariff year by modelling prices using the approach taken by DH for the 2013/14 PbR, with changes including ensuring that manual adjustments are cost neutral, allowing for up-to-date inputs and new calculation models and managing provider revenue volatility. 150. We proposed to set national prices for 2017/18 by using the currencies proposed in the currency section of this document and modelling national prices using the process set out in the figure above. 151. This was a change to the approach used for the 2016/17 NTPS, but reflected the approach we originally proposed in earlier consultations for the 2016/17 NTPS.25 152. We considered it would be more appropriate to model prices than to continue to roll prices forward. This would allow us to use up-to-date cost data that reflect changes in clinical practice, and to set prices for the proposed new currency design, HRG4+. 7.2.2. What you told us Table 15: Breakdown of responses to the proposal to model prices Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose 12 95 30 24 20 7% 52% 17% 13% 11% Don’t know 12 Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 153. Responses to our proposals on the method for modelling prices focused mainly on the following areas. a. data quality issues in the reference cost and Hospital Episode Statistics (HES) datasets b. inappropriate proposed prices in specific areas: in particular orthopaedic and renal prices, and specialist services provider prices that are too low 24 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/nationaltariff-policy-proposals-1718-and-1819/ 25 This was proposed in our summer engagement document 2016/17 national tariff proposal: Currency design and relative prices at www.gov.uk/government/publications/201617-national-tariffproposals-currency-design-and-relative-prices 48 c. specific issues with the modelling approach: we should use spell-based reference costs rather than convert finished consultant episodes to spells in calculating prices. 7.2.3. How this has influenced our proposals 154. A clear majority (59%) of respondents supported our proposals. 155. Reference costs and HES for 2014/15 are the most comprehensive datasets available to us. There are no realistic alternatives to them for setting the 2017/18 tariff. 156. Issues with reference costs are well known and we propose to mitigate these shortcomings, for example through our proposed data cleaning and manual adjustment processes. 157. We propose to mitigate the impact on orthopaedic, renal and specialist providers through our approach to managing volatility (Section 7.10) and through specialist top-up payments. 158. We do not propose to use spell-based reference costs because the very tight timelines due to the later than- expected publication of the 2016/17 NTPS did not allow us to explore this option further. 7.2.4. Final proposal 159. We propose to adopt the approach to modelling 2017/18 national prices set out in National tariff: Policy proposals for 2017/18 and 2018/19. This means we propose to set 2017/18 prices using the modelling approach previously used by DH for the 2013/14 DH PbR tariff, with some method changes and adjustments to allow us to use up-to-date inputs and new calculation models, and to simplify other models. 49 7.3. Managing model inputs for 2017/18 7.3.1. What we previously proposed26 160. In our summer engagement document, we proposed to model prices using 2014/15 reference costs and 2014/15 HES activity data. This is because the 2014/15 reference costs are designed to support the HRG4+ currency proposals for 2017/18, and the 2014/15 HES activity data is the activity dataset that is most compatible with the 2014/15 reference costs. When we started our modelling, these datasets were also the most recent available. 161. We also proposed to apply some data cleaning rules to clean reference cost data. We believe this would improve the quality of the reference cost dataset. 7.3.2. What you told us Table 16: Breakdown of responses to our proposals for managing model inputs Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose 10 88 42 22 13 6% 50% 24% 13% 7% Don’t know 16 Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 162. A clear majority (56%) of respondents supported our proposals. 163. Respondents raised a few concerns, particularly that our data-cleaning approach could remove genuine outliers. 164. Some respondents also suggested alternatives to our proposed data-cleaning rules. 7.3.3. How this has influenced our proposals 165. We stated in our summer engagement that we would only apply data-cleaning rules to reference costs for admitted patient care. This would result in a small percentage of reference cost data records submitted by a small number of providers being removed to improve the quality of the dataset. 166. Our analysis shows that the data-cleaning rules do have a significant effect on a relatively small number of HRGs. However, we think we have put done enough to minimise the risk of a negative effect from an unintentional removal of genuine outliers, in particular: 26 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/nationaltariff-policy-proposals-1718-and-1819/ 50 a. our clinical review process for our modelled prices with the option for clinical experts to propose manual adjustments to prices that appear to be implausible b. the ability for stakeholders to propose similar adjustments in response to our consultation in July.27 To aid this we published with our July consultation a readout tool that shows the impact of data cleaning on each HRG. An updated version can be found on the NHS Improvement 2017/19 national tariff page.28 167. We have not changed the way we propose to clean reference costs in response to the suggested alternative data-cleaning methods. This is because we still believe this method is appropriate and to do otherwise would require significant development work to assess the suitability of these alternative approaches relative to the effect of data cleaning on most HRGs. 7.3.4. Final proposal Reference costs 168. We propose to adopt the approach to managing model inputs for 2017/18 prices as set out in our summer engagement paper. This means we propose to clean reference cost data by removing: a. outliers from the raw reference cost dataset using a statistical outlier test known as the Grubbs test b. providers submitting reference costs more than 50% below the national average for more than 25% of HRGs, who also submit reference costs more than 50% higher than the national average for more than 25% of HRGs c. providers submitting reference costs containing more than 75% duplicate costs across HRGs and departments. 169. For the 2017/18 tariff we propose to clean only reference cost data for the admitted patient care model. HES data We intend to use 2014/15 HES data grouped by Monitor. 27 National Tariff: Policy proposals for 2017 to 2019 https://improvement.nhs.uk/resources/nationaltariff-policy-proposals-1718-and-1819/ 28 https://improvement.nhs.uk/resources/national-tariff-1719-consultation 51 7.4. Setting prices for best practice tariffs for 2017/18 7.4.1. What we previously proposed29 170. In National Tariff: policy proposals for 2017/18 and 2018/19 we proposed to, where possible, simplify and standardise the method for setting prices for existing and new BPTs by: a. using the modelled price without adjustments as the starting point b. setting a fixed differential between the BPT and non-BPT price (either a percentage or absolute value) c. setting an expected compliance rate that would be used to determine final prices d. then calculating the BPT and non-BPT price so that the BPT would not add to or reduce the total amount paid to providers at an aggregate level. 171. These proposals would reduce the risk of BPTs creating an extra efficiency requirement, would be easier to understand and simpler to calculate. 7.4.2. What you told us Table 17: Breakdown of responses to our proposals for managing model inputs Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 10 79 59 12 4 6% 48% 36% 7% 2% 23 Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19 172. 54% of respondents supported the proposed modelling approach and only 9% did not. 173. Responses to our proposals focused mainly on the following areas. a. the need to expressly take into account the cost of complying when setting a BPT b. lack of clarity on BPT criteria and payment rules and the associated processes causing an administrative burden on the sector. 29 ational tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 52 7.4.3. How this has influenced our proposals 174. The pricing method for BPTs makes the assumption that the existing cost base already includes the cost of compliance with BPTs. We think this is a reasonable assumption for BPTs that have been in place for some time and have received no evidence that newer BPTs cause significant extra costs to providers. 175. We do consider the administrative burden on providers when proposing the introduction of new BPTs but this needs to be weighed against the patient benefit. Where we have significant feedback on undue administrative burdens we have amended our BPT proposals to minimise the burden. We also have not received any specific evidence that the administrative burden for existing BPTs is disproportionately large. 176. As a result we do not currently have enough evidence to justify a change to our proposals for the BPT pricing method to account for the cost of compliance or the cost of administrative burden. 7.4.4. Final proposal 177. We are not amending our earlier proposals and so propose, where possible, to simplify and standardise the method for setting prices for existing and new BPTs by: a. using the modelled price without adjustments as the starting point b. setting a fixed differential between the BPT and non-BPT price (either a percentage or absolute value) c. setting an expected compliance rate that would be used to determine final prices d. calculating the BPT and non-BPT price so that the BPT would not add to or reduce the total amount paid to providers at an aggregate level. 7.5. Setting national prices for 2018/19 7.5.1. What we previously proposed30 178. In National tariff: policy proposals for 2017/18 and 2018/19 we proposed to model national prices for 2018/19 using the 2017/18 price list as a base and then: 30 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 53 a. determine final price levels by applying adjustments for expected efficiency, inflation and CNST b. adjust the method for setting inflation, efficiency and CNST to base them on longer term projections rather than the most recent available data. 7.5.2. What you told us 179. A majority of respondents (53%) supported the proposed modelling approach. 180. Responses to our proposals on the modelling approach for 2018/19 prices focused mainly on the limited flexibility that setting a two-year tariff imposes: a. very limited flexibility to make changes in year 2 of the tariff poses a risk that undesirable effects of the tariff are present for an extended period b. limited opportunity to accommodate innovation c. limited ability to react to unexpected cost changes. 7.5.3. How this has influenced our proposals 181. We recognise that there are limitations on making price changes when setting a two-year tariff. We have addressed these concerns in Section 5 Setting a tariff for 2017/19. 182. We have not been told of any major concerns around our proposal to use a rollover method for setting 2018/19 national prices. We are therefore not proposing any changes to these proposals in the National tariff: policy proposals for 2017/18 and 2018/19 document. 7.5.4. Final proposal 183. As set out above, we propose to model national prices for 2018/19 using the 2017/18 price list as a base and then: a. determine final price levels by applying adjustments for expected efficiency, inflation and CNST b. adjust the method for setting inflation, efficiency and CNST to base them on longer term projections rather than the most recent available data. 54 7.6. Making manual adjustments to prices 7.6.1. What we previously proposed31 184. In our summer engagement document we proposed to introduce some manual adjustments to price relativities based on the expert clinical feedback, for example, from workshops with clinicians and specialty groups. 185. We presented these adjustments to the wider sector in an annex to the engagement document32 and asked for further recommendations on these price relativities. 7.6.2. What you told us Table 18: Breakdown of responses to the proposal to manually adjust prices Strongly support Number % Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 8 75 55 13 14 5% 45% 33% 8% 8% 24 Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19 186. Although feedback to this proposed approach was broadly positive, some respondents commented that the process should be more open and that particular groups, such as bariatric surgeons, had not been adequately engaged with. 187. There were also specific comments on price levels submitted through the survey as well as recommendations returned using the template in the manual adjustment annex. 7.6.3. How this has influenced our proposals 188. We have reviewed all comments on specific prices, accepted some feedback and made further recommendations. We are now proposing a new set of manual adjustments to price relativities. 189. These manual adjustments have already been factored into the prices proposed in Annex B1. We have included all the proposed manual adjustments in Annex B2. 190. The manual adjustments proposed for the summer engagement were developed with a relatively narrow series of stakeholder groups but we are now 31 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 32 https://improvement.nhs.uk/uploads/documents/Annex_B_ Price_relativities_response_template.xlsx 55 releasing them to all stakeholders to get the widest possible range of views. We are also looking at ways to make sure the groups represent a wider range of views at the earliest stage of the manual adjustment process. 7.6.4. Final proposal 191. Following sector engagement we propose to introduce some manual adjustments to price relativities. Details of these are in Annex B2. 7.7. Setting the efficiency factor 7.7.1. Background 192. The efficiency factor is a mechanism used in sectors where prices are regulated centrally to incentivise providers to reduce costs. It measures the efficiency providers are expected to achieve by treating patients at lower cost over time, for example by introducing innovative healthcare pathways, technological changes or better use of the labour force.33 193. The objective of the efficiency factor is to set a challenging but achievable target to encourage trusts to continually improve their use of resources, so that patients receive as much high quality healthcare as possible. 194. Setting the efficiency factor inappropriately can have substantial and undesirable impacts on providers, commissioners and patients because: a. Setting a too high efficiency factor (prices too low) may challenge providers’ financial position and sustainability. Providers may not be adequately reimbursed for the services they provide, which potentially could affect a service quality (eg increasing waiting times) and increase the risk of adverse impact on the quality of care for patients. b. Setting a very low efficiency factor (prices too high) may reduce both the volume of services that commissioners can purchase with given budgets and reduce the incentive for providers to achieve cost savings. 7.7.2. What are we proposing? 195. We propose an efficiency factor of 2% for 2017/18 and 2% for 2018/19. 7.7.3. Rationale 196. We use evidence-based data to set the efficiency factor. The starting point is the Deloitte analysis produced to inform our decision on the efficiency factor for the 2015/16 national tariff. This initial analysis was based on an econometric 33 The Carter report has proposed ways providers can achieve efficiencies. 56 model and a supporting case study.34 The model used data from 165 acute trusts between the 2008/09 and 2012/13 financial years. For the 2016/17 NTPS we developed the Deloitte econometric approach by changing our measurement of certain variables and incorporating 2013/14 data into the model.35 197. For the 2017/18 NTPS we considered how we might develop the existing econometric model, as well as whether any update to the evidence was needed. We updated the analysis prepared for the 2016/17 NTPS to include 2014/15 data.36 This allows us to account for the most recent changes in efficiency in our decision on the efficiency factor setting. We have also improved the measurement of deprivation in the model.37 198. We estimated two measures of efficiency: trend efficiency and variation in efficiency. a. Trend efficiency is the average sector-wide efficiency gain we observe over time. This could arise from new technologies, improved hospital processes or less efficient trusts catching up with more efficient ones. We estimate trend efficiency as a percentage reduction in costs over time that does not vary by trust. Given the importance of achieving value for money in the NHS, we think it is reasonable to set an efficiency ask at least at the level of historical trend efficiency. b. Variation in efficiency is the range of efficiency performance across trusts. This could arise from differences in use of technologies, or differences in hospital processes. We estimate variation in efficiency as a percentage difference in costs from the average trust that does not change over time. We use this to inform our understanding of what reasonable efficiency ask, over and above trend efficiency, would enable less efficient trusts to catch up with more efficient trusts. 199. The table below displays the results of the estimates of our model and suggests it would be reasonable for the efficiency factor to be at least 1% with catch up factor to reduce variations in efficiency. Given the financial pressures on the NHS, we believe that it is appropriate to set a challenging but achievable efficiency target for 2017/18. We are proposing an efficiency factor of 2%. 34 See Deloitte report for detailed description of the method. The report of the efficiency factor for the 2016/17 national tariff can be found here: Evidence on the efficiency factor. 36 Where changes in data collections mean data is not available for variables, for instance certain disease’s prevalence in the Quality Outcomes Framework, we have extrapolated based on historical data. 37 In 2016/17 the estimate of the level of deprivation a trust faced was calculated using the area-level index of multiple deprivation, mapped to trusts by the average patient flow. This was time-invariant. This year we have recalculated patient flow each year. This enables us to capture changes in the deprivation profile a trust may face due to changes in catchment area served over time. 35 57 Table 19: Efficiency estimates Estimate Trend efficiency 1.0% Variation in efficiency Median to 60th centile 1.6% Median to 70th centile 3.0% Median to 80th centile 5.2% Median to 90th centile 6.9% Notes: The econometric analysis is based on cost data on 170 providers for the period 2008/092014/15. 200. Our modelling suggests that trusts become 1% more efficient each year on average. Around this trend we estimate that there is substantial variation in efficiency, which could justify an efficiency factor greater than 1% as poorer performers can improve more than the average. For instance, if the average performer catches up to the 60th centile we estimate that this would release 1.6% efficiency in addition to trend efficiency. For the 2018/19 national tariff we assume trend efficiency will continue and this goes in line with the other government reviews.38 We therefore consider it appropriate to adopt an efficiency factor of 2% for 2018/19. 7.8. Cost uplifts 7.8.1. Background 201. To determine national prices for 2017/18 and 2018/19 we need to assess the cost pressures in those years taking into account the expected changes to the major components of provider costs. Table 20: Cost uplift factor components Category Description Source Frequency of update Labour cost inflation Expected pay settlement, pay drift, apprenticeship levy, staff mix and pension changes Department of Health Annually Drugs cost inflation Cost increase of all drugs Department of Health Monthly Non-pay, non-drugs inflation General inflation of other operating expenses using the latest forecast of the gross domestic product deflator Office for Budget Responsibility End of each quarter Changes in capital costs Anticipated changes in depreciation and private finance initiative (PFI) payments Department of Health Annually 38 A recent Carter review report on operational productivity and performance suggests the NHS is expected to deliver efficiencies of 2-3% per year, which could represent savings of 10-15% by 2021. 58 Category Description Source Frequency of update CNST Expected increases in CNST contribution payments NHS Litigation Authority Annually (October/ November) Service development Expected cost of new requirements set out in the government’s mandate to NHS England NHS England Annually (November/ December) 7.8.2. Our proposal 202. We propose to use broadly the same methodology for setting cost uplifts that we have used in previous years with the notable difference that we must estimate for two years rather than one.39 We are also making some adjustments to the DH figures for labour cost and drug cost inflation, as explained below. To estimate the appropriate cost uplift for 2017/18 and 2018/19, we propose to: a. forecast the rate of inflation for each of the categories in the table above b. combine these into a single cost uplift factor by weighting each category by its average share of providers’ expenditure c. estimate cost weightings based on the actual weighting in the 2015/16 consolidated accounts and use the same weightings for 2017/18 and 2018/19. 203. Based on the approach we have developed for cost uplift and the latest available data, we propose to use an inflation cost uplift of 2.1% for 2017/18 and 2.1% for 2018/19. A breakdown of this estimate, calculated using the approach described above, is shown below. 204. For labour costs we propose to exclude estimates for pay inflation that lead to increased output on the basis that this activity growth would be paid for by reimbursement of that extra activity through national prices. 205. For drugs costs we propose to exclude estimates for inflation that relate to activity growth as this would be paid for by reimbursement of that extra activity through national prices. We also propose to exclude the estimates of inflation for high cost drugs. 39 Please see Section 4.2 of the 2016/17 National Tariff Payment System for more details on the previous methodology for setting cost uplifts 59 Table 21: Summary of cost uplift factor estimates Category 2017/18 uplift % 2018/19 uplift % Category weight Weighted estimate 2017/18 Weighted estimate 2018/19 Labour cost inflation 2.1% 2.0% 63.1% 1.3% 1.3% Drugs cost inflation 2.8% 2.1% 8.5% 0.2% 0.2% Non-pay, non-drugs inflation 1.8% 2.1% 20.9% 0.4% 0.4% Changes in capital costs 3.0% 2.9% 5.7% 0.2% 0.2% CNST cost inflation 0.9% 0.9% 1.8% 0.0% 0.0% Service development and other costs 0.0% 0.0% n/a 0.0% 0.0% 100.0% 2.1% 2.1% Overall Note: calculations were done unrounded; only one decimal place is displayed 7.8.3. Rationale 206. Every year the efficient cost of providing healthcare changes because of changes in wages, prices and other inputs over which providers have limited control. We therefore make a forward-looking adjustment to the modelled prices to reflect expected cost pressures in future years. We refer to this as the cost uplift. 207. We have considered other methods of setting cost uplifts, including the inflation estimates from the OBR, but we feel that, because the current methodology includes estimates of changes to healthcare costs provided by the bodies best placed to estimate them (eg the Department of Health or the NHS Litigation Authority), it reflects our best understanding of changes to healthcare costs. 208. Labour cost inflation. We are projecting an increase in the pay bill of 2.1% in 2017/18 and 2.0% in 2018/19. Our estimate for labour cost inflation comprises: 1% pay award, in line with public sector-pay policy as set by HM Treasury pay drift and group mix effects of 0.7% in 2017/18 and 1.0% in 2018/19. In arriving at these figures, we have made an adjustment of -0.3% to the DH projections to reduce or exclude elements of pay inflation that would lead to additional output and so are remunerated through activity rather than price the apprenticeship levy, which is estimated to add a net 0.3% to the total wage bill in 2017/18 (with no further impact in 2018/19). This comprises 0.4% expected gross costs, offset by our estimate of 0.1% financial benefit, as employers are able to access funding for the training of apprentices the immigration skills charge, which the Department of Health estimate will add 0.1% to the total wage bill in 2017/18 (with no further impact in 2018/19) 60 209. Drug cost inflation. Our estimate for drug cost inflation is 2.8% in 2017/18 and 2.1% in 2018/19. The approach is a development of that used in previous years to ensure that it better reflects actual price increases. 210. The starting point for our approach is DH estimates of drug expenditure growth. These are based on long-term trends, DH’s expectation of new drugs coming to market and other drugs that will cease to be provided solely under patent in the coming 12 months. The figures are 5.8% in 2017/18 and 5.0% in 2018/19. We then adjust these to calculate a figure appropriate for use in the tariff, as follows: a. calculating a revised figure for tariff drugs, by assuming 6.2% cost growth in the proportion of drugs expenditure accounted for by high cost drugs. As the cost of high cost drugs is paid outside the tariff, it is not correct to include expected price growth in our calculation of tariff inflation b. removing assumed underlying activity growth of 2.5% in both years as this this activity growth would be paid for by reimbursement of that extra activity through national prices c. recognising the uncertainty associated with these adjustments, particularly for pass-through drugs, and setting the growth figure to be at least the GDP deflator in each year. 211. Non pay non drugs inflation. For other operating costs, which include general costs such as medical, surgical and laboratory equipment and fuel, we have used the forecast of the GDP deflator estimated by the Office of Budget Responsibility (OBR) as the basis of the expected increase in costs. The latest available forecast of the GDP deflator is from June 2016.40 This is 1.8% in 2017/18 and 2.1% in 2018/19. 212. Capital costs. Providers’ costs typically include depreciation charges and private finance initiative (PFI) payments. As with increases in operating costs, providers should have an opportunity to recover an increase in these capital costs. 213. In previous years, DH reflected changes in these capital costs when calculating cost uplifts, and we have adopted the same approach for 2017/18 and 2018/19. Specifically, we have applied DH’s projection of changes in overall depreciation charges and PFI payments. 214. In aggregate, DH projects PFI and depreciation to grow by 3.0% in 2017/18 and 2.9% in 2018/19. These both translate to an 0.2% uplift on tariff prices. 40 Published at www.gov.uk/government/statistics/gdp-deflators-at-market-prices-and-money-gdpjune-2016-quarterly-national-accounts 61 215. CNST. As in previous years, most CNST costs are allocated to the relevant HRGs at a subchapter level. About 2% of CNST costs cannot be allocated to subchapters. Our proposed approach is that we apply this residual or unallocated CNST cost change to all HRGs by including an uplift to the cost uplift factor. We used data provided by the NHS Litigation Authority to calculate the uplift factor for unallocated CNST, and propose to adopt that approach for the final prices. 216. Service development and other costs. We also considered whether any extra allowance should be made for other identified costs, or to allow for expected service developments including major initiatives in NHS England’s mandate. We concluded that no further adjustments were necessary, having in particular considered the following potential areas of extra cost: a. CQC inspection fees: the impact of announced extra CQC inspection fees is less than 0.1% and not considered material b. Seven-day services: this will be considered as part of transformation funding and it is not therefore necessary to include an uplift in tariff. 7.9. Clinical Negligence Scheme for Trusts 7.9.1. Background 217. CNST is an indemnity scheme for clinical negligence claims. Providers contribute to the scheme to cover the legal and compensatory costs of clinical negligence.41 The NHS Litigation Authority (NHSLA) administers the scheme and sets the contribution each provider must make to ensure the scheme is fully funded each year. 218. Following the approach used in previous years, we propose to allocate the increase in CNST costs to core HRG subchapters (for admitted patient care), to the maternity delivery tariff and to A&E services, in line with the average increase that will be paid by providers. This approach to the CNST uplift is different to other cost uplifts. While other cost uplifts are estimated and applied across all prices, the estimate of the CNST increase can be different for each subchapter (within admitted patient care), A&E services and for the maternity delivery tariff. 219. Each relevant HRG has received an uplift based on the change in CNST cost across specialties mapped to HRG subchapters. This means that our proposed 41 CCGs and NHS England are also members of the CNST scheme. 62 cost uplifts reflect, on average, each provider’s relative exposure to CNST cost growth, given their individual mix of services and procedures.42 220. As we are proposing to move to a two-year tariff we would set the CNST uplift for both years. 7.9.2. Proposal 221. We propose to set the same CNST uplifts for both years. These are in the table on the next page. 7.9.3. Rationale 222. We propose to use the same method we have used in previous years with minor adjustments to adapt it to HRG4+ and a two-year tariff. 223. As this is a tested model previously accepted by the sector we do not believe a redesign of the policy is required at this stage. 224. We believe that setting the same levels for two years makes sense given the information from the NHSLA and the rollover method we propose to adopt for setting prices in 2018/19. 225. The NHS Litigation Authority (NHS LA) provides NHS Improvement with a breakdown by treatment and staff specialty of the total amount to be collected from members of the scheme to cover projected litigation claims. For the 2017/19 tariff the NHS LA have provided two years’ worth of projections covering the 2017/18 and 2018/19 financial years. The increase from the 2016/17 and 2017/18 projections respectively is then allocated to the relevant areas of tariff using the same method. 42 For example, maternity services have been a major driver of CNST costs in recent years. For this reason, a provider that delivers maternity services as a large proportion of its overall service mix would probably find its CNST contributions (set by the NHSLA) have increased more quickly than the contributions of other providers. However, the cost uplift reflects this, since the CNST uplift is higher for maternity services. This is consistent with the approach previously taken by DH. 63 Table 22: CNST tariff impact by HRG subchapter HRG sub chapter 2017/18 up lift (%) 2018/19 uplift (%) HRG sub chapter 2017/18 upli ft (%) 2018/19 uplift (%) HRG sub chapter 2017/18 uplif t (%) 2018/19 uplift (%) AA 0.72% 0.89% JC 0.67% 0.80% PP 1.25% 1.53% AB 0.41% 0.54% JD 0.40% 0.49% PQ 0.58% 0.71% BZ 0.54% 0.68% KA 0.48% 0.63% PR 1.14% 1.41% CA 0.34% 0.46% KB 0.22% 0.25% PV 1.08% 1.34% CB 0.36% 0.45% KC 0.20% 0.22% PW 1.33% 1.62% CD 0.16% 0.19% LA 0.18% 0.20% PX 1.10% 1.35% DZ 0.17% 0.20% LB 0.37% 0.45% SA 0.30% 0.37% EB 0.26% 0.31% MA 0.22% 0.37% VA 0.83% 1.08% EC 0.26% 0.33% MB 0.41% 0.58% WH 0.49% 0.61% ED 0.23% 0.32% PB 1.12% 1.38% WJ 0.22% 0.26% EY 0.29% 0.36% PC 1.18% 1.45% YA 2.71% 3.55% FZ 0.56% 0.71% PD 1.33% 1.63% YD 0.29% 0.33% GA 0.56% 0.72% PE 0.94% 1.15% YF 0.57% 0.73% GB 0.27% 0.34% PF 1.14% 1.40% YG 0.26% 0.31% GC 0.52% 0.65% PG 0.75% 0.92% YH 0.91% 1.17% HC 0.84% 1.10% PH 0.86% 1.07% YJ 0.72% 0.92% HD 0.49% 0.60% PJ 1.24% 1.51% YL 0.23% 0.28% HE 1.51% 1.92% PK 0.74% 0.91% YQ 0.71% 0.91% HN 0.83% 1.08% PL 0.79% 0.97% YR 0.75% 0.95% HT 0.92% 1.20% PM 0.24% 0.30% VB 1.94% 1.90% JA 0.84% 1.05% PN 0.70% 0.85% Maternity 6.36% 7.54% Source: The NHS Litigation Authority. Note: * Maternity is delivery element only 64 7.10. Managing volatility 7.10.1. Background 226. In proposing to set national prices based on the HRG4+ currency design underpinned by cost and activity data from 2014/15, we accept that this would change the distribution of provider income and commissioner expenditure. While this is one of the desired consequences of introducing an improved currency design based on more up-to-date cost data, the change may be destabilising for individual providers even though in aggregate the effect is neutral to the provider sector. 227. Delaying the introduction of the new currency design would reduce this volatility but it would mean that prices become increasingly removed from current costs and practice. It would also mean that when any new currency design is implemented the impact would be much greater. 228. This means that the impact from introducing the new currency design needs to be managed in a way that reduces the total impact on providers and commissioners to a manageable level in any year. 229. For the prices released with National tariff: Policy proposals for 2017/18 and 2018/19,43 we were concerned that some services had large gains and others significant losses: in particular orthopaedics (subchapters HC, HD, HE, HN and HT), neonatal disorders (PB), renal dialysis (LD), chemotherapy (SB) and radiotherapy (SC). 7.10.2. Proposal 230. We propose to continue to adjust prices in the subchapters mentioned above so that services recover 75% of the initial estimated loss. Tariff prices outside these subchapters have been reduced equally by 1.2% to pay for this revenue adjustment (top sliced). The table below displays the adjustments factors: Table 23: Adjustments made to individual subchapters Subchapter Subchapter description Uplift adjustment HC Spinal Procedures and Disorders 3.9% HD Musculoskeletal and rheumatological Disorders 0.9% HE Orthopaedic Disorders 11.1% HN Orthopaedic Non-Trauma Procedures 5.3% HT Orthopaedic Trauma Procedures 7.9% LD Renal Dialysis for Chronic Kidney 10.4% 43 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 65 Subchapter Subchapter description Disease Uplift adjustment PB Neonatal disorders 15.0% SB Chemotherapy 4.1% SC Radiotherapy 6.3% All remaining chapters -1.2% 231. We also propose a further change to the management of subchapter HD to separate it from the rest of chapter H for price calculation. 232. NHS England is making consequential adjustments as between CCG and specialist commissioners budgets to ensure the changes are purchasingprovider neutral between locally and nationally commissioned prices. 7.10.3. Rationale 233. Under the existing approach all prices in chapter H are calculated together which means that manual adjustments to prices in another H subchapter have a significant impact on prices within HD. Separating this sub-chapter means we can avoid a significant reduction to prices for musculoskeletal and rheumatological disorders. 234. However, this is not a perfect solution and would still leave 52 NHS providers facing a reduction of more than 0.5% of operating revenue. We do not collect data on operating revenue from independent providers and so are not able to provide this analysis for the independent sector. 235. This approach would allow the introduction of a new currency design while reducing some of the extreme reductions in payments for some services as a result of switching to HRG4+. The remaining issues may relate to casemix complexity that is not captured adequately by the HRG4 or HRG4+ currency designs and cannot be mitigated through the national tariff. 7.11 Setting the cost base 7.11.1 Background 236. The cost base is the level of cost the tariff will allow providers to recover before adjustments are made for cost uplifts, CNST and the efficiency factor are applied. Therefore in setting national prices, after setting price relativities, we set prices at a level that will allow them to recover the cost base, and then we adjust those prices to allow for cost uplifts, and the efficiency factor. 66 7.11.2 What are we proposing? 237. For 2017/18, for the total activity with a national price, we are proposing to set the cost base equal to the revenue that would be received under 2016/17 national tariff. 238. Similarly, for 2018/19, we propose that the cost base should equal the revenue that would be received under 2017/18 prices (that is the 2016/17 cost base adjusted for 2017/18 cost uplifts and efficiency factor). 7.11.3 Rationale 239. As with many other parts of tariff setting, we use last year’s tariff as a starting point for the following tariff. Therefore, last year’s prices and last year’s revenue are used as a starting point. 240. After setting the starting point, we consider new information, and a number of factors to form a view whether an adjustment to the cost base is warranted. 241. Information and factors we considered include: a. historical efficiency and cost uplift assumptions b. latest cost data c. additional funding outside the national tariff. d. any other additional revenue providers use to pay for tariff services 44 e. our pricing principles and the factors which legislation requires us to consider, including matters such as the importance of setting cost reflective prices, and the need to take into account the duties of commissioners in the context of the budget available for the NHS. 242. In using our judgement, we also consider the effect of setting the cost base too high or too low. This effect is asymmetric: a. If we set the cost base too low (ie we set too high an expectation that providers will be able to catch up to past undelivered efficiency), providers will be in deficit, service quality will decrease (eg waiting times will increase), and some providers may cease providing certain services. b. However, if we set the cost base too high, commissioners, who have an obligation to stay within their budgets, are likely to restrict the volumes of commissioned services, and could cease commissioning certain services 44 We commissioned a review into the cost base from FTI. This can be found at: improvement.nhs.uk/resources/national-tariff-1719-consultation 67 entirely. This would mean some patients may not be provided with the healthcare service they require. 243. Given the above, it is our judgement to keep the cost base equal to the revenue that would be received under 2016/17 prices. 68 8 National variations 244. National variations refer to variations to national prices specified in the national tariff (s116(4)(a) of the 2012 Act). They relate to circumstances where it is appropriate to make adjustments to national prices (as distinct from local variations agreed between commissioners and providers). National variations may reflect features of costs that are not fully captured in national prices or seek to share risk more appropriately between providers and commissioners. The national variations in the national tariff aim to do one of the following: a. improve the extent to which prices reflect location-specific costs (eg the market forces factor (MFF)) b. improve the extent to which prices reflect patient complexity (eg top-ups for specialised services) c. create incentives to share responsibility for preventing avoidable unplanned hospital stays (eg the marginal rate emergency rule) d. share financial risk appropriately following (or during) a move to new payment approaches (eg national variation to support the implementation of the BPT for hip and knee replacements). 245. For 2017 to 2019 we are only proposing to adjust top-up payments for specialised services. 246. We propose to retain the current approach to the market forces factor: a. Where there are mergers during the period in which the tariff has effect, as now, the existing MFF rate will continue to apply, but providers and commissioners may agree a local variation to national prices in accordance with the rules set out in Section 6 of the national tariff. b. Where MFF rates are recalculated, for example where two trusts have merged before the end of March 2017, we will publish the rates and they will apply from April 2017. 247. We propose to retain the marginal rate emergency rule and the 30 day readmission rule. We believe that these still provide appropriate incentives to prevent avoidable admissions. 248. We propose to retain the transitional national variation for primary hip and knee replacements. This was introduced in 2014/15 to recognise that there are circumstances in which some providers will be unable to demonstrate that they meet all the best practice criteria, but where it would be inappropriate not to pay the full BPT price. We will continue to review this policy over the period of the tariff and may propose changes in 2019/20. 69 8.11 Updating top-up payment for specialised services 8.11.1 What we previously proposed45 249. In our previous engagement, we proposed to: a. Move to top-ups based on the Prescribed Specialised Services (PSS) definition of specialised services b. Move to top-up payments for 2017/18 that adopt the recommendations from the University of York.46 250. We would mitigate the impact by transitioning to the new rates over four years for services that would lose income from the new rates. Other rates will be scaled pro-rata to maintain a total payment amount of around £416 million. 251. This change would use the latest reference costs and HES data, and a methodology developed by the University of York with input from the service and the Specialist and Complex Care Advisory Group. 252. Moving straight to the new top-up rates could destabilise providers. We are also analysing how complexity is captured by the national tariff. As we will not conclude this analysis in time for proposals to be included for the 2017 to 2019 national tariff, we believe that is appropriate to transition to the new top-up levels. 8.11.2 What you told us Table 24: Response from the sector to updating top-up payment for specialised services Number % Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Don’t know 17 62 48 14 24 22 10% 38% 29% 8% 15% Source: Survey responses to National tariff: policy proposals for 2017/18 and 2018/19 253. Support for this policy was generally favourable. The update to the top-ups to line up with specialised commissioning rules and to reflect HRG4+ phase 3 was seen as a necessary change. 254. Concerns were raised that the PSS rules were not being evenly applied and the definitions were not in line with services being commissioned locally. 45 In 2017 to 2019 National tariff: policy proposals for 2017/18 and 2018/19 https://improvement.nhs.uk/resources/national-tariff-policy-proposals-1718-and-1819/ 46 www.york.ac.uk/media/che/documents/papers/researchpapers/ CHERP118_costs_prescribed_specialised_services.pdf 70 255. Certain key stakeholders did have concerns about the impact of the policy particularly orthopaedic and paediatric providers. 256. We also had feedback suggesting that other issues with the payment of complex care were not fully addressed by this new policy. 8.11.3 How this has influenced our proposals 257. Based on the positive feedback from the sector we still believe that it is appropriate to introduce this policy. To address concerns regarding price volatility, the PSS definitions and complexity payments we are proposing to introduce measures to reduce this: a. We have updated the top-ups to account for the latest PSS rules consultation carried out by NHS England specialised commissioning. This means that top-ups and our impact assessments will reflect an updated set of PSS rules due to be released in the payment grouper in April 2017. b. To ensure greater stability for paediatric and orthopaedic providers we are not going to make further adjustment to rates for top-ups between the 2017/18 and 2018/19 prices. The top-up values will remain the same across both years. c. We remain committed to investigating other areas of concern raised by our key stakeholders and are developing a work plan for the specialist and complex care group to review for 2017/19. 8.11.4 Final proposal 258. We propose to: a. Move to top-ups based on the most up to date definitions of PSS available from NHS England specialised commissioning. b. Move to top-up payments for 2017/18 that adopt the recommendations from the University of York.47 c. We would mitigate the impact by transitioning to the new rates over four national tariff periods. Other rates will be scaled pro-rata to maintain a total payment amount of around £478 million. d. This change would use the latest reference costs, currency design and HES data, and a methodology developed by the University of York with input from the service and the Specialist and Complex Care Advisory Group. 47 www.york.ac.uk/media/che/documents/papers/researchpapers/ CHERP118_costs_prescribed_specialised_services.pdf 71 259. The impact of the top-up values by specialty area and the changes between the values reported in the previous engagement are presented in the table below: Table 25: Top-up impact by specialist area Top-up area Rollover of SSNDS top-ups TED top-ups (no update to PSS rules): no transition S118 prices (with update to PSS): no transition TED top-ups (no update to PSS rules): with transition S118 prices (with update to PSS): with transition All top-up areas £322.5M £416.3M £478.5M £416.3M £478.5M Spinal £18.5M 0 0 £13.7M £13.9M Neurosciences £60.8M £138.9M £165.6M £87.7M £117.7M £5.3M £0.8M £1.0M £4.2M £4.2M £237.9M £106.3M £124.8M £203.2M £209.6M Cancer 0 £22.4M £23.6M £14.1M £16.7M Respiratory 0 £42.6M £45.5M £26.9M £32.3M Cardiac 0 £93.5M £103.1M £59.1M £73.3M Other 0 £11.8M £15.0M £7.5M £10.7M Orthopaedics Children 72 9 Locally determined prices 260. Over half of the £70 billion of NHS activity covered by the national tariff is subject to local pricing arrangements. 261. Subject to compliance with local pricing rules and methods, national prices can be adjusted, particularly if it will allow commissioners to innovate in the design of services for patients (local variations) or where they do not adequately reimburse efficient costs because of structural issues (local modifications). These changes must be published and, in the case of local modifications, NHS Improvement must agree to the proposals applying its methods. 262. Under the rules, in agreeing a local payment approach, commissioners and providers must adhere to three principles: a. the approach must be in the best interests of patients b. the approach must promote transparency to improve accountability and encourage the sharing of best practice c. the provider and commissioner(s) must engage constructively with each other when trying to agree local payment approaches. 263. We are proposing to make some changes to the structure of the locally determined prices section of the proposed 2017/19 NTPS to reduce duplication and simplify the guidance. We have also moved guidance out of the supporting document48 and into the proposed 2017/19 NTPS. There will be no supporting document for locally determined prices for the 2017/19 NTPS. 264. Over the past two tariff cycles we have received feedback that the locally determined prices section and supporting guidance are repetitive and poorly written. We believe that these changes should make it easier for the sector to understand the rules and obligations. 265. For mental health we are proposing two changes: a. the sector to move to episode of care, capitation models for mental health services or an alternative approach under local pricing Rule 4 b. the sector to adopt the IAPT payment model from 2018/19 or an alternative approach under local pricing Rule 4. 48 www.gov.uk/government/publications/nhs-national-tariff-payment-system-201617-supportingdocuments 73 9.11 Mental health payment proposals for adults and older people 9.11.1 What we previously proposed 266. We proposed to change the local payment rules to require mental health providers and commissioners to link prices to locally agreed quality and outcome measures and the delivery of access and waits standards. This applies regardless of the payment approach chosen. 267. We also proposed to change the rules to require local use of one of the following options: a. episode of treatment or year of care, as appropriate to each mental healthcare cluster b. capitation, informed by care cluster data and any other relevant data c. an alternative payment approach consistent with the rules for local pricing. 268. Our payment proposals describe the use of mental health currencies known as care clusters to inform payment. Care clusters were developed to be needs based and to assist providers in the patient’s clinical assessment. Even though the care clusters cover not all but most mental health services for working-age adults and older people, they are the existing tool available to support clinical decision-making. 269. Going forward, NHS England will look to strengthen the clinical relevance of the care clusters and their relationship with diagnosis-based pathways to draw on the best evidence available. This work will have a patient-centred focus to improve quality and outcomes by bringing greater transparency to payment approaches in clinical decision-making as well as informing commissioners in improving investment decisions for mental health services. 9.11.2 What you told us 270. We originally consulted on these proposals in October 2015 and received support. Feedback to the summer engagement contained little negative comment, and several people felt that moving to a new approach was long overdue. The table below outlines the breakdown of responses received to the summer engagement. Table 26: Response from the sector to mental health payment proposals Question Mental health Strongly support Tend to support Neither support or oppose Tend to oppose Strongly oppose Number 6 36 63 6 6 % 5% 31% 54% 5% 5% Source: Survey responses to ‘National tariff: policy proposals for 2017/18 and 2018/19’ 74 Don’t know 69 271. Feedback this year found that some commissioners felt that the data submitted by providers were not sufficiently robust to support payment. They were also concerned that they did not have sufficient time or resources to fully implement the proposals because of pressure related to the acute sector. 272. There were also requests for more detailed guidance to support the local implementation of the payment approaches. This is currently being prepared by NHS Improvement and NHS England. We are also considering the requests for more support on national benchmarking of quality and outcome metrics, and how this can be incorporated into local systems. 9.11.3 How this has influenced our proposals 273. We do not propose making any adjustments to the existing proposals. 274. Based on this and earlier feedback, we intend to publish further guidance to support local health economies develop and implement local payment approaches. We will also continue to work with NHS Digital to ensure data reporting supports this. 9.11.4 Final proposal 275. Our final proposals are to: a. require mental health providers and commissioners to link prices to locally agreed quality and outcome measures from 2017/18 b. require local use of one of the three payment options outlined above from 2017/18. 276. These proposals are consistent with the work NHS Improvement and NHS England have been doing with the sector over the past few years to move to a more transparent and robust payment approach. Providers and commissioners must now put in place the building blocks for successful implementation of these proposals. Guidance and further support material are available via the payment development webpage.49 49 https://improvement.nhs.uk/resources/new-payment-approaches/ 75 9.12 Mental health payment proposals IAPT 9.12.1 What we previously proposed 277. In our summer engagement on mental health we proposed to mandate the IAPT payment model,50 as outlined previously in the local payment example, for use from 2018/19. 278. This model involves using the set of outcomes and process metrics routinely collected and reported by all IAPT providers as an integral part of payment. 9.12.2 What you told us 279. Overall, most providers and commissioners welcomed our proposal but wanted more support and guidance. This included: a. the use of local flexibility and discretion b. ensuring patient choice continues to be supported c. appropriateness of the cluster tool for IAPT. 280. There were a number of requests for the evidence base for the payment approach. The IAPT care programme51 has already conducted reviews of benefits of the IAPT care programme nationally.52 9.12.3 How this has influenced our proposals 281. We recognise that the nationally developed IAPT payment model may not be appropriate in all cases and wish to encourage local flexibility and innovation while retaining a focus on linking payment to outcomes. 282. To this end we are no longer proposing to mandate the IAPT payment model for use but instead to introduce a rule mandating the use of an outcomes-based payment model for IAPT that uses the outcome measures that are collected nationally as part of the IAPT dataset. Local variations still apply. 9.12.4 Final proposal 283. Our final proposal is to introduce a new Rule 8, in Section 6 of the 2017/19 NTPS, which would mandate the use of an outcomes-based payment model for IAPT from 1 April 2018/19. This model would need to take into account the severity and complexity of a service user’s presenting problem. The 10 national outcome measures collected in the IAPT dataset must reflect the outcomes 50 https://www.gov.uk/government/publications/local-payment-example-improving-access-topsychological-therapies 51 https://www.england.nhs.uk/mentalhealth/adults/iapt/ 52 http://www.iapt.nhs.uk/silo/files/iapt-3-year-report.pdf 76 element of the payment model for IAPT services. NHS England and NHS Improvement would publish updated guidance on the use of this payment model for shadow testing in 2017/18. 284. Commissioners and providers may use a different payment approach under local pricing Rule 4. We propose that any alternative payment model must link prices to agreed quality and outcomes measures. 285. Commissioners and providers should consider shadow testing their chosen payment model in 2017/18 ahead of implementation. 9.13 Proposed changes to rules for locally determined prices and payment 9.13.1 Background 286. Section 6 of the 2016/17 NTPS sets out the current requirements for all locally determined prices. It contains the principles that apply to the rules for local variations, the method used by NHS Improvement to assess local modifications and rules on local prices. 287. Section 7 of the 2016/17 NTPS sets out the current payment rules. In particular it reflects the requirements for billing and activity reporting contained in the terms and conditions of the NHS standard contract. 288. In the consultation on the 2016/17 NTPS we received feedback53 that the locally determined prices section of the national tariff and the supporting guidance are repetitive and, in places, unclear. 289. Over the course of this year we have reviewed this guidance and we propose to simplify Sections 6 and 7 to reduce repetition and improve accessibility for the reader. 290. In doing this, we identified some rules that could be usefully changed. 9.13.2 What are we proposing? 291. We propose to: a. remove Rule 5 b. amend Rule 3 and remove Rule 6 c. remove local pricing Rules 11a and 11c of the 2016/17 NTPS (rules for ambulance services) 53 www.gov.uk/government/uploads/system/uploads/attachment_data/file/512795/1617_tariff_feedba ck_for_publication.xls 77 d. change the rule relating to high cost drugs, devices and listed procedures so that prices reflect the actual supply cost, nominated supply cost or any national reference price, whichever is lower. 292. We also propose drafting changes to: a. more clearly distinguish mandatory requirements from guidance b. provide some additional guidance c. include guidance, which was previously published separately,54 in Section 6 d. remove duplication. 9.13.3 Rationale Removal of local pricing Rule 5 293. Rule 5 of the 2016/17 NTPS applies to acute services without national currencies and required prices to be determined in accordance with the terms and service specifications set out in locally agreed commissioning contracts. We believe that the rule is unnecessary because we consider that Rules 1 and 2 of the 2016/17 NTPS (general rules for all services without a national price) are sufficient to ensure that prices are set in line with our objectives. Commissioning contracts also contain dispute resolution provisions that may be used. We feel it is inappropriate for us to become involved in such disputes and the removal of this rule would provide clarification. Combining local pricing Rules 3 and 6 294. Local pricing Rule 3 of the 2016/17 NTPS applies to services with a national currency but no national price generally. Rule 6 applies specifically to acute services. Both rules require that national currencies are used unless an alternative payment approach is agreed in accordance with Rule 4. Rule 3(d) however refers only to the national currencies for mental health and ambulance services. Changing Rule 3 so that it more clearly applies to all services with a national price would remove the need for rule 6. 295. In addition, Rule 3(c) requires the completion of a local pricing template when national currencies are used. This applies to all services, although the lack of a reference to acute services in Rule 3(d) may have made this unclear. 296. We therefore propose to amend Rule 3(d) so that it refers to acute services and remove rule 6, which is no longer required. 54 www.gov.uk/government/uploads/system/uploads/attachment_data/file/509771/Guidance_on_local ly_determined_prices.pdf 78 Removing local pricing rules 11(a) and 11(c) 297. Local pricing rule 3 of the 2016/17 NTPS applies to all services with a national currency (but no national price) while rules 11(a) and 11(c) apply specifically to ambulance services. Both rule 3 and rule 11 require that the national currencies are used unless an alternative payment approach is agreed in accordance with rule 4. They also require that local pricing templates are completed when national currencies are used. Rules 11(a) and 11(c) therefore duplicate rule 3 and are unnecessary. Their removal will simplify the rules. Changing the rule relating to high cost drugs, devices and listed procedures so that prices reflect the actual supply cost, nominated supply cost or any national reference price, whichever is lower 298. Rule 7 of the 2016/17 NTPS concerns high-cost drugs and listed procedures. Rule 7(c) requires prices to reflect the actual cost to the provider or the nominated supply cost, whichever is the lower. NHS England intends to publish reference prices for high cost drugs (and possibly some high cost devices devices) during 2017/19. These references prices will be calculated using existing NHS framework prices as a basis. We are therefore proposing to amend rule 7(c) so that the price agreed should reflect the actual cost to the provider, the nominated supply cost or the published reference price, whichever is the lower. NHS England would contact providers in advance of publishing reference prices to give them sufficient time to prepare. The rationale for this approach is that it will encourage providers to behave economically when purchasing high cost drugs and devices. 79 Error! No text of specified style in document. Proposed 2017/18 and 2018/19 National Tariff Payment System Published by NHS England and NHS Improvement 79 Error! No text of specified style in document. Error! No text of specified style in document. Contents Please note: Part A of this document is the statutory consultation notice. It starts on page 3. Part B of this document is the proposed 2017/19 National Tariff Payment System. This is shown as it would appear in final form. It starts on page 79. Part C of this document is the glossary. It starts on page 198. 1. Introduction ..................................................................................................................... 81 2. Scope of the 2017/19 NTPS............................................................................................ 83 2.1. Public health services ............................................................................................................. 83 2.2. Primary care services ............................................................................................................. 83 2.3. Personal health budgets ......................................................................................................... 84 2.4. Integrated health and social care ........................................................................................... 85 2.5. Contractual incentives and sanctions ..................................................................................... 85 2.6. Devolved administrations ....................................................................................................... 86 3. Currencies with national prices........................................................................................ 88 3.1. Classification, grouping and currency .................................................................................... 88 3.2. Currencies for which there are national prices ....................................................................... 90 3.3. High cost drugs, devices and listed procedures ................................................................... 115 3.4. The innovation and technology tariff .................................................................................... 116 4. Method for determining national prices.......................................................................... 122 4.1. Overall approach .................................................................................................................. 122 4.2. The method for setting prices ............................................................................................... 123 4.3. Managing model inputs ........................................................................................................ 128 4.4. Manual adjustments ............................................................................................................. 131 4.5. Cost base ............................................................................................................................. 131 4.6. Volatility ................................................................................................................................ 132 4.7. Cost uplifts ............................................................................................................................ 133 4.8. Efficiency .............................................................................................................................. 142 5. National variations to national prices ............................................................................. 143 5.1. Variations to reflect regional cost differences: the market forces factor .............................. 144 5.2. Variations to reflect patient complexity: top-up payments .................................................... 145 5.3. Variations to help prevent avoidable hospital stays ............................................................. 146 5.4. Variations to support transition to new payment approaches .............................................. 154 6. Locally determined prices.............................................................................................. 157 6.1. Principles applying to all local variations, local modifications and local prices .................... 157 6.2. Local variations..................................................................................................................... 164 6.3. Local modifications ............................................................................................................... 168 6.4. Local prices .......................................................................................................................... 188 7. Payment rules ............................................................................................................... 197 7.1. Billing and payment .............................................................................................................. 197 7.2. Activity reporting ................................................................................................................... 197 80 Error! No text of specified style in document. Error! No text of specified style in document. 1. Introduction 1. This document is the national tariff, specifying the currencies, national prices, the method for determining those prices, the local pricing and payment rules, the methods for determining local modifications and related guidance that make up the national tariff payment system for 2017 to 2019 (the 2017/19 NTPS). 2. Since 1 April 2016, Monitor and the NHS Trust Development Authority have been operating as a single integrated organisation known as NHS Improvement. This document is however issued in exercise of functions conferred on Monitor by Section 116 of the Health and Social Care Act 2012. In this document, ‘NHS Improvement’ means Monitor, unless the context otherwise requires. 3. This 2017/19 NTPS has effect for the period beginning on 1 April 2017 and ending on 31 March 2019 or the day before the next national tariff published under section 116 of the 2012 Act has effect, whichever is the later.1 4. National prices published for the 2017/18 financial year will have effect from 1 April 2017. National prices published for the 2018/19 financial year will have effect from 1 April 2018. 5. The document is split into six sections and six annexes. The six sections are: a. the scope of the tariff b. the currencies used to set national prices c. the method for determining national prices d. national variations to national prices e. locally determined prices f. payment rules. 1 If a replacement national tariff was to be introduced before the end of the two year period, this tariff would cease to have effect when that new tariff takes effect. 81 Error! No text of specified style in document. Error! No text of specified style in document. Table 1: 2017/19 NTPS annexes Annex Description B1 The national prices and the national tariff workbook. B2 The model used to set national prices B3 Technical guidance for mental health clusters B4 Guidance on currencies with national prices B5 Guidance on currencies with no national price B6 Guidance on best practice tariffs 6. The national tariff is also supported by documents containing guidance and other information. Table 2: Supporting guidance to the 2017/19 NTPS Title 2017/19 National Tariff Impact assessment A guide to the market forces factor Guidance for commissioners on the marginal rate emergency rule and the 30 day readmission rule Non-mandatory prices Innovation and Technology Tariff 82 Error! No text of specified style in document. Error! No text of specified style in document. 2. Scope of the 2017/19 NTPS 7. The scope of services covered by the 2017/19 NTPS is the same as that under the 2016/17 NTPS. 8. As set out in the Health and Social Care Act 2012,2 the national tariff covers the pricing of healthcare services provided for the purposes of the NHS. Subject to what we explain below, this covers all forms of NHS healthcare provided to individuals, whether relating to physical or mental health and whether commissioned by clinical commissioning groups (CCGs), NHS England or local authorities acting on behalf of NHS commissioners under partnership arrangements. 9. Various healthcare services are however outside the scope of the national tariff, as explained below. 2.1. Public health services 10. The national tariff does not apply to public health services:3 a. provided or commissioned by local authorities or Public Health England b. commissioned by NHS England under its Section 7A public health functions agreement with the Secretary of State.4 11. Public health services commissioned by local authorities include local open access sexual health services and universal health visitor reviews. The services commissioned by NHS England under section 7A arrangements include public health screening programmes, sexual assault services and public health services for people in prisons. 2.2. Primary care services 12. The 2017/19 NTPS does not apply to primary care services (general practice, community pharmacy, dental practice and community optometry) where payment is substantively determined by or in accordance with regulations or directions, and related instruments, made under the provisions of the National Health Service Act 2006 (‘the 2006 Act’).5 13. Where the payment for NHS services provided in a primary care setting is not determined by or in accordance with regulations or directions, or related 2 www.legislation.gov.uk/ukpga/2012/7/contents/enacted See the meaning of ‘healthcare service’ given in Section 64 of the 2012 Act; and the exclusion of public health services in Section 116(11). 4 For the Section 7A agreement, see: Public Health Commissioning in the NHS 2015 to 2016. 5 See chapters 4 to 7 of the 2006 Act. For example, the Statement of Financial Entitlements for GP services, and the drug tariff for pharmaceutical services. 3 83 Error! No text of specified style in document. Error! No text of specified style in document. instruments, made under the 2006 Act then the 2017/19 NTPS rules on local price setting apply. For instance, local price setting rules apply to minor surgical procedures performed by GPs and commissioned by clinical commissioning groups (CCGs). The rules governing payments for these services are set out in Section 6 Locally Determined Prices. 2.3. Personal health budgets 14. A personal health budget (PHB) is an amount of money to support the identified health and wellbeing needs of a particular patient, planned and agreed between that patient and their local NHS. 15. There are three types of PHB: a. Notional budget: no money changes hands − the patient and their NHS commissioner agree how to spend the money. The NHS will then arrange the agreed care. b. Real budget held by a third party: an organisation legally independent of the patient and their NHS commissioner will hold the budget and pay for the care in the agreed care plan. c. Direct payment for healthcare: the budget is transferred to the patient to buy the care that has been agreed between the patient and their NHS commissioner. 16. Payment to providers of NHS services from a notional budget is in the scope of the 2017/19 NTPS. It will either be governed by national prices as set out in Annex B1 (including national variations set out in Section 5) or subject to the local pricing rules (see Section 6.4). 17. In some cases a notional budget may be used to buy integrated health and social care services to facilitate more personalised care planning. Where these services and products are not NHS services, the 2017/19 NTPS does not apply. 18. If a PHB takes the form of a direct payment to the patient or third-party budget, the payments for health and care services agreed in the care plan and funded from the direct payment are not in the scope of the 2017/19 NTPS. Direct payments for healthcare are governed by regulations made under sections 12A(4) and 12B(1) to (4) of the 2006 Act.6 6 See the National Health Service (Direct Payments) Regulations 2013 (SI 2013/1617, as amended) http://www.legislation.gov.uk/uksi/2013/1617/contents/made 84 Error! No text of specified style in document. Error! No text of specified style in document. 19. The following are not in the scope of the 2017/19 NTPS, as they do not involve paying for provision of healthcare services: a. payment for assessing an individual’s needs to determine a PHB b. payment for advocacy: advice to individuals and their carers about how to use their PHB c. payment for the use of a third party to manage an individual’s PHB on their behalf. 20. More information about implementing PHBs can be found on the NHS Personal Health Budgets page.7 2.4. Integrated health and social care 21. Section 75 of the 2006 Act provides for the delegation of a local authority’s health-related functions (statutory powers or duties) to their NHS partner, and vice versa, to help meet partnership objectives and create joint funding arrangements. 22. Where NHS healthcare services are commissioned under these arrangements (‘joint commissioning’), they remain in the scope of the 2017/19 NTPS even if commissioned by a local authority. 23. Payment to providers of NHS services that are jointly commissioned are governed either by a national price as set out in Annex B1 (including national variations set out in Section 5) where applicable, or by a local price (including a local variation in Section 6.2). 24. Local authority social care or public health services commissioned under joint commissioning arrangements are outside the scope of the 2017/19 NTPS. 2.5. Contractual incentives and sanctions 25. Commissioners’ application of Commissioning for Quality and Innovation (CQUIN) payments and contractual sanctions are based on provider performance, after a provider’s income has been determined in accordance with the 2017/19 NTPS. If a contractual sanction changes the amount paid for the provision of an NHS service, this is permitted under the rules relating to the making of payments to providers under Section 7. 7 http://www.england.nhs.uk/healthbudgets/ 85 Error! No text of specified style in document. Error! No text of specified style in document. 2.6. Devolved administrations 26. The pricing provisions of the 2012 Act cover healthcare services in the NHS in England only. The devolved administrations (DAs) are responsible for the NHS in Scotland, Wales and Northern Ireland. If a patient from Scotland, Wales or Northern Ireland is treated in England or vice versa, the 2017/19 NTPS applies in some but not all circumstances. 27. Table 3 summarises how the 2017/19 NTPS applies to various cross-border scenarios. ‘DA commissioner’ or ‘DA provider’ refers to a commissioner or provider in Scotland, Wales and Northern Ireland. Table 3: How the 2017/19 NTPS applies to devolved administrations Scenario NTPS applies to provider NTPS applies to commissioner Examples DA patient treated in England and paid for by commissioner in England Scottish patient attends A&E in England DA patient treated in England and paid for by DA commissioner A Welsh patient, who is the responsibility of a local health board in Wales, has elective surgery in England which is commissioned and paid for by that local health board English patient treated in DA and paid for by DA commissioner English patient, who is the responsibility of a CCG, attends A&E in Scotland English patient treated in DA and paid for by commissioner in England English patient has surgery in Scotland which is commissioned and paid for by CCG in England 28. In the final scenario above, the commissioner in England has to follow the prices and rules in the 2017/19 NTPS, but there is no such requirement for the DA provider. The commissioner in England may wish or need to pay a price set locally in the country in question, or use a different currency from that mandated by the national tariff. In such cases, the commissioner must follow the rules for local pricing (see Section 6). If there is a national price for the service, a local variation would be required to pay a different price to the DA provider or to make a change to the currency. If there is no national price, the commissioner should follow the rules for local price setting. 86 Error! No text of specified style in document. Error! No text of specified style in document. 29. Providers and commissioners should also be aware of rules for cross-border payment responsibility set by other national bodies. The England–Wales Protocol for Cross-Border Healthcare Services8 sets out specific provisions for allocating payment responsibility for patients who live near the Wales–England border. NHS England also provides comprehensive guidelines on payment responsibility in England.9 The scope of the 2017/19 NTPS does not cover payment responsibility rules as set out in these documents. These rules should therefore be applied as well as any applicable provisions of the 2017/19 NTPS. 8 9 http://www.england.nhs.uk/wp-content/uploads/2013/03/england-wales-protocol.pdf This guidance is set out in Who Pays? Determining responsibility for payments to providers, www.england.nhs.uk/wp-content/uploads/2014/05/who-pays.pdf 87 Error! No text of specified style in document. Error! No text of specified style in document. 3. Currencies with national prices 30. Currencies are one of the ‘building blocks’ that support the NTPS. They include the clinical grouping classification systems for which there are national prices in 2016/17. 31. Under the Health and Social Care Act 2012 (‘the 2012 Act’), the national tariff must specify certain NHS healthcare services for which a national price is payable.10 The healthcare services to be specified must be agreed between NHS England and NHS Improvement.11 The 2012 Act also provides that the national tariff may include rules for determining which currency applies where there is more than one currency and price for the same service. 32. We are using healthcare resource group HRG4+ currency design as the basis for setting national prices for admitted patient care, outpatient procedures and accident and emergency (A&E) attendances. We are using ‘phase 3’ of the currency design, which was used for the collection of the 2014/15 reference costs.12 33. This section should be read with the following information set out in: a. Annex B1: National tariff workbook. This contains: i. The list of national prices (and related currencies) ii. Maternity data requirements and definitions iii. The lists of high cost drugs and devices b. Annex B4: Guidance on currencies with national prices c. Annex B6: Guidance on best practice tariffs. 3.1. Classification, grouping and currency 34. The NHS payment system relies on patient-level data. To operate effectively, the payment system needs: a. a way of capturing and classifying clinical activity: this enables information about patient diagnoses and healthcare interventions to be captured in a standard format b. a currency: the large number of codes for admitted patient activity in the primary classification system makes it impractical as a basis for payment; 10 2012 Act, Section 116(1)(a) 2012 Act, Section 118(7) 12 Details available at http://digital.nhs.uk/article/6226/HRG4-201415-Reference-Cost-Grouper 11 88 Error! No text of specified style in document. Error! No text of specified style in document. instead casemix groupings are used as the currency for admitted patients, outpatient procedures and A&E. For outpatient attendances, the currency is based on groupings that relate to clinic attendance and categories. 35. Clinical classification systems describe information from patient records with standardised definitions and nomenclature. The 2017/19 NTPS relies largely on two standard classifications to record clinical data for admitted patients. These are: a. the World Health Organization International Classification of Diseases, 10th revision (ICD-10) for diagnoses13 b. Office of Population Censuses and Surveys 4 (OPCS-4) for operations, procedures and interventions.14 36. ‘Grouping’ is the process of using clinical information such as diagnosis codes (in admitted patient care only), procedure codes (in admitted patient care and outpatient care), treatment codes (A&E only) and investigation codes (A&E only) to classify patients to casemix groups structured around healthcare resource groups. HRGs are groupings of clinically similar conditions or treatments that use similar levels of healthcare resources. The grouping is done using grouper software produced by NHS Digital.15 NHS Digital16 also publishes comprehensive documentation giving the logic and process behind the software’s derivation of HRGs as well as other materials that explain and support the development of the currencies that underpin the national tariff.17 37. A ‘currency’ is a unit of healthcare for which a payment is made. Under the 2012 Act, a healthcare service for which a national price is payable must be specified in the national tariff. A currency can take one of several forms. We use spellbased HRGs as the currency for admitted patient care and some outpatient procedures. The currencies for A&E services are based on A&E attendances. 38. The HRG currency design used for the 2017/19 NTPS is known as HRG4+ and is arranged into chapters, each covering a body system. Some chapters are divided into subchapters. The specific design for the 2017/19 NTPS is that used to collect 2014/15 reference costs. 39. The currency used for outpatient attendances is based on attendance type and clinic type, defined by treatment function code (TFC). This is explained in more detail in Section 3.2.4. 13 The 5th edition update of ICD-10 was published in April 2015. OPCS version 4.8 has been incorporated into the currency design used for national prices. 15 http://digital.nhs.uk/casemix/payment 16 Any enquiries on the ‘Code to grouper’ software, guidance and confirmation of appropriate coding and the grouping of activities can be sent to [email protected] 17 http://digital.nhs.uk/casemix/payment 14 89 Error! No text of specified style in document. Error! No text of specified style in document. 3.2. Currencies for which there are national prices 40. Section 3.2.1 describes the currencies for which there are national prices. 41. Details of the methods we use to determine the national prices are provided in Section 4. The list of national prices and related currencies is Annex B1. 42. In particular circumstances we specify services in different ways, and attach different prices; for example, setting best practice tariffs (BPTs) to incentivise improved outcomes for particular cohorts of patients. As well as specifying the currencies, Section 3 (in combination with Annexes B1, B4 and B6) includes the rules for determining which currencies and prices apply where a service is specified in more than one way. 43. The rules for the local pricing of services with mandatory currencies but no national prices – such as adult mental health and ambulance services – are set out in Section 6.4. 3.2.1. Admitted patient care 44. Spell-based HRG4+ is the currency design for admitted patient care covering the period from admission to discharge. If a patient is under the care of one consultant for their entire spell,18 this would comprise one finished consultant episode (FCE). Occasionally, a patient will be under the care of more than one consultant during their spell; this would mean that the spell had multiple FCEs. 45. National prices for admitted patient care cover the care received by a patient during their spell in hospital, including the costs of services such as diagnostic imaging. The national price to be applied is determined by date of discharge. 46. The costs of some elements of the care pathway, such as critical care and high cost drugs, are excluded from national prices. These costs are paid under the rules applicable to local pricing. 47. To promote movement to day-case settings where appropriate, most elective prices are for the average of day-case and ordinary elective-case costs, weighted according to the proportion of activity in each group. 48. For a few HRGs there is a single price across outpatient procedures and day cases, or a single price across all settings. This approach has been taken where a price that is independent of setting is clinically appropriate. 18 A spell is a period from admission to discharge or death. A spell starts following the decision to admit the patient. 90 Error! No text of specified style in document. Error! No text of specified style in document. 49. When a patient has more than one distinct admission on the same day19 (eg the patient is admitted in the morning, discharged, then re-admitted in the afternoon), each admission is counted as the beginning of a separate spell, although a short stay adjustment may apply to the first admission. 50. Short stay emergency adjustments20 and long stay payments21 apply to admitted patient care. These are explained in detail below. Changes to the scope of services with national prices 51. The services for which there are national prices remain the same for 2017/19 as for 2016/17, except that we are adding the following services : a. cochlear implants (CA41Z, CA42Z) b. complex computerised tomography scans (RD28Z) c. complex therapeutic endoscopic, upper or lower gastrointestinal procedures (FZ89Z) d. photodynamic therapy (JC41Z, JC42A and JC42B). 52. While the tariff has been informed by the 2014/15 design of HRG4+ and the 2014/15 reference cost relativities, the scope of the tariff, unless explicitly stated otherwise, is consistent with 2016/17. Short stay emergency adjustment 53. The short stay emergency adjustment (SSEM) is a mechanism for ensuring appropriate payment for lengths of stay shorter than two days, where the average HRG length of stay (LoS) is longer. It applies whether the patient is admitted under a medical or a surgical specialty providing all the following criteria are met: a. the patient’s adjusted LoS is either zero or one day b. the patient is not a child, defined as aged under 19 years on the date of admission c. the admission method code is 21-25, 2A, 2B, 2C or 2D (or 28 if the provider has not implemented Commissioning Data Set CDS version 6.2) 19 20 21 Calendar day not 24-hour period. Short-stay emergency adjustments ensure that emergency stays of less than two days, where the average length of stay of the HRG is longer, are appropriately paid for. For patients that remain in hospital beyond an expected length of stay for clinical reasons, there is an additional reimbursement to the national price called a ‘long stay payment’ (sometimes referred to as an ‘excess bed day payment’). The long stay payment applies at a daily rate to all HRGs where the length of stay of the spell exceeds a ‘trim point’ specific to the HRG. 91 Error! No text of specified style in document. Error! No text of specified style in document. d. the average length of non-elective stay for the HRG is two or more days e. the assignment of the HRG can be based on a diagnosis code, rather than on a procedure code alone, irrespective of whether a diagnosis or procedure is dominant in the HRG derivation. 54. The adjustment percentages applied are set out in the table below. Table 4: HRG short stay emergency adjustment percentages HRG Average length of stay 2017/19 short stay percentages < 2 days 100.0 2 days 65.0 3 or 4 days 40.0 ≥5 days 30.0 55. For BPTs the short stay emergency adjustment is not universally applicable as: a. SSEM only applies to diagnostic driven HRGs b. it does not apply, for example, when the purpose of the BPT is to reduce length of stay. 56. The table before is designed to help clarify when the SSEM is applicable and how the adjustment is to be applied in each case. Table 5: Application of SSEM Best Practice Tariff SSEM Applicable SUS Applied Local Adjustment Required COPD (new) Yes To base price To conditional top-up Non-ST segment elevation myocardial infarction No – procedure driven n/a n/a Acute stroke care No – policy exempt n/a n/a Diabetic ketoacidosis and hypoglycaemia Yes To base price To conditional top-up Fragility hip fracture No – policy exempt n/a n/a Heart failure Yes To base price To conditional top-up Same-day emergency care No – policy exempt n/a n/a Primary hip and knee replacement outcomes No – procedure driven n/a n/a 92 Error! No text of specified style in document. Error! No text of specified style in document. 57. Providers and commissioners should take this into account when agreeing local data flows and reconciliation processes. Where applicable any local adjustment should be adjusted at the same rate as the core spell (as defined in Annex B1). 58. Any adjustments to the tariff, such as specialised service top-ups,22 are applied to the reduced tariff. Annex A lists the HRGs to which the reduced short stay emergency tariff is applicable. Long stay payment 59. A long stay payment on a daily rate basis applies to all HRGs where the length of stay of the spell exceeds a specified trim point23 specific to the HRG and point of delivery. 60. The trim point is defined in the same way as for reference costs, but is spell based and there are separate elective and non-elective trim points. The trim point for each HRG is shown alongside national prices in Annex A. 61. For 2017 to 2019, there is a trim point floor of five days.24 There are two long stay payment rates per chapter – one for child-specific HRGs and one for all other HRGs. 62. If a patient is medically ready for discharge and delayed discharge payments have been imposed on local authorities under the provisions of the Community Care (Delayed Discharges etc) Act 2003, commissioners should not be liable for any further long stay payment. 63. Long stay payments may only be adjusted when SUS+25 applies an adjustment for delayed discharge when the Discharge Ready Date field is submitted in the Commissioning Data Set, by removing the number of days between the ready date and actual discharge date from any long stay payment. Where the Discharge Ready Date field is submitted, providers will wish to satisfy themselves that local authorities are being appropriately charged. 3.2.2. Chemotherapy and radiotherapy Chemotherapy 64. HRG subchapter SB covers both the procurement and the delivery of chemotherapy regimens for patients of all ages. The HRGs in this subchapter 22 Specialised top-ups are paid to reimburse providers for the higher costs of treating patients who require specialised care. Further information is provided in Section 5. 23 The trim point is defined as the upper quartile length of stay for the HRG plus 1.5 times the interquartile range of length of stay. 24 For simplicity, we have shown a trim point floor of at least five days for all HRGs in the tariff spreadsheet, regardless of whether the HRG includes length of stay logic of less than five days. 25 http://content.digital.nhs.uk/sus/replacement 93 Error! No text of specified style in document. Error! No text of specified style in document. are unbundled and include activity undertaken in inpatient, day case and nonadmitted care settings. 65. Chemotherapy payment is split into three parts: a. a core HRG (covering the primary diagnosis or procedure) – this has a national price b. unbundled HRGs for chemotherapy drug procurement – these have local currencies and prices c. unbundled HRGs for chemotherapy delivery – these have national prices. 66. The regimen list has changed for 2017 to 2019.26 Radiotherapy 67. HRG subchapter SC covers both the preparation and the delivery of radiotherapy for patients of all ages. The HRGs in this subchapter are for the most part unbundled and include activity undertaken in inpatient, day case and non-admitted care settings. 68. HRG4+ groups for radiotherapy include: a. radiotherapy planning for pre-treatment (planning) processes b. radiotherapy treatment (delivery per fraction) for treatment delivered, with a separate HRG allocated for each fraction delivered. 69. The radiotherapy planning HRGs are intended to cover all attendances needed to complete the planning process. It is not intended to record individual attendances for parts of this process separately. 70. The planning HRGs do not include the consultation at which the patient consents to radiotherapy, nor any medical review required by any change in status of the patient. 71. The HRGs for radiotherapy treatment cover the following elements of care: a. external beam radiotherapy preparation: this has a national price b. external beam radiotherapy delivery: this has a national price c. brachytherapy and molecular radiotherapy administration: this has local currencies and prices. 26 http://systems.digital.nhs.uk/data/clinicalcoding/codingstandards/opcs4/chemoregimens 94 Error! No text of specified style in document. Error! No text of specified style in document. 72. Further information on the structure of the chemotherapy and radiotherapy HRGs and payment arrangements can be found in Annexes B4 and B6.27 3.2.3. Nuclear medicine 73. To create more appropriate, procedure-specific HRGs to better differentiate the resource use of high cost, complex scans, as well as nuclear medicine procedures, Subchapter RA Diagnostic Imaging Procedures has been deleted and replaced with the following: a. Subchapter RD Diagnostic Imaging Procedures b. Subchapter RN Nuclear Medicine Procedures. 74. We note that the scope of activity under HRG4 currencies and HRG4+ currencies do not map exactly. 3.2.4. Post-discharge rehabilitation 75. Post-discharge national currencies cover the entire pathway of treatment post discharge. They are designed to help reduce avoidable emergency readmissions and provide a service agreed by clinical experts to facilitate better post-discharge rehabilitation and reablement for patients.28 76. Post-discharge currencies cover four specific rehabilitation pathways: a. cardiac rehabilitation i. The post-discharge price will only apply to the subset of patients identified as potentially benefitting from cardiac rehabilitation, where the evidence for the effect of cardiac rehabilitation is strongest; that is, those patients discharged having had an acute spell of care for: o acute myocardial infarction o percutaneous coronary intervention or heart failure o coronary artery bypass grafting b. pulmonary rehabilitation29 i. The post-discharge price will apply to patients discharged having had an acute episode of care for COPD. The national price can be paid only for 27 https://improvement.nhs.uk/resources/national-tariff-1719-consultation More information on commissioning rehabilitation services can be found here https://www.england.nhs.uk/wp-content/uploads/2016/04/rehabilitation-comms-guid-16-17.pdf 29 Based on the care pathway outlined in the Department of Health’s ‘Chronic Obstructive Pulmonary Disease (COPD) Commissioning Pack’. 28 95 Error! No text of specified style in document. Error! No text of specified style in document. patients discharged from acute care with an HRG for the spell of care of DZ65A to DZ65K, who subsequently complete a course of pulmonary rehabilitation c. hip replacement rehabilitation i. The national price can only be paid for patients discharged from acute care with an episode of care with a spell dominant procedure of W371, W381, W391, W931, W941 or W951 d. knee replacement rehabilitation. i. The national price can be paid only for patients discharged from acute care with an episode of care with a spell dominant procedure coding of W401, W411, W421 or O181. 77. We are continuing with national prices for these four post-discharge currencies for the care of patients where a single provider provides both acute and community services. These prices are listed in Annex B1. Where services are not integrated, the national price does not apply; however, we encourage the use of these prices in local negotiations on commissioning of post-discharge care pathways. 78. Degrees of service integration vary. Accordingly commissioners and providers will need to establish which health communities receive both acute and community services from a single provider to establish whether the postdischarge national prices should be used. 79. The post-discharge national prices must be paid on completion of a full rehabilitation pathway. 80. The post-discharge activity and national price will not be identified by the grouper or by SUS+. Therefore, in deriving a contract for this service, commissioners and providers need to locally agree the number of patients expected to complete rehabilitation packages. This forecast should be reconciled to the actual numbers of packages completed at year end. 81. Further information to support the implementation of all four post-discharge currencies, their scope and their specific rules can be found in Annex B6 guidance on best practice tariffs. 96 Error! No text of specified style in document. Error! No text of specified style in document. 3.2.5. Outpatient care 82. National prices for consultant-led outpatient attendances are based on clinic type categorised according to treatment function code (TFC).30 There are separate prices for first and follow-up attendances, for each TFC, as well as for single professional and multi-professional clinics.31 83. To incentivise a change in the delivery of outpatient follow-up activity, to encourage a move to more efficient models and to free up consultant capacity, we over-reimburse first attendances and under-reimburse corresponding followup attendances. This transfer in cost is set at a TFC level and ranges from 10% to 30%. There is a full list in Annex B1. 84. The outpatient attendance national price remains applicable only to pre-booked, consultant-led attendances and in accordance with the service conditions in the NHS Standard Contract. 85. When an attendance with a consultant from a different main specialty occurs during a patient's admission and replaces an attendance that would have taken place, it should attract a national price provided it is pre-booked and consultant led. 86. When a patient has multiple distinct pre-booked outpatient attendances on the same day (eg one attendance in the morning and a second separate attendance in the afternoon) each attendance is counted separately and will attract a separate national price unless a local pathway price has been agreed with commissioners. 87. Outpatient attendances do not have to take place on hospital premises. Therefore consultant-led outreach clinics held in a GP practice or a children’s centre should be eligible for the national price. For these clinics, it is important to make sure the data flows into SUS+ to support payment for this activity. However, home visits are not eligible for the outpatient care national price and are instead subject to local price-setting. 88. If, following an outpatient attendance, a patient attends an allied health professional (eg a physiotherapist), the costs of the latter attendance are not included in the national price for the original attendance and these attendances will be subject to local price-setting (in accordance with the rules on local pricing). 30 TFCs are defined in the NHS Data Model and Dictionary as codes for ‘a division of clinical work based on main specialty, but incorporating approved sub-specialties and treatment interests used by lead care professionals including consultants’. 31 Multi-professional attendances are defined as multiple care professionals (including consultants) seeing a patient together, in the same attendance, at the same time. For more detail see Annex B4. 97 Error! No text of specified style in document. Error! No text of specified style in document. 89. Commissioners and providers should use the NHS Data Model and Dictionary to decide the category of outpatient attendance and day-case activity.32 Furthermore, providers must ensure that the way they charge for activity is consistent with the way they cost activity in reference costs, and consistent with any conditions for payment included in contracts. 90. For some procedures undertaken in an outpatient setting, there are national prices based on HRGs. If more than one of these procedures is undertaken in a single outpatient attendance, only one price is applicable. The grouper software will determine the appropriate HRG, and the provider will receive payment at the relevant price. 91. Where a procedure-driven HRG is generated, SUS+ determines whether the HRG has a mandatory national price and, if so, applies it. Outpatient procedures for which there is no mandatory HRG price will be paid according to the relevant outpatient attendance national price. 92. For TFCs with no national price, the price should be set through local price setting (in accordance with the rules on local pricing). The national price for any unbundled diagnostic imaging associated with the attendances must be used in all cases. National prices for diagnostic imaging in outpatients are mandatory, regardless of whether or not the core outpatient attendance activity has a national price. 93. As set out in the 2017-2019 Operational Planning and Contracting guidance, and linked to the Advice and Guidance CQUIN, local systems are being encouraged to introduce Advice and Guidance services as part of plans to manage demand in secondary care acute services. National guidance is being produced by NHS England but in the meantime, local health systems should work together to agree a local solution for such services, supported by local data flows. 3.2.6. Direct access 94. There are national prices for activity accessed directly from primary care, which are listed in Annex B1. One example is where a GP sends a patient for a scan and results are sent to the GP for follow up rather than such a service being requested as part of an outpatient referral. 32 The NHS Data Model and Dictionary Service sets out the definitions to be applied. It provides a reference point for assured information standards to support health care activities in the NHS in England. 98 Error! No text of specified style in document. Error! No text of specified style in document. 95. A field was added to the outpatient Commissioning Data Set version 6.2 which can be used to identify services that have been accessed directly.33 96. Where direct access activity is processed through the grouper, both a core HRG and an unbundled HRG will be created. When the activity is direct access, the core HRG should not attract any payment but the direct access service should attract a payment. 97. In the case of direct access diagnostic imaging services for which there are national prices, the costs of reporting are included in prices. These costs are also shown separately in Annex B1 so that they can be used if a provider provides a report but does not carry out the scan. 98. There is also a non-mandatory price for direct access plain film x-rays. 3.2.7. Urgent and emergency care 99. There are national prices for A&E services and minor injury units, based on 11 HRGs (subchapter VB – Emergency and Urgent Care). The A&E currency is based on investigation and treatment. 100. Where a patient is admitted following an A&E attendance, both the relevant A&E and non-elective prices are payable. Please note that the tariff for patients who are ‘dead on arrival’ (DOA) should be that applying to VB99Z. 101. Type 1 and Type 2 A&E departments continue to be eligible for the full range of A&E HRGs and corresponding national prices; Type 3 A&E departments are eligible for VB11Z only. 102. Services provided by NHS walk-in centres, which are categorised as Type 4 A&E services by the NHS Data Model and Dictionary, will not attract national prices. Information on local price-setting can be found in Section 6. 3.2.8. Best practice tariffs 103. A BPT is a national price that is designed to incentivise quality and costeffective care. The first BPTs were introduced in 2010/11 following Lord Darzi’s 2008 review.34 104. The aim is to reduce unexplained variation in clinical quality and spread best practice. BPTs may introduce an alternative currency to an HRG, including a description of activities that more closely corresponds to the delivery of outcomes for a patient. An incentive to move from usual care to best practice is 33 34 SUS R16 release (April 2016) has a requirement to add new functionality to implement the CDS6.2 new data item ‘Direct access indicator’. ‘High Quality Care For All’, presented to Parliament in June 2008. 99 Error! No text of specified style in document. Error! No text of specified style in document. created by creating a price differential between agreed best practice and usual care to create an incentive for providers to shift from usual care to best practice. More detail on the method for setting BPT prices can be found in Section 4. 105. Where a BPT introduces an alternative currency, that currency should be used in the cases described here, and set out in Annexes B1, B4 and B6. 106. Each BPT is different, tailored to the clinical characteristics of best practice for a patient condition and to the availability and quality of data. However, there are groups of BPTs that share similar objectives, such as: a. avoiding unnecessary admissions b. delivering care in appropriate settings c. promoting provider quality accreditation d. improving quality of care. 107. The service areas covered by BPTs are all: a. high impact (that is, high volumes, significant variation in practice, or significant impact on patient outcomes) b. supported by a strong evidence base and clinical consensus on what constitutes best practice. 108. A breakdown of the BPTs and the eligibility criteria are provided in Table 5. 109. For 2017/19, the NTPS includes two new mandatory BPTs for: a. chronic obstructive pulmonary disorder (COPD) care b. Improving the time from a patient being admitted to receiving coronary angioplasty for patients with NSTEMI. 110. There are also changes to five BPTs: a. day case procedures b. fragility hip fracture c. primary hip and knee replacements d. same day emergency care e. acute stroke care. 111. The 2017/19 NTPS no longer includes the BPT for interventional radiology. This is because the adoption of HRG4+ makes it unnecessary. 100 Error! No text of specified style in document. Error! No text of specified style in document. 112. Some BPTs relate to specific HRGs (HRG-level) while others are more detailed and relate to a subset of activity in an HRG (sub-HRG). The BPTs that are set at a more detailed level are identified by ‘BPT flags’. For sub-HRG level BPTs there will be other activity covered by the HRG that does not relate to the BPT activity, and so a ‘conventional’ price is also published for these HRGs to reimburse the costs of the activity unrelated to the BPT. For more information relating to the BPT flags see Annex B1. 113. Top-up payments for specialised services and long stay payments apply to all of the relevant BPTs. The short stay emergency adjustment (SSEM) is not universally applicable to BPTs. Details of how the adjustment is to be applied in each case is set out above in section relating to SSEM (Section 3.2.1). Table 6: Summary of best practice tariffs BPT Eligibility criteria Acute stroke care (amended 2017/19) The BPT is made up of three conditional payment levels: Patients admitted directly to an acute stroke unit either by the ambulance service, from A&E or via brain imaging. Patients must not be admitted directly to a medical assessment unit. Patients must be seen by a consultant with stroke specialist skills in 14 hours of admission. Patients must then also spend most of their stay in the acute stroke unit. Initial brain imaging is delivered in 12 hours of admission. Patients are assessed for thrombolysis, receiving alteplase if clinically indicated in accordance with the NICE technology appraisal TA264 ‘Alteplase for treating acute, ischaemic stroke’. Adult renal dialysis (haemodialysis) The BPT requires vascular access via a functioning arteriovenous fistula. Therefore, renal units will need to collaborate with surgical services to establish processes that facilitate timely referral for formation of vascular access Adult renal dialysis (Home haemodialysis) The BPT price for home haemodialysis will reflect a week of dialysis, irrespective of the number of dialysis sessions prescribed. The BPT price covers the direct costs of dialysis as well as the associated set up, removal and utility costs incurred by the provider (eg preparation of patients’ homes, equipment and training). Chronic obstructive pulmonary disease (COPD) (new 2017/19) Best practice would be considered achieved when: 60% of patients with a primary diagnosis of COPD, admitted for an exacerbation of COPD, receive specialist input in to their care in 24 hours of admission, and 101 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria where they receive a discharge bundle before discharge as measured by the national COPD audit. Day-case procedures (amended 2017/19) The BPT is made up of a pair of prices for each of the procedures listed in Annex B1; one applied to day-case admissions (higher) and one applied to ordinary elective admissions (lower). Annex B1 details the prices, whether they apply at HRG or sub-HRG (with BPT flag) and the relevant OPCS codes. Diabetic ketoacidosis and hypoglycaemia The BPT applies only to adults admitted as an emergency with diabetic ketoacidosis or hypoglycaemia. The BPT is made up of two components: a base price and a conditional payment. The base price is payable for all activity irrespective of whether best practice was met. The conditional payment is payable if the patient receives all the following care: referred to the diabetes specialist team (DST) on admission, and seen in 24 hours by a member of the DST has an education review by a member of the DST before discharge is seen by a diabetologist or diabetic specialist nurse before discharge discharged with a written care plan (which allows the person with diabetes to be actively involved in deciding, agreeing and taking responsibility for how their diabetes is managed) that is copied to their GP offered access to structured education, with the first appointment scheduled to take place in three months of discharge. Early inflammatory arthritis There are three separate BPT payments applicable where care meets the standards set out below. Diagnosis and discharge For those patients with suspected early inflammatory arthritis who are: seen in three weeks of referral diagnosed as not having early inflammatory arthritis and discharged in six weeks of referral. 102 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria The BPT includes the costs of plain radiology, ultrasounds, all blood tests, and clinical consultations with doctors/nurses. Disease-modifying antirheumatic drugs (DMARD) Therapy For those patients with suspected early inflammatory arthritis who: are seen in three weeks of referral start DMARD treatment in six weeks of referral receive regular follow-up and monitoring over first year of treatment with evidence of appropriate titration of therapy. The BPT price includes the annual costs of all blood tests, non-biological prescriptions, clinical consultations with doctors/nurses, annual review. The price excludes physiotherapy, psychology, podiatry, occupational therapy, telephone emergency advice line, inpatient admissions, biologics and associated drug costs. Biological Therapy For patients with suspected early inflammatory arthritis who: are seen in three weeks of referral have DMARD treatment initiated in six weeks of referral receive regular follow-up and monitoring over first year of treatment meet NICE eligibility criteria for biological therapy and biologics are prescribed and initiated in year 1. The BPT price includes the annual costs of all blood tests, non-biologic prescriptions, clinical consultations with doctors/nurses, annual review. The price excludes physiotherapy, psychology, podiatry, occupational therapy, telephone emergency advice line, inpatient admissions, biologics, drug infusion and associated costs. Endoscopy procedures The BPT applies to adults only for elective endoscopic procedures in all NHS providers (including community organisations) and independent sector providers. providers achieving BPT Level 1 Joint Advisory Group (JAG) accreditation will be reimbursed at the full BPT price providers achieving BPT Level 2 will receive a price 2.5% 103 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria below the BPT price providers at BPT Level 3 will receive a price 5% below the BPT price. each month the JAG will publish a list indicating each endoscopy unit's BPT level.35 Fragility hip fracture (amended 2017/19) The BPT is made up of two components: a base price and a conditional payment. The base price is payable to all activity irrespective of whether the characteristics of best practice are met. The conditional payment is payable only if all the following characteristics are achieved: time to surgery within 36 hours from arrival in an emergency department, or time of diagnosis if an admitted patient, to the start of anaesthesia assessed by a geriatrician in the perioperative period (within 72 hours of admission) fracture prevention assessments (falls and bone health) an abbreviated mental test performed before surgery and the score recorded in National Hip Fracture Database (NHFD) a nutritional assessment during the admission a delirium assessment using the 4AT screening tool during the admission assessed by a physiotherapist the day of or day following surgery. Commissioners determine compliance with best practice using reports compiled from data submitted by providers to the NHFD. Heart failure The BPT is made up of two components: a base price and a conditional payment. The base price is payable to all activity irrespective of whether the characteristics of best practice are met. The conditional payment is payable only if all of the following characteristics are achieved: data submission to the National Heart Failure Audit (NHFA) with a target rate of 70%: this means that at least 70% of all eligible records need to be submitted to the NHFA. specialist input with a target rate of 60%: this means that at 35 www.thejag.org.uk/Commissioning/BestPracticeTariffStatus.aspx 104 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria least 60% of all patients recorded in the heart failure audit have received specialist input as defined by the NHFA. Major trauma care The BPT is made up of two levels of payment differentiated by the patients’ Injury Severity Score (ISS) and conditional on achieving the criteria below. A Level 1 BPT is payable for all patients with an ISS of more than eight providing that: the patient is treated in a major trauma centre Trauma Audit and Research Network (TARN) data are completed and submitted within 25 days of discharge a rehabilitation prescription is completed for each patient and recorded on TARN any coroners’ cases flagged in TARN as being subject to delay to allow later payment tranexamic acid is administered within three hours of injury for patients receiving blood products if the patient is transferred as a non-emergency they must be admitted to the major trauma centre within two calendar days of referral from Trauma Unit (TU). A Level 2 BPT is payable for all patients with an ISS of 16 or more providing Level 1 criteria are met and that: if the patient is admitted directly to the major trauma centre or transferred as an emergency, they must be received by a trauma team led by a consultant in the major trauma centre. The consultant can be from any specialty, but must be present within five minutes if the patient is transferred as a non-emergency they must be admitted to the major trauma centre within two calendar days of referral from the trauma unit patients admitted directly to a major trauma centre with a head injury (AIS 1+) and a Glasgow Coma Scale (GCS) score of less than 13 (or intubated pre-hospital), and who do not require emergency surgery or interventional radiology within one hour of admission, receive a head CT scan within 60 minutes of arrival. NSTEMI (new 2017/19) The BPT is made up of two components: a base price and a conditional payment. The base price is payable to all activity irrespective of whether the characteristics of best practice are met. 105 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria Best practice will be considered achieved where 60% of NSTEMI patients, undergoing coronary angiography, do so within 72 hours of first admission. Success against the best practice criteria is measured at provider level and for the provider who undertakes the procedure. Outpatient procedures The BPTs for all three outpatient procedures apply at the HRG level. SUS+ will automate payment by applying the relevant prices to the HRG. Annex B1 details the prices, relevant HRGs and the relevant OPCS codes. To qualify for the outpatient BPT, the procedure must occur and be coded to an outpatient setting as defined by the NHS Data Model and Dictionary. Paediatric diabetes Where commissioners are satisfied the standards have been achieved, the BPT must be paid for all the young people attending the clinic. It is expected that compliance with all criteria will need to be demonstrated for at least 90% of patients attending the clinic. The best practice service specification is: On diagnosis, a young person’s diabetes is discussed with a senior member of paediatric diabetes team within 24 hours of presentation. A senior member is defined as a doctor or paediatric specialist nurse with ‘appropriate training’ in paediatric diabetes. Information as to what constitutes ‘appropriately trained’ is available from the British Society for Paediatric Endocrinology and Diabetes or the Royal College of Nursing. All new patients must be seen by a member of the specialist paediatric diabetes team on the next working day. Each provider unit can provide evidence that each patient has received a structured education programme, tailored to the child or young person’s and their family’s needs, both at initial diagnosis and at ongoing updates throughout the child or young person’s attendance at the paediatric diabetes clinic. Each patient is offered a minimum of four clinic appointments per year with a multidisciplinary team (MDT), defined as including a paediatric diabetes specialist nurse, dietitian and doctor. At every visit, the child must be seen by the doctor, who must be a consultant or associate specialist/ speciality doctor with training in paediatric diabetes or a specialist registrar training in paediatric diabetes, under the supervision of an appropriately trained consultant (see above). The dietitian must be a paediatric dietitian with 106 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria training in diabetes (or equivalent appropriate experience). Each patient is offered additional contact by the diabetes specialist team for check-ups, telephone contacts, school visits, troubleshooting, advice, support etc. Eight contacts per year are recommended as a minimum. Each patient is offered at least one extra appointment per year with a paediatric dietitian with training in diabetes (or equivalent appropriate experience). Each patient is offered a minimum of four haemoglobin HbA1C measurements per year. All results must be available and recorded at each MDT clinic appointment. All eligible patients must be offered annual screening as recommended by current NICE guidance. Retinopathy screening must be performed by regional screening services in line with the national retinopathy screening programme, which is not covered by the paediatric diabetes BPT and is funded separately. Where retinopathy is identified, timely and appropriate referral to ophthalmology must be provided by the regional screening programme. Each patient must have an annual assessment by their MDT as to whether they need input to their care by a clinical psychologist, and access to psychological support, which should be integral to the team, as appropriate. Each provider must take part in the annual Paediatric National Diabetes Audit. Each provider must take part in the local paediatric diabetes network. A contribution to the funding of the network administrator will be required. A minimum of 60% attendance at regional network meetings needs to be demonstrated. They should also take part in peer review. Each provider unit must provide patients and their families with 24-hour access to advice and support. This should also include 24-hour expert advice to fellow health professionals on the management of patients with diabetes admitted acutely, with a clear escalation policy as to when further advice on managing diabetes emergencies should be sought. A provider of expert advice must be fully trained and experienced in managing paediatric diabetes emergencies. Each provider unit must have a clear policy for transition to adult services. 107 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria Each unit will have an operational policy, which must include o a structured ‘high HbA1C’ policy o a clearly defined DNA/was not brought policy taking into account local safeguarding children board policies and evidence of patient feedback on the service. If the young person is not registered with a provider, the admitting provider must invoice the relevant commissioner. If a patient is referred elsewhere for a second opinion, shared care or full transfer of care, subsequent division of funding will need to be agreed between the referring and receiving centres. Paediatric epilepsy The BPT is a payment for each attendance for follow-up appointments and covers outpatient care after first acute or outpatient assessment, for patients with a diagnosis of probable epilepsy until they transfer to adult services. Activity meeting the best practice criteria must be coded against the TFC223 Paediatric Epilepsy. The BPT is payable to providers of a service that meets the following criteria: Paediatric consultants with expertise in epilepsies lead the service with epilepsy specialist nurses (ESNs) performing an integral role. Patients have a comprehensive care plan that is agreed between the patient, family and/or carers and both the paediatric consultant with expertise in epilepsies and the ESN. This must cover lifestyle issues as well as medical issues. The follow-up appointments provide enough time with both the paediatric consultant (or associate specialist) with expertise in epilepsies and the ESN to manage the patient against the agreed care plan. As a guide, it is expected that the patient spends at least 20 minutes with each professional (either at the same time or in successive slots). All children with epilepsy must be able to be reviewed when clinically required. Outpatient booking systems must be able to guarantee these follow up appointments. The service has evidence of shared care and referral pathways to tertiary paediatric neurology services, transition and referral pathways to adult services, and continuing full participation in the Epilepsy 12 national audit. The BPT is a payment for each attendance for follow-up 108 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria appointments and covers outpatient care after first acute or outpatient assessment, for patients with a diagnosis of probable epilepsy until they transfer to adult services. Parkinson’s disease The BPT applies to adults with a probable diagnosis of Parkinson’s disease where care during the first year is delivered in line with the criteria detailed below: Referrals from primary care with suspected Parkinson’s disease must be seen by a movement disorder specialist (neurology/elderly care) within six weeks. These timescales are applicable to all patients for the purposes of the BPT, but the expectation is that new referrals in later stages of disease with more complex problems will continue to be seen within two weeks. Each patient must receive regular follow-up and diagnostic review with a specialist nurse at least every six months with a process in place to identify the appropriate period of follow-up. Each patient must have a nominated person identified to continue with follow-up and diagnostic review. All patients must be referred to a Parkinson’s disease nurse specialist (PDNS) (local names may include neurology nurse specialist or movement disorder specialist) who will be responsible for co-ordinating care. Evidence to demonstrate that the provider is using recognised tools, for example patient feedback, NMS screening tool and cognitive assessment tool. Patients must be offered therapy assessment within one year (including physiotherapist, speech and language therapist and occupational therapist). The costs of the therapy assessment are not included in the BPT. However, payment is dependent on therapy assessment being offered (irrespective of whether patient takes this up). Pleural effusions The aim of this BPT is to incentivise a shift in activity away from non-elective admissions to pleural effusions being performed on a planned elective basis under ultrasound control. This is achieved by setting the price for daycase admissions relatively higher than the non-elective price, therefore creating a financial incentive for the managing patients on an elective basis. In setting the BPT, we have assumed that 50% of current emergency admissions to DZ16N are suitable to be managed 109 Error! No text of specified style in document. Error! No text of specified style in document. BPT Eligibility criteria on a daycase basis (YD04Z or YD05Z). Primary hip and knee replacement outcomes (amended 2017/19) The criteria for payment of the BPT are: the provider not having an average health gain significantly below the national average the provider adhering to the following data submission standards: o a minimum patient reported outcome measures (PROMs) participation rate of 50% o a minimum NJR compliance rate of 85% o an NJR unknown consent rate below 15%. Providers will not receive the BPT if they are either: below the lower 99.8% control limit based on the most recently published data or below the lower 95% control limit based on the most recently published previous two years data. Commissioners will need to monitor PROMs and NJR publications to determine whether providers are complying with the payment criteria. Where they are not, commissioners should make manual adjustments to the base (non-best practice) price until an improvement is shown in the published data and the requirements of the BPT are met (unless subject to the national variation). Same-day emergency care (amended 2017/19) The BPT for each clinical scenario listed in Annex B1 is made up of a pair of prices: one applied to emergency admissions with a zero day length of stay (higher), the other to emergency admissions with a stay of one or more days (lower). It is not expected that the rate of emergency admissions will increase as a result of introducing the BPT for the clinical scenarios. It would be expected that either the rate remains constant with the proportion of zero stays increasing, or the rate reduces as providers implement more same day emergency care pathways appropriate to a non-admitted setting. 110 Error! No text of specified style in document. Error! No text of specified style in document. 3.2.9. Looked after children health assessments 114. Looked after children36 are one of the most vulnerable groups in society. 115. One-third of all looked after children are placed with carers or in settings outside the originating local authority. These are referred to as ‘out-of-area’ placements. 116. When children are placed in care by local authorities, their responsible health commissioner has a statutory responsibility to commission an initial health assessment and conduct six-monthly or yearly reviews. When the child is placed out of area, the originating commissioner retains this responsibility but the health assessment should be done by a provider in the local area, to promote optimal care co-ordination for the child. 117. Usually, there are clear arrangements between commissioners and local providers for health assessments of looked after children placed ‘in area’. However, arrangements for children placed out of area are variable, resulting in concerns over the quality and scope of assessments. 118. To address this variability in the arrangements for children placed out of area and to enable more timely assessments, a currency was devised and mandated. A checklist for implementing the currency is included in Annex B4. 119. National prices apply for children placed out of area, these can be found under ‘Other National Prices’ in Annex B1. When a looked after child is placed “out of area”, the responsible commissioner must commission providers in the receiving area to undertake the health assessments and pay them using the national price. 120. There is a non-mandatory currency but no mandatory currencies or national prices for in-area health assessments for looked after children. In setting prices, commissioners and providers must adhere to the relevant rules and principles set out the locally determined prices section of the national tariff. We have made non-mandatory prices available for children placed in area to support the development of local prices. 3.2.10. Pathway payments 121. Pathway payments are single payments that cover a bundle of services37 which may be provided by several providers for an entire episode or whole pathway of 36 The National Society for the Prevention of Cruelty to Children (NSPCC) website on Children in Care states: “A child who is being looked after by the local authority is known as a child in care or "looked after”. 37 2012 Act, Section 117 provides that a bundle of services may be specified as a single service (ie a currency) to which a national price applies, where those services together constitute a form of treatment. 111 Error! No text of specified style in document. Error! No text of specified style in document. care for a patient. They are designed to encourage better organisation and coordination of care across a pathway and among different healthcare providers. Improving the co-ordination of care, including across different care settings (eg primary, secondary, community services and social care), has the potential to improve patient outcomes by reducing complications and readmissions. 122. There are two pathway-based payment systems. These relate to: a. maternity healthcare services b. healthcare for patients with cystic fibrosis. Maternity pathway payment 123. The maternity pathway payment system splits maternity care into three stages: antenatal, delivery and postnatal. For each stage, a woman chooses her pathway provider, identified as the ‘lead provider’. The commissioner makes a single payment to the lead provider of each stage to cover the cost of care38 the level of which depends on clinical factors that affect the extent and intensity of care a woman is expected to need. 124. Women may still receive some of their care from a different provider for clinical reasons or to support their choice. This care is paid for by the lead provider who will have received the entire pathway payment from the commissioner. 125. For 2017/19, we have updated the casemix assumptions for the antenatal pathway to increase the activity allocated to the intermediate and intensive levels. This means that the allocation at standard level would be reduced and relative weightings between the standard, intermediate and intensive prices will change. This policy will help to ensure that providers are more appropriately reimbursed for the care they provide. More detail on this can be found in Section 4.3.4. 126. The table below sets out what is included and excluded from all three stages of the maternity payment system. Besides the exceptions identified, there should be no further payments for individual elements of activity along the pathway. 38 Antenatal care for uncomplicated pregnancies https://www.nice.org.uk/guidance/cg62/chapter/guidance 112 Error! No text of specified style in document. Error! 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Table 7: Description of the maternity pathway payment system Area Included Excluded Admitted patient care All activity against NZ* HRGs (regardless of TFC) This includes all fetal medicine, including that provided by tertiary providers39 All activity against non-NZ* HRGs (regardless of TFC) Outpatient care All activity against NZ* HRGs (regardless of TFC) All attendance activity against TFC 501 (obstetrics) and 560 (midwife episode) - includes all foetal medicine, including that provided by tertiary providers - Includes any activity in emergency gynaecology or early pregnancy units that codes to ‘NZ’ HRGs, even if before the antenatal assessment visit All activity against non-NZ* HRGs (except with a TFC of 501 or 560) An attendance TFC other than 501 (obstetrics) or 560 (midwife episode) Emergency gynaecology and early pregnancy activity will normally code to TFC502 or non NZ* HRGs and will therefore be excluded Antenatal education Antenatal education activity Critical care All critical care activity Community/ primary care All maternity community-based antenatal and postnatal care All primary care activity applicable to payment under the GP contract. A woman may choose some of her maternity pathway to be delivered by her GP or for the practice to be the lead pathway provider, but any care delivered by the GP will be paid under the GP contract Scans, screening and tests All maternity ultrasound scans, and all relevant maternal and newborn screening which is part of National Screening Programmes40 The analysis elements of the screening process undertaken by specialist diagnostic laboratories under a separate commissioner contract Immunisation All specified immunisation of 39 It is expected that from 2014/15 fetal medicine has been coded differently, which should facilitate separate commissioning for this service in the future. 40 Further information can be found in the NHS England publication ‘Who pays for antenatal and newborn screening?’ at https://www.england.nhs.uk/expo/wp-content/uploads/sites/18/2015/06/whopays-mpp-upd-06-2015.pdf 113 Error! No text of specified style in document. Error! No text of specified style in document. Area Included the newborn which should occur before handover to primary care Birth The birth, irrespective of type and setting Post-birth care Well/healthy babies, both during the delivery module and pathway checks/ screening during the postnatal module Pre-pregnancy care Excluded Pathways for unwell/unhealthy babies. Babies requiring admitted patient care treatment will have their own admission record All pre-pregnancy/preconception care and reproductive services Non-maternity care Advice on risks in the context of pregnancy and referral to other relevant professionals where necessary for resolution if possible All activity that is the named responsibility of other professionals or providers who receive payment to deliver that care for the population (eg drug and alcohol services, mental health services, stopping smoking services, weight management services, etc) Specialised services All fetal medicine, including that provided by tertiary providers All activity paid for directly by NHS England Ambulance transfers All ambulance transfer costs Accident and emergency All unscheduled A&E activity Clinical Negligence Scheme for Trusts (CNST) All CNST costs are included High cost drugs and devices All specified high cost drugs and devices not covered by national prices 127. Further information on the pathway payment approach can be found in Annexes B1 and B4. Cystic fibrosis pathway payment 128. The cystic fibrosis (CF) pathway currency is a complexity-adjusted yearly banding system with seven bands of increasing complexity of patient need. The 114 Error! No text of specified style in document. Error! No text of specified style in document. tariff relates to a year of care. The pathway does not distinguish between adults and children. 129. The pathway payments cover all treatment directly related to cystic fibrosis for a patient during the financial year. This includes: admitted patient care and outpatient attendances (whether delivered in a specialist centre or under shared network care arrangements) home care support, including home intravenous antibiotics supervised by the CF service, home visits by the multidisciplinary team to monitor a patient’s condition, eg management of totally implantable venous access devices (TIVADs), collection of mid-course aminoglycoside blood levels and general support for patient and carers intravenous antibiotics provided during in-patient spells annual review investigations. 130. The cystic fibrosis pathway currency was designed to support specialist cystic fibrosis multidisciplinary teams (MDTs) to provide care in a seamless, patientcentred manner, removing any incentives to hospitalise patients whose care can be well managed in the community and in their homes. Furthermore, it allows early intervention (following international guidelines) to prevent disease progression, for example, through the use of antipseudomonal inhaled/nebulised antibiotics and mucolytic therapy. 131. Further information is provided in Annex B1 and supporting guidance. 3.3. High cost drugs, devices and listed procedures 132. Several high cost drugs, devices and listed procedures are not reimbursed through national prices. Instead they are subject to local pricing in accordance with the rules set out in Section 6. These can be found on the high cost lists in Annex B1. If they are not on this list, and are part of a nationally priced treatment or service, then the cost of the drug, device or listed procedure is covered by the national price. It should be noted that high cost drugs are excluded either individually or as a group exclusion, as indicated in Annex B. 133. Where a provider and commissioner believe that the national price does not cover the cost of the drug or device, in addition to the other costs of treating the patient, then a local variation can be agreed between provider and commissioner, in accordance with local pricing rules, to facilitate an additional payment. 115 Error! No text of specified style in document. Error! No text of specified style in document. 134. For the 2017/19 NTPS we have updated the list of drugs, devices and procedures using the same criteria used in previous years.41 Annex B1 sets out the details. New listed procedures: molecular and companion diagnostics and personalised medicine 135. In 2016/17 NHS England provided a list of list of molecular diagnostic tests for exclusion. This list remains the same for 2017 to 2019. Details of the excluded tests can be found under the heading of listed procedures on the high cost drugs, devices and listed procedures list in Annex A. 136. NHS England commissioners will agree local prices and activity volumes with providers for these tests in accordance with the rules on local pricing. 3.4. The innovation and technology tariff 137. We are introducing a new Innovation and Technology Tariff (ITT) with the aim of setting incentives to encourage the uptake and spread of innovative medical technologies that benefit patients. 138. The development of innovations is encouraged through the NHS Innovation Accelerator (NIA),42 the NHS test beds, and the Commissioning through Evaluation Programme. 139. Innovations that have been accepted on to the NIA process were subject to an assessment by NHS England of suitability for inclusion in the ITT. 140. This assessment was made against a range of factors such as whether the service which would utilise the innovation is currently in the scope of the national tariff, how widespread the innovation is in the sector and whether the innovation is suitable for pricing in the national tariff. Working with UCL Partners and clinicians from the NIA process, and also subject matter experts, NHS England has identified a range of innovations suitable for inclusion in the ITT. 141. The innovations that are included in the ITT for 2017/19 are listed below. 142. Recognising the concerns of the sector, NHS England is committed to funding CCGs to implement these innovations. For five of the six innovation categories, NHS England will reimburse commissioners for this cost in addition to its commissioner allocations. The sixth category, treatment of lower urinary tract 41 Further information about high cost drugs, devices and procedures may be found online via the high cost drugs, devices and chemotherapy portals www.england.nhs.uk/resources/paysyst/drugs-and-devices/ 42 www.england.nhs.uk/ourwork/innovation/nia/ 116 Error! No text of specified style in document. Error! No text of specified style in document. symptoms of benign prostatic hyperplasia as a day case, is already included in national prices. 143. NHS England intends to agree fixed prices with manufacturers for five of the six products covered by the Innovation and Technology Tariff. These prices can be found in the supporting document for the Innovation and Technology Tariff. We expect that these prices will be adopted in local agreements between providers and commissioners so there should be no need for further negotiation of the price. The five innovations to be locally priced are not included within the currencies used to set national prices. This approach similar to the approach adopted for high cost drugs and devices which are also subject to the local pricing rules 3.4.1. Guided mediolateral episiotomy to minimise the risk of obstetric anal sphincter injury Innovation detail 144. Approximately 15% of births in England require an episiotomy. Of these, around 25% experience obstetric anal sphincter injuries (OASIS). The angle of the cut is important and NICE Guidance recommends that cuts need to be between 45 and 60 degrees to reduce the incidence of poor patient outcomes, reconstructive surgery and litigation costs. The use of angled scissors in episiotomies therefore should improve patient experience and outcomes and reduce OASIS repair and litigation. Further information 145. Further information is available at: a. www.nice.org.uk/advice/mib33/chapter/introduction b. www.nice.org.uk/guidance/cg190/chapter/1-Recommendations#third-stageof-labour 3.4.2. Arterial connecting systems to reduce bacterial contamination and the accidental administration of medication Innovation detail 146. Arterial line placement is a common procedure in various critical care settings. Intra-arterial blood pressure (BP) measurement is more accurate than measurement of BP by non-invasive means, especially in the critically ill. Although rare, when wrong route drug administration occurs, it has the potential to cause serious damage to the vessel and surrounding tissue. Arterial cannulation is associated with complications including bacterial contamination, accidental intra-arterial injection and blood spillage. 117 Error! No text of specified style in document. Error! No text of specified style in document. 147. Needle-free connectors prevent blood spillage and through a one-way valve allow aspiration only thus preventing accidental administration of medication to the arterial line. Further information 148. Further information can be found at the Eastern Academic Health Science Network.43 3.4.3. Prevention of ventilated associated pneumonia in critically ill patients Innovation detail 149. Ventilator-associated pneumonia (VAP) is defined as pneumonia that occurs 48-72 hours or thereafter following endotracheal intubation, characterised by the presence of a new or progressive infiltrate, signs of systemic infection (fever, altered white blood cell count), changes in sputum characteristics, and detection of a causative agent. Approximately 100,000 patients are admitted for ventilation in critical care units in the UK each year. The risk for patients is highest during early ICU stay when it is estimated to be 3% per day during days 1–5 of ventilation, 2% per day during days 5–10 of ventilation and 1% per day thereafter (Masterton, 2008). 150. On average 10-20% (10,000- 20,000) patients will be diagnosed with Ventilator Associated-Pneumonia (VAP) resulting in an attributable mortality rate of about 30% or between 3,000 and 6,000 deaths. Each episode of VAP has an estimated cost to the NHS of between £10,000 and £20,000. 151. Improved airway management in critically ill patients who are having mechanical ventilation can prevent ventilator-associated pneumonia by minimising the risk of pulmonary aspiration and micro-aspiration in patients having ventilation for 24 hours or more. This could see a reduction in the length of time spent on ventilation and length of stay in ICU. 152. There are available pneumonia prevention systems which are designed to stop ventilator-associated pneumonia through the use of a cuffed ventilation tube and an electronic cuff monitoring and inflating device which prevents leakage of bacterial laden oral and stomach contents to the lung – a problem associated with standard tubes. Further information 153. NICE has produced a Medtech Innovation Briefing44 (MIB) which identified three studies including 1 RTC and two retrospective cohort studies. 43 www.eahsn.org/our-work/casestudies/non-injectable-arterial-connector/ 118 Error! No text of specified style in document. Error! No text of specified style in document. 3.4.4. Application for the self-management of chronic obstructive pulmonary disease Innovation detail 154. Managing chronic obstructive pulmonary disease (COPD) costs the NHS more than £1 billion each year. However, treatment is complex, with different inhalers needing to be used in different ways. Compliance with treatment is often extremely low, leading to poor outcomes and wasted prescribing. For this reason, improving self-management for patients with COPD is a key priority for the NHS. 155. There is no cure for COPD and good symptom management is essential to stabilise disease and prevent recurrent flare-ups or exacerbations. Exacerbations often require intensive treatment and can be severe enough to require hospital admission. 156. There is evidence from recent studies that disease-specific self-management improves health status and reduces hospital admissions in COPD patients. It is critical to implement health education programs in the continuum of care aimed at behaviour modification. Studies in COPD have shown that self-management increases knowledge and skills the patients require to treat their own illness. 157. A number of a web based and iOS applications that help patients manage their condition more effectively are available. These platforms can interface with clinical dashboards to monitor and manage their patients remotely at an individual and population level. 158. These platforms can also be used by local health care providers and CCGs to monitor exacerbation burdens in real-time and review potential inequalities in health care to plan support services effectively. Further information 159. NICE have produced guidance on the management of COPD.45 3.4.5. Frozen faecal microbiota transplantation for recurrent Clostridium difficile infection rates Innovation detail 160. Clostridium difficile infection (CDI) rates are climbing in frequency and severity, and the spectrum of susceptible patients is expanding beyond the traditional scope of hospitalized patients receiving antibiotics. There are over 3,000 new 44 45 www.nice.org.uk/advice/mib45 www.nice.org.uk/guidance/CG101 119 Error! No text of specified style in document. Error! No text of specified style in document. cases of chronic CDI across England per annum. Faecal microbiota transplantation (FMT) is becoming increasingly accepted as an effective and safe intervention in patients with recurrent disease, likely due to the restoration of a disrupted microbiome. Cure rates of > 90% are being consistently reported from multiple centres. FMT is the provision of a screened specially prepared stool administers via a nasal tube into the intestine to restore the balance of bacteria in the gut. FMT is a NICE recommended treatment for chronic CDI. 161. To date nine trusts have performed FMTs on their own site via the frozen service. Further information 162. NICE has produced interventional procedures guidance for this technology as part of the pathway for gastrointestinal conditions.46 3.4.6. Treatment of lower urinary tract symptoms of benign prostatic hyperplasia as a day case Innovation detail 163. Benign prostatic hyperplasia (BPH) is a common and chronic condition where the enlarged prostate can make it difficult for a man to pass urine, leading to urinary tract infections, urinary retention, and in some cases renal failure. Existing treatment TURP (transurethral resection of the prostate) involves cutting away or removing existing tissue, require an average hospital stay of three days and often catheterisation for many days post-surgery. 164. In people with benign prostatic hyperplasia, the prostate becomes enlarged. A prostatic urethral lift system uses adjustable, permanent implants to hold the enlarged prostate away from the urethra so that it isn’t blocked. In this way, the device can relieve lower urinary tract symptoms (such as pain or difficulty when urinating). 165. Healthcare teams may want to use a prostatic urethral lift system as an alternative to transurethral resection of the prostate and holmium laser enucleation of the prostate (HoLEP). Payment/price detail 166. For the purposes of reimbursement this cost is included in tariff and reported via SUS+ and charged per spell. 167. Providers should use combination code M678 (Other specified other therapeutic endoscopic operations on prostate) + Y022 (Therapeutic endoscopic 46 www.nice.org.uk/guidance/ipg485 120 Error! No text of specified style in document. Error! No text of specified style in document. implantation of prosthesis into prostate) which will group to the LB70 Complex Endoscopic, Prostate or Bladder Neck Procedures (Male and Female) HRG Root. 168. Annex B1 details the prices for LB70. Further information 169. NICE has developed medical technology guidance on prostatic urethral lift systems (MTG26).47 47 www.nice.org.uk/guidance/mtg26?unlid= 121 Error! No text of specified style in document. Error! No text of specified style in document. 4. Method for determining national prices 170. Our aim in setting prices is to support the highest quality patient care delivered in the most efficient way. 171. Our principles for setting national prices are that: a. Prices should reflect efficient costs. This means that the prices set should: i. reflect the costs that a reasonably efficient provider ought to incur in supplying services at the quality expected by commissioners ii. not provide full reimbursement for inefficient providers. b. Prices should provide appropriate signals by: i. giving commissioners the information needed to make the best use of their budgets and enabling them to make decisions about the mix of services that offer most value to the populations they serve ii. incentivising providers to reduce their unit costs by finding ways of working more efficiently iii. encouraging providers to change from one delivery model to another where commissioners want this and where it is more efficient and effective. 4.1. Overall approach 172. We are setting national prices for 2017/18 and 2018/19. 173. We are setting prices using different methods for 2017/18 and 2018/19. 174. National prices for 2017/18 are modelled from the currency design set out in Section 3 of this document with 2014/15 costs and activity data. This is different from how we set the 2016/17 national prices, when we rolled over prices adopted under the Enhanced Tariff Option (ETO) with adjustments for cost uplifts, CNST and efficiency.48 The methodology for the tariff model for the 2017/18 prices follows closely the methodology previously used by the DH Payment by Results (PbR) team. 49 48 49 More detail on the method used to set prices for 2015/16 can be found in section 4 of the 2016/17 National Tariff Payment System https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509697/201617_National_Tariff_Payment_System.pdf For a description of the 13/14 PbR method, please see Payments by Results, Step by Step Guide: Calculating the 2013/14 National Tariff. It was not always possible to exactly replicate the PbR method. Where we have significantly deviated from the PbR method we set this out in this document. For example we have simplified some of the calculation processes. 122 Error! No text of specified style in document. Error! No text of specified style in document. 175. For 2018/19 we are using a rollover model. We use the 2017/18 national prices and currencies as a starting point and apply adjustments based on our estimates of inflation, efficiency and, where appropriate, CNST in 2018/19 to the 2017/18 prices in order to derive the 2018/19 prices. This is similar to the approach taken for the 2016/17 NTPS. 176. The stages in our approach can be seen below: Figure 1: Stages in our methods for setting national prices for 2017/19 2014/15 Reference costs Determine price relativities (relationship between average unit costs) Set prices to 2016/17 levels (current year) Adjust to 2016/17 base using 15/16 and 16/17 efficiency, cost uplifts and CNST Adjust relativities using expert advice Adjust subchapters to manage volatility Apply cost base adjustment 2017/18 Price levels 2018/19 price levels Adjust for forward looking 2017/18 efficiency, cost uplifts and CNST Adjust for forward looking 2018/19 efficiency, cost uplifts and CNST 177. This section is supported by Annex B2. This contains the models used to set prices: a. the admitted patient care (APC) tariff model b. the APC handbook c. the outpatient procedures (OPROC) model d. the outpatient attendances (OPATT) model e. the accident and emergency (A&E) model f. the unbundled services model g. the maternity pathway model h. the other national prices model i. the best practice tariff (BPT) model. 178. The section below sets out a high level explanation of the method for setting prices and the changes made for this year. For the full detail of how each price has been set please consult the relevant model. 4.2. The method for setting prices 4.2.1. Modelling prices for 2017/18 179. We note that in adopting the PbR method for the 2017/18 tariff year we have in some cases deviated from the exact implementation of the method. For example we used different software packages for some calculations (SQL) than 123 Error! No text of specified style in document. Error! No text of specified style in document. those used by the PbR team (Access), but in all cases we aimed to replicate the PbR methodology, with the main changes we made to the PbR method set out in this section. 180. The PbR method for setting prices was different for different care settings (or points of delivery). This was mainly due to differences in the type of input data used and differences in assumptions and incentives. We have therefore developed a number of different models for different care settings (or procedures). This means that the 2017/18 tariff model is in practice a suite of tariff models (for example, we have separate models to generate APC and outpatient attendance (OPATT) prices). 181. The steps in our modelling approach for 2017/18 are: a. Determine price relativities (based on average unit costs). We use cleaned reference costs and Hospital Episode Statistics (HES) data as key inputs to set average costs per currency (eg HRG). See Sections 4.2.3 and 4.2.4 for more details. b. Adjust average unit costs to an appropriate price base. As price relativities are based on 2014/15 costs we need to adjust them to the current year (2016/17) before we can make any forward looking adjustments. To do this we adjust absolute price levels by applying efficiency, inflation and CNST adjustment factors for the two-year gap using the inflation and efficiency factors and, where appropriate, CNST from the 2016/17 national tariff. At this point we also apply an adjustment to the amount of money allocated to admitted patient care (a top slice) to be reallocated to top up payments for specialised services (see section 5.2). c. Apply manual adjustments to modelled prices to reduce the number of instances where price relativities are implausible, illogical or distorted50 (see Section 4.4) d. Apply a cost base adjustment factor to prices to ensure prices reimburse a total amount of cost equal to the desired cost base, see Section 4.5. e. Where appropriate, applies a volatility factor to prices (at subchapter level) to reduce volatility in prices. See Section 4.6. f. Adjust prices to 2017/18 levels to reflect expected inflation (including service development), CNST (section 4.7) and also an estimation of the level of efficiency that we expect that they can achieve in 2017/18. See Section 4.8. 50 An example of an illogical relativity could be where the price for a more complex treatment is lower than the price for a less complex treatment without good reason. 124 Error! No text of specified style in document. Error! No text of specified style in document. 182. The changes from the 2013/14 PbR method are to: a. update models for the HRG4+ currency design b. apply a small set of data-cleaning rules to the 2013/14 reference cost data to improve the quality of the cost data in the model c. include a reconciliation to ensure that we base our price relativities, between tariff models on the equivalent cost relativities in the reference costs dataset d. we made the manual adjustment process more transparent and included a reconciliation at chapter51 level to ensure that the manual adjustments made to modelled prices do not change the total amount paid for each chapter e. make minor adjustments to streamline the calculation process and improve its transparency: for example removing some calculation steps in the 2013/14 PbR model which did not have any clearly identifiable policy intention (such as adjustments that appeared to be historic manual adjustments) f. recreate any models that were not transferred from the DH as closely as possible g. updated the calculation method for BPTs (Section 4.2.3) h. introduced volatility and a cost base adjustment (scaling) i. removed the affordability adjustment.52 183. For prices for which a 2013/14 PbR method was not available we either: a. used the rollover approach applied in the 2014/15 national tariff (this approach calculates 2017/18 prices using the 2016/17 tariff prices as a base and applies the inflation, efficiency and, where applicable, Clinical Negligence Scheme for Trusts factors to them to arrive at the 2017/18 prices)53 51 In exceptional cases this was done at a subchapter level Affordability remains a factor which is being considered - for example, when determining the appropriate efficiency factor, and when making decisions about cost base adjustments. 53 Section 5.2 of the ‘2014/15 National Tariff Payment System’ states: ‘2014/15 national prices (for currencies that are unchanged) are calculated by using 2013/14 prices as the base and adjusting those prices generally for: cost pressures on providers; offset by our expectations for improved efficiency on the part of providers. We refer to the above approach as a ‘rollover’ approach, to reflect the fact that we have adjusted most prices by a common factor (rather than use updated reference costs at the currency level).’ 52 125 Error! No text of specified style in document. Error! No text of specified style in document. b. developed new models that were designed to follow, as closely as possible, the principles of the 2013/14 PbR method: for example the calculation of the Short Stay Emergency (SSEM)54 tariff. All models can be found in Annex B2. 4.2.2. The rollover approach for 2018/19 184. For 2018/19 we model prices using the 2017/18 price list as a base and then determine the final price levels by applying adjustments for expected efficiency, inflation and, where appropriate, CNST for 2018/19. 185. We have used the latest available projections to make these adjustments. 4.2.3. Setting prices for best practice tariffs for 2017/18 Changes to the method for setting best practice tariffs 186. For 2017/18 we have changed the method for setting prices for BPTs. 187. Where possible we have applied a standard method of pricing BPTs which can be summarised in three steps: a. using the modelled APC/OPROC or OPATT price (without BPT adjustments) as the starting point (‘base price’) b. setting a fixed differential between the BPT and non-BPT price. This differential can take the form of a percentage of the APC or OPATT base price or can be an absolute value c. setting the level of the BPT and non-BPT prices so that the BPTs are cost neutral at HRG level. 188. We set BPTs with the intention that they are cost neutral at HRG level. Under the DH PbR method neutrality was achieved by adjusting the overall uplift factor. 189. To achieve neutrality we need to make an assumption about the expected actual compliance rate, at an aggregate national level, is for each HRG that is associated with a BPT in the tariff year (in this case 17/18). If this is set too high, then it will create an extra efficiency ask on providers, too low and it will put extra pressure on commissioners. The compliance rates can be found in the BPT model in Annex B2. 190. We currently do not have sufficient information to update the assumptions for the expected compliance rate in the 2017/18 tariff year for all BPTs. Where we do not have this information, we have used our best estimate for the expected 2017/18 compliance rates. 54 See ‘Reduced Short Stay Emergency Tariff’ in the BPT model in Annex B2. 126 Error! No text of specified style in document. Error! No text of specified style in document. 191. There are some BPTs where we are not fully able to implement the approach set out above. In those cases we have developed bespoke solutions that either used the existing approach or streamlined the existing model as far as possible: a. Use the existing method (see Annex B2 and Annex B6 for more detail). We generally did this where we were not able to update either the 2013/14 PbR method and/or inputs to the 2013/14 PbR method. This affects: i. early inflammatory arthritis ii. major trauma iii. paediatric diabetes year of care iv. Parkinson’s disease. b. Streamlined the existing model for that BPT, as far as possible, in line with the approach set out above, with necessary adjustments. In particular: i. renal dialysis: maintaining the 2013/14 PbR method, except that we simplified the calculation of the peritoneal dialysis prices by basing them directly on reference costs ii. paediatric epilepsy: setting the standard national price as per the 2013/14 PbR method and set the BPT based on the principles set out above iii. pleural effusion: The currency design changed substantially for this BPT between 2013/14 and 2017/19 due to the introduction of HRG4+. We retained the policy intentions of the 2013/14 pleural effusion BPT design as much as possible, taking into account, where possible, the BPT simplification principles set out above iv. transient ischaemic attack. We retained the extra payment as per the 2013/14 PbR method, but otherwise updated this BPT in line with the approach set out above. 192. All BPT price models can be found in Annex B2. 4.2.4. Changes to the method for calculating outpatient attendance prices 193. To incentivise a change in the delivery of outpatient follow-up activity, to encourage a move to more efficient models of care (eg non face to face/telemedicine) and to free up consultant capacity, we over-reimburse first attendances and under-reimburse corresponding follow-up attendances. After calculating prices for these services we then make an adjustment to increase first attendances by a set percentage and reduce the corresponding follow up price by the amount required to make up that increase. For example, if we increase the first attendance TFC by 10% and there is an average of two 127 Error! No text of specified style in document. Error! No text of specified style in document. follow-up attendances for this TFC, we would reduce the average follow-up price by 5%. 194. For 2017/19 we have increased this transfer for a number of TFCs from 10% to either 20% or 30%. There is a full list in Annex B1. 4.3. Managing model inputs 4.3.1. Overall approach 195. The two main data inputs used to generate prices for the 17/18 tariff year are costs (obtained from the annual reference cost collection) and activity, which is captured in the HES dataset as well as the annual reference cost collection. We explain these two datasets in more detail in this section. 196. For the 2018/19 tariff year, we are not using any activity and cost data to generate prices as the prices are based on the prices for the 2017/18 tariff year using a ‘rollover’ approach. 197. The reference costs dataset contains cost and activity data for many, but not all, healthcare services providers. The data are collected from all NHS trusts and NHS foundation trusts and therefore cover most healthcare costs. We do not currently collect cost data from the independent sector. 198. The HES activity dataset contains the number of admitted patient care, outpatients appointments and A&E attendances in England from all providers of secondary care services to the NHS. It is mainly needed for the APC tariff calculation because the APC currencies are paid on a spell basis, while the activity data contained in the reference cost dataset is based on FCEs. 199. We are using 2014/15 reference costs and 2014/15 activity data to model prices for the 2017/18 tariff year. 4.3.2. Reference cost inputs Reference cost dataset used 200. We are using 2014/15 reference cost data55 for the prices for the 2017/18 tariff year. We use this reference cost dataset because it is very closely aligned with the currency design56 of the 2017/19 tariff. Reference cost data cleaning 201. One of our main objectives is to create a more stable and reliable tariff and reduce unexplained tariff price volatility. 55 56 See NHS reference costs 2014 to 2015 We have used the HRG4+ currency system (see Section 4 of this document for further details). 128 Error! No text of specified style in document. Error! No text of specified style in document. 202. We think using cleaned data (ie raw reference cost data with some implausible records removed) will, over time, reduce the number of illogical cost inputs (for example, fewer very-low-cost recordings for a particular service and fewer illogical relativities).57 This, in turn, should reduce the number of modelled prices that require manual adjustment and should therefore increase the reliability of the tariff. We believe this benefit outweighs the disadvantage of losing some data points as a result of the data cleaning process. 203. We have applied new rules for reference cost data cleaning based on recommendations provided by Deloitte.58 These exclude: a. outliers from the raw reference cost dataset detected using a statistical outlier test known as the Grubbs test (also known as the ‘maximum normed residual test’) b. providers that submitted reference costs more than 50% below the national average for more than 25% of HRGs and at the same time also submitted reference costs 50% higher than the national average for more than 25% of HRGs submitted c. providers who submitted reference costs containing more than 75% duplicate costs across HRGs and departments. 204. We have not followed the recommendations in full because we encountered some technical issues in the implementing of some of the rules. For example, it proved more difficult than anticipated to identify the full set of potential illogical relativities. In particular we have not followed the recommendation to: a. exclude providers with at least five unit cost submissions below £5 and at least 10 unit cost submissions above £50,000, subject to an average unit cost check b. exclude providers who submitted reference costs containing more than 15% of unit costs that exhibited illogical relativities. 205. For the prices in the 2017/18 tariff year we are cleaning only reference cost data for the model for APC. 206. Applying these rules to the reference costs dataset we use to set national prices for APC has led to a small percentage of reference cost data records being removed to improve the quality of the dataset. The most significant effect was to 57 58 An illogical relativity is where the cost of performing a more complex procedure is lower than the cost of performing a less complex procedure (without good reason). See the independent research paper on the ‘NHS National Tariff Payment System 2016/17: engagement documents’ webpage. 129 Error! No text of specified style in document. Error! No text of specified style in document. remove all APC reference cost data submitted by six, mainly mental health and community, providers. 4.3.3. HES data inputs 207. We use 2014/15 HES data grouped by NHS Improvement using the 2014/15 (HRG4+) various groupers and the 2017/18 Engagement grouper in our modelling of the prices for the 2017/18 tariff year. 208. Using NHS Improvement grouping is a deviation from the 2013/14 PbR method which used HES data grouped by NHS Digital. However we are making this change because: a. It allows us more flexibility in the timing of grouping the data. b. The NHS Digital use patient identifiable data for grouping, which cannot be shared with third parties (to protect patient confidentiality). NHS Improvement’s method does not use patient identifiable data, which makes it easier for third parties to replicate our method. We believe this change makes the tariff more transparent and will enable stakeholders to better review and engage with our proposed tariff calculation method. 209. The NHS Improvement grouping method aims to follow, as closely as possible, the casemix grouping method and initial analysis indicates that the differences between the two grouping methods are relatively small. 4.3.4. Updates to the maternity pathway 210. For maternity, price relativities are set using assumptions about the casemix. We have updated the casemix assumptions for the antenatal phase of the maternity pathway model. These changes are based on feedback from clinicians. 211. As a result of this information, we updated our model inputs to assume that more women will require intermediate and intensive antenatal care. Our revised assumptions are shown in the table below Table 8: Assumptions for antenatal care Pathway PbR allocations 17/18 allocations Standard 64.0% 50.0% Intermediate 28.2% 38.7% 7.8% 11.3% Intensive 212. Full details of the method for setting prices for maternity are in Annex B2. 130 Error! No text of specified style in document. Error! No text of specified style in document. 4.4. Manual adjustments 213. The 2013/14 PbR method involved making some manual adjustments to the modelled tariff. This was done to minimise the risk of setting implausible tariffs (eg tariffs that have illogical relativities) based on reference cost data of variable quality. We have broadly followed this approach for the 2017 to 2019 national tariff. We have also introduced a new process of making manual adjustments to price relativities they are published. This involved not identifying illogical relativities but identifying implausible prices from a clinical perspective. In doing so we adopted the following process. a. We made manual adjustments following feedback on draft tariff prices: i. We made several manual adjustments following a series of meetings to review draft price relativities with NHS Digital’s expert working groups of clinicians before publication of the currency design and relative prices engagement document released in August 2016. ii. We made further manual adjustments and revisions following stakeholder feedback and comments, further engagement with clinical experts and adjustments on the draft prices published in this summer engagement document. 214. The manual adjustments made to individual prices can be found in Annex B2. 4.5. Cost base 215. The cost base is the level of cost that the tariff will allow providers to recover, before adjustments are made for cost uplifts and the efficiency factor is applied. 216. For 2017/18 and 2018/19, for the total activity with a national price, we have set the cost base equal to the revenue that would be received under 2016/17 national tariff. In other words, we have made no adjustment to the cost base, except for that which recognises changes in the scope of nationally priced services. 217. As with many other parts of tariff setting, we use last year’s tariff as a starting point for the following tariff. Therefore, last year’s prices and last year’s revenue are used as a starting point. 218. After setting the starting point, we consider new information, and a number of factors to form a view whether an adjustment to the cost base is warranted. 219. Information and factors we considered include: a. historical efficiency and cost uplift assumptions b. latest cost data 131 Error! No text of specified style in document. Error! No text of specified style in document. c. additional funding outside the national tariff d. any other additional revenue providers use to pay for tariff services 59 e. our pricing principles and the factors which legislation requires us to consider, including matters such as the importance of setting cost reflective prices, and the need to take into account the duties of commissioners in the context of the budget available for the NHS. 220. In using our judgement, we also consider the effect of setting the cost base too high or too low. This effect is asymmetric: a. If we set the cost base too low (ie we set too high an expectation that providers will be able to catch up to past undelivered efficiency), providers will be in deficit, service quality will decrease (eg waiting times will increase), and some providers may cease providing certain services. b. However, if we set the cost base too high, commissioners, who have an obligation to stay within their budgets, are likely to restrict the volumes of commissioned services, and could cease commissioning certain services entirely. This would mean some patients may not be provided with the healthcare service they require. 221. Given the above, it is our judgement to keep the cost base equal to the revenue that would be received under 2016/17 prices. 4.6. Volatility 222. To reduce the volatility from introducing a new currency design we have adjusted prices in the some subchapters such that services recover 75% of the initial estimated loss. Tariff prices outside of these subchapters have been topsliced to pay for this revenue adjustment. The table below displays the adjustments factors: Table 9: Subchapters and uplift adjustments Subchapter Subchapter description Uplift adjustment HC Spinal Procedures and Disorders 3.9% HD Musculoskeletal and Rheumatological Disorders 0.9% HE Orthopaedic Disorders 11.1% HN Orthopaedic Non-Trauma Procedures 5.3% HT Orthopaedic Trauma Procedures 7.9% LD Renal Dialysis for Chronic Kidney 10.4% 59 We commissioned a review into the cost base from FTI. This can be found at: improvement.nhs.uk/resources/national-tariff-1719-consultation 132 Error! No text of specified style in document. Error! No text of specified style in document. Subchapter Subchapter description Disease Uplift adjustment PB Neonatal Disorders 15.0% SB Chemotherapy 4.1% SC Radiotherapy 6.3% All remaining chapters -1.2% 4.7. Cost uplifts 223. Every year, the efficient cost of providing healthcare changes because of changes in wages, prices and other inputs over which providers have limited control. We therefore make a forward-looking adjustment to the modelled prices to reflect expected cost pressures in future years. We refer to this as the cost uplift. 224. We have retained broadly the same methodology for 2017 and 2018/19 as for 2016/17 with some developments as discussed below. We recognise that forecasting inflation for two years is subject to increased uncertainty but we have used the best available information. 225. In determining the cost uplift adjustments we have considered six categories of cost pressures. These are: a. pay costs b. drugs costs c. other operating costs d. changes in the cost associated with CNST payments e. changes in capital costs (ie changes in costs associated with depreciation and private finance initiative payments) f. costs arising from new requirements in the Mandate to NHS England. We call these changes ‘service development’ costs. There are no adjustments from the Mandate for service development in 2017/18 or 2018/19. 226. The adjustments are included in a total cost uplift factor which is then applied to the modelled or rolled-over prices, except, as explained below, for most of the CNST increases. In setting the general cost uplift factor , each cost category is assigned a weight reflecting the proportion of total expenditure. These weights are based on aggregate provider expenditure obtained from DH’s published 2015/16 financial accounts. Figure 2 shows the weights applied to each cost category. 133 Error! No text of specified style in document. Error! No text of specified style in document. Figure 2: Breakdown of the tariff cost uplift 227. Below, we set out our method for estimating the level of each cost uplift component and the CNST adjustments. Pay 228. As shown in Figure 2, pay costs are a major component of providers’ aggregate input costs, so it is important that we reflect changes in these costs as accurately as possible when setting national prices. 229. Pay-related inflation has four elements. These are: a. pay settlements: the increase in the unit cost of labour reflected in pay awards for the NHS b. pay drift: the tendency for staff to move to a higher increment or to be upgraded and also includes the impact of overtime c. staff group mix: the movement in the average unit cost of labour due to changes in the overall staff mix (e.g. the relative proportions of senior and junior staff, or the relative proportions of specialist and non-specialist staff). d. extra overhead labour costs: there are two new charges for NHS providers, the apprenticeship levy and the immigration skills charge, both due to be implemented from 1 April 2017. 230. We are using DH’s central estimates for these components. DH maintains the most accurate and detailed records of labour costs in the NHS, and is directly involved in pay negotiations. We are assuming pay drift and group mix effects of 0.7% in 2017/18 and 1.0% in 2018/19. In arriving at these figures, an 134 Error! No text of specified style in document. Error! No text of specified style in document. adjustment of -0.3% has been made to the DH projections for pay drift and staff mix to reduce or exclude elements of pay inflation that lead to extra output and thus are remunerated through activity rather than price. 231. The pay award is in line with public sector pay policy of 1% and this is assumed to be the same for both 2017/18 and 2018/19. The 1% pay award assumption is a limit to the average pay award set by HM Treasury. A greater increase for lower paid staff would have to be offset by a lower increase for higher paid staff. 232. The combined impact of pay drift and group mix for tariff purposes is assumed to be 0.7% in 2017/18 and 1.0% in 2018/19. 233. The apprenticeship levy is estimated to add a net 0.3% to the total wage bill in 2017/18 (with no further impact in 2018/19). This comprises 0.4% expected gross costs, offset by 0.1% financial benefit, as employers can access funding for the training of apprentices. 234. The immigration skills charge is estimated to add 0.1% to the total wage bill in 2017/18 (with no further impact in 2018/19). 235. In total, the projection is an increase in the pay bill of 2.1% in 2017/18 and 2.1% in 2018/19. Drugs costs 236. The drugs cost uplift is intended to reflect increases in drugs expenditure per unit of activity. Although drugs costs are a relatively small component of total provider expenditure (approximately 8%), they have historically grown faster than other costs. This has made drugs costs one of the larger cost uplift components in some years. 237. Our approach is a development of that used in previous years which uses a forecast increase in expenditure and removes the increase in costs resulting from activity to identify the cost increase due to price increases. This is because providers will be paid for increased drugs use because of the increase in volumes and therefore payments. We have also made a new adjustment to seek to exclude the impact of the more rapid forecast of price growth in high cost drugs paid for on a pass-through basis outside of tariff. As the cost of these drugs is remunerated outside the tariff, it is not correct to include it in our calculation of tariff inflation. 238. To reflect the expected increase in drugs costs, we have used DH’s estimates as the basis for our calculation. This estimate is based on long-term trends and DH’s expectation of new drugs coming to market, and other drugs that will cease to be provided solely under patent in the coming 12 months. DH has provided us with its best estimate of the increase in drugs total costs for 135 Error! No text of specified style in document. Error! No text of specified style in document. providers. The figures are 5.8% in 2017/18 and 5.0% in 2018/19. We then adjust these by: calculating a revised figure for tariff drugs, by assuming 6.2% cost growth in the proportion of drugs expenditure accounted for by pass-through drugs. This figure is based on NHS England analysis of likely expenditure growth in high cost drugs (9% average growth) less an assessment of overall efficiencies required of specialised commissioning (2.6%)60 removing assumed underlying activity growth of 2.5% in both years as increases in activity are covered by each additional unit paid for not increases in price per unit recognising the uncertainty associated with these adjustments, particularly for pass through drugs, setting the growth figure to be at least the Gross domestic product (GDP) deflator estimated by the Office of Budget Responsibility (OBR) each year. 239. This results in assumed drugs cost inflation of 2.8% in 2017/18 and 2.1% in 2018/19. Other operating costs 240. Other operating costs include general costs such as medical, surgical and laboratory equipment and fuel. For this category of cost uplift, we have used the forecast of the GDP deflator estimated by the OBR as the basis of the expected increase in costs. The GDP deflator, from June 2016,61 is 1.8% in 2017/18 and 2.1% in 2018/19. In both years this translates to a 0.4% uplift once the weighting of the increase is taken into consideration. Clinical Negligence Scheme for Trusts 241. The Clinical Negligence Scheme for Trusts (CNST) is an indemnity scheme for clinical negligence claims. Providers make a contribution to the scheme to cover the legal and compensatory costs of clinical negligence.62 The NHS Litigation Authority (NHSLA) administers the scheme and sets the contribution that each provider must make to ensure that the scheme is fully funded each year. 242. Following the previous DH approach, we have allocated the increase in CNST costs to core HRG subchapters, to the maternity delivery tariff and A&E services in line with the average cost increases that will be paid by providers. This approach to the CNST uplift is different to other cost uplifts. While other cost 60 Note that the percentages do not sum due to compounding effects Published at www.gov.uk/government/statistics/gdp-deflators-at-market-prices-and-money-gdpjune-2016-quarterly-national-accounts 62 CCGs and NHS England are also members of the CNST scheme. 61 136 Error! No text of specified style in document. Error! No text of specified style in document. uplifts are estimated and applied across all prices, the estimate of the CNST cost increase differs according to the mix of services delivered by providers. To reflect these differences in CNST payments, the cost uplift is differentially applied across HRG subchapter, A&E services and for the maternity delivery tariff. Each relevant HRG is uplifted based on the change in CNST cost across specialties mapped to HRG subchapters. This means that our cost uplifts reflect, on average, each provider’s relative exposure to CNST cost growth, given their individual mix of services and procedures.63. 243. The table on the next page lists the percentage uplift that we have applied to each HRG subchapter to reflect the increase in CNST costs. 244. Most of the increases in CNST costs are allocated at HRG subchapter level, maternity tariff or A&E, but a small residual amount (about £18 million in 2017/18 and £22.1 million in 2018/19) is unallocated at a specific HRG level. This unallocated figure is redistributed as a general uplift across all prices. We have calculated the uplift due to this pressure as 0.02% in both 2017/18 and 2018/19. (though this is given as 0.0% in the table below due to rounding). 63 For example, maternity services have been a major driver of CNST costs in recent years. For this reason, a provider delivering maternity services as a large proportion of its overall service mix would probably find that its CNST contributions (set by the NHSLA) have increased more quickly than the contributions of other providers. However, the cost uplift reflects this, since the CNST uplift is higher for maternity services. This is consistent with the approach previously taken by DH. 137 Error! No text of specified style in document. Error! No text of specified style in document. Table 10: CNST tariff impact by HRG subchapter HRG sub chapter 2017/18 up lift (%) 2018/19 uplift (%) HRG sub chapter 2017/18 upli ft (%) 2018/19 uplift (%) HRG sub chapter 2017/18 uplif t (%) 2018/19 uplift (%) AA 0.72% 0.89% JC 0.67% 0.80% PP 1.25% 1.53% AB 0.41% 0.54% JD 0.40% 0.49% PQ 0.58% 0.71% BZ 0.54% 0.68% KA 0.48% 0.63% PR 1.14% 1.41% CA 0.34% 0.46% KB 0.22% 0.25% PV 1.08% 1.34% CB 0.36% 0.45% KC 0.20% 0.22% PW 1.33% 1.62% CD 0.16% 0.19% LA 0.18% 0.20% PX 1.10% 1.35% DZ 0.17% 0.20% LB 0.37% 0.45% SA 0.30% 0.37% EB 0.26% 0.31% MA 0.22% 0.37% VA 0.83% 1.08% EC 0.26% 0.33% MB 0.41% 0.58% WH 0.49% 0.61% ED 0.23% 0.32% PB 1.12% 1.38% WJ 0.22% 0.26% EY 0.29% 0.36% PC 1.18% 1.45% YA 2.71% 3.55% FZ 0.56% 0.71% PD 1.33% 1.63% YD 0.29% 0.33% GA 0.56% 0.72% PE 0.94% 1.15% YF 0.57% 0.73% GB 0.27% 0.34% PF 1.14% 1.40% YG 0.26% 0.31% GC 0.52% 0.65% PG 0.75% 0.92% YH 0.91% 1.17% HC 0.84% 1.10% PH 0.86% 1.07% YJ 0.72% 0.92% HD 0.49% 0.60% PJ 1.24% 1.51% YL 0.23% 0.28% HE 1.51% 1.92% PK 0.74% 0.91% YQ 0.71% 0.91% HN 0.83% 1.08% PL 0.79% 0.97% YR 0.75% 0.95% HT 0.92% 1.20% PM 0.24% 0.30% VB 1.94% 1.90% JA 0.84% 1.05% PN 0.70% 0.85% Maternity 6.36% 7.54% Source: The NHS Litigation Authority. Note: * Maternity is delivery element only 140 Error! No text of specified style in document. Error! No text of specified style in document. Capital costs (changes in depreciation and private finance initiative payments) 245. Providers’ costs typically include depreciation charges and PFI payments. As with increases in operating costs, providers should have an opportunity to recover an increase in these capital costs. 246. In previous years, DH reflected changes in these capital costs when calculating cost uplifts, and we have adopted the same approach for 2017/18 and 2018/19. Specifically, we have applied DH’s projection of changes in overall depreciation charges and PFI payments. 247. In aggregate, DH projects PFI and depreciation costs to grow by 3.0% in 2017/18 and 2.9% in 2018/19. These both translate to a 0.2% uplift on tariff prices. Service development 248. The service development uplift factor reflects the expected extra unit costs to providers of major initiatives that are included in the Mandate.64 There are no major initiatives anticipated in the Mandate to be funded through national prices in 2017/18 or 2018/19, and no uplift is to be applied for either year. 4.7.2. Summary of data for cost uplifts 249. Given the above, we have calculated the total cost uplift factor for both 2017/18 and 2018/19 national prices as 2.1%, as shown in the table below. This excludes the targeted CNST adjustments. Table 11: Cost uplift factors Uplift factors Weighted average estimate (uplift x weighting) 2017/18 2018/19 Pay costs 1.3% 1.3% Drugs costs 0.2% 0.2% Other operating costs 0.4% 0.4% Unallocated CNST 0.0% 0.0% Capital costs 0.2% 0.2% Total 2.1% 2.1% Notes: 64 Unallocated CNST refers to CNST cost increases not associated with specific HRG subchapters. Numbers may not add up exactly due to rounding. The Mandate to NHS England sets out objectives for the NHS and highlights the areas of health care where the government expects to see improvements. 141 Error! No text of specified style in document. 4.8. Efficiency 250. The efficiency factor for 2017/18 is 2%. The efficiency factor for 2018/19 is also 2%. 251. We use evidence-based data to set the efficiency factor. As a starting point we use the Deloitte analysis produced to inform us on the efficiency factor for the 2015/16 national tariff. The initial analysis was based on an econometric model and a supporting case study.65 The model used data from 165 acute trusts for the period between the 2008/09 and 2012/13 financial years. For the 2016/17 national tariff we developed further the Deloitte’s econometric model by changing our measurement of some variables and by incorporating 2013/14 data into the model.66 252. For the 2017/18 national tariff we considered more ways in which we might develop the existing econometric model, as well whether any update to the evidence was needed. We have decided to update the 2016/17 analysis to include 2014/15 data67. This allows us to account for the most recent changes in efficiency in our decision on the efficiency factor setting. We have also improved the measurement of deprivation in the model.68 253. Our modelling suggests that trusts become 1% more efficient each year on average. Around this trend we estimate that there is substantial variation in efficiency, which could justify an efficiency factor greater than 1% as poorer performers can improve more than the average. For instance, if the average performer catches up to the 60th centile we estimate that this would release 1.6% efficiency in addition to trend efficiency. Given the financial pressures on the NHS, we believe that it is appropriate to set a challenging but achievable efficiency factor for 2017/18. We are proposing an efficiency factor of 2%. 254. For 2018/19 we assume trend efficiency will continue and this goes in line with the other government reviews.69 Given that the financial pressures on the NHS are likely to continue, we again consider it appropriate to set a challenging but achievable efficiency factor. We therefore consider that it appropriate to adopt an efficiency factor of 2% for 2018/19. 65 See Deloitte report for detailed description of the method. The report of the efficiency factor for the 2016/17 national tariff can be found here: Evidence on the efficiency factor. 67 Where changes in data collections mean data is no available for variables, for instance certain disease’s prevalence in the Quality Outcomes Framework, we have extrapolated based on historical data. 68 In 2016/17 the estimate of the level of deprivation a trust faced was calculated using the area-level index of multiple deprivation, mapped to trusts by the average patient flow. This was time-invariant. This year we have recalculated patient flow each year. This enables us to capture changes in the deprivation profile a trust may face due to changes in catchment area served over time. 69 A recent Carter review report on operational productivity and performance suggests the NHS is expected to deliver efficiencies of 2-3% per year, which could represent savings of 10-15% by 2021. 66 142 Error! No text of specified style in document. 5. National variations to national prices 255. In some circumstances, it is appropriate to make national adjustments to national prices. For example, adjustments may reflect local differences in costs that the formulation of national prices has not taken into account, or share risk more appropriately among parties. 256. We refer to these nationally determined adjustments as ‘national variations’ to national prices. We refer to the price, after application of national variations, as the ‘nationally determined price’. 257. Specifically, each national variation aims to achieve one of the following: a. improve the extent to which the actual prices paid reflect location-specific costs b. improve the extent to which the actual prices paid reflect the complexity of patient need c. provide incentives for sharing the responsibility for preventing avoidable unplanned hospital stays d. share the financial risk appropriately following (or during) a move to new payment approaches. 258. This section sets out the national variations specified in the 2017/19 NTPS. 259. The national variations have changed from those set out in the 2016/17 NTPS in one area, top-ups for specialised services. All other national variations remain the same. 260. National variations are an important part of the overarching payment system framework. They sit alongside local variations and local modifications. Providers and commissioners should note that: a. National variations only apply to services with a national price. b. If a commissioner and a provider choose to bundle services that have a mix of national prices and locally determined prices, national variations can in effect be disapplied or modified by local variations agreed in accordance with the applicable rules (see Section 6.2). c. In the case of an application or agreement for a local modification (see Section 6.3), the analysis must reflect all national variations that could alter the price payable for a service (ie it is the price after any national variations have been applied that should be compared with a provider’s costs). d. Where a new service is commissioned that does not have a national price, rules for local price-setting apply (see Section 6.4). 143 Error! No text of specified style in document. 261. The rest of this section covers four types of national variation to national prices: a. variations to reflect regional cost differences b. variations to reflect patient complexity c. variations to help prevent avoidable hospital stays d. variations to support transition to new payment approaches. 5.1. Variations to reflect regional cost differences: the market forces factor 262. National prices are calculated on the basis of average costs and do not take into account some features of cost that are likely to vary across the country. The purpose of the market forces factor (MFF) is to compensate providers for the cost differences of providing healthcare in different parts of the country. Many of these cost differences are driven by geographical variation in land, labour and building costs, which cannot be avoided by NHS providers, and therefore a variation to a single national price is needed. 263. The MFF takes the form of an index. This allows a provider’s location-specific costs to be compared with every other organisation. The index is constructed to always have a minimum value of 1.00. The MFF payment index operates as a multiplier to each unit of activity. The example below explains how this works in practice. A patient attends an NHS trust for a first outpatient attendance, which has a national price of £168. The NHS trust has an MFF payment index value of 1.0461. The income that the trust receives from the commissioner for this outpatient attendance is £176 (£168 x 1.0461). 264. Further information on the calculation and application of the MFF is provided in the supporting guidance document A guide to the market forces factor. 265. The 2016/17 MFF indices remain unchanged for 2017 to 2019, except in cases where organisations have merged or are merging or are undergoing some other organisational restructuring (such as dissolution) before 1 April 2017. The MFF index values for each NHS provider are in Annex B1. 266. Independent sector providers should adopt the MFF of the NHS trust or NHS foundation trust nearest to the location where the services are being provided. 267. Organisations merging or undergoing other organisational restructuring after 31 March 2017 will not have a new MFF set during the period covered by the tariff. 144 Error! No text of specified style in document. For further guidance in these circumstances see the supporting document A guide to the market forces factor 268. Where there is a relevant acquisition or merger prior to 31 March 2017 a new MFF will be calculated and will apply from 1 April 2017. Providers should notify NHS Improvement by email ([email protected]) of any planned changes that might affect the MFF index. 5.2. Variations to reflect patient complexity: top-up payments 269. National prices in this national tariff are calculated on the basis of average costs. They do not therefore take into account cost differences between providers that arise because some providers serve patients with more complex needs. The purpose of top-up payments for some specialised services is to recognise these cost differences and to improve the extent to which prices paid reflect the actual costs of providing healthcare, when this is not sufficiently differentiated in the Healthcare Resource Group (HRG) design. Only a few providers are commissioned to provide such care. 270. In order to set payments we make an adjustment to the (a top-slice) to the total amount of money allocated to national prices and reallocated this money to providers of specialised services. 271. Specialised service top-ups have been part of the payment system since 2005/06. The current list of qualifying specialised services, and the design and calculation of specialised top-ups for these services, is informed by research undertaken in 2011 by the Centre for Health Economics (CHE) at the University of York.70 272. These amounts paid and the providers that are eligible are based on the Prescribed Specialised Services definitions provided by the NHS England Specialised Commissioning team. The list of eligible providers is contained within the PSS operational tool.71 273. Top-up payments are only made for inpatient care Table 12: Top up impact by specialist area 2017/19 Top up area Top up amounts All top up areas £478.5M Spinal £13.9M Neurosciences £117.7M Orthopaedics £4.2M 70 Estimating the costs of specialised care and Estimating the Costs of Specialised Care: Updated Analysis Using Data for 2009/10. 71 http://content.digital.nhs.uk/casemix/prescribedspecialisedservices 145 Error! No text of specified style in document. Top up area Top up amounts Children £209.6M Cancer £16.7M Respiratory £32.3M Cardiac £73.3M Other £10.7M 274. We have changed the top-ups payable for 2017 to 2019 based on these definitions to introduce payments for new areas including cancer, respiratory and cardiac care. 275. A list of the services eligible for top-ups, the adjustments and their flags can be found in Annex B1. 5.3. Variations to help prevent avoidable hospital stays 5.3.1. Marginal rate emergency rule 276. The marginal rate emergency rule was introduced in 2010/11 in response to a growth in emergency admissions in England that could not be explained by population growth and A&E attendance growth alone.72 It was made up primarily of emergency spells lasting less than 48 hours. 277. The purpose of the marginal rate emergency rule is twofold. It is intended to incentivise: a. lower rates of emergency admissions b. acute providers to work with other parties in the local health economy to reduce the demand for emergency care. 278. The marginal rate emergency rule sets a baseline monetary value (specified in GBP) for emergency admissions at a provider.73 A provider is then paid 70% of the national price for any increases in the value of emergency admissions above this baseline. Further guidance for commissioners on investing retained funds can be found here.74 279. While the original design of the marginal rate emergency rule set a national baseline expectation, our review of the policy in 2014/15 identified that in some 72 Over 70% of emergency admissions are patients who are admitted following an attendance at A&E. 73 As defined in the NHS Data Model and Dictionary. These codes are: 21-25, 2A, 2B, 2C or 2D (or 28 if the provider has not implemented CDS 6.2). 74 improvement.nhs.uk/resources/national-tariff-1719-consultation 146 Error! No text of specified style in document. localities, change is needed to ensure the policy works more effectively. For example, where there have been major changes to the pattern of emergency care in a local health economy or insufficient progress towards demand management and discharge management schemes. In 2014/15 we therefore updated the marginal rate emergency rule to: a. require baseline adjustment where necessary to account for significant changes in the pattern of emergency admissions faced by providers in some localities b. ensure retained funds from the application of the rule are invested transparently and effectively in appropriate demand management and improved discharge schemes. 280. The rule continues to include the changes to local baseline setting and reinvestment transparency introduced in 2014/15. Setting and adjusting the baseline 281. A provider’s total baseline value must be assessed as the value of all emergency admissions at the provider in 2008/09 according to the relevant year’s NTPS prices (2017/18 or 2018/19).75 A contract baseline value must be calculated for each contractual relationship. 282. We recognise that changes to HRGs since 2008/09 and the introduction of BPTs76 cause difficulties in setting baseline values. Therefore, we expect providers and commissioners to take a pragmatic approach in agreeing a baseline value: for example, by applying an uplift to a previously agreed baseline to reflect average changes in price levels. 283. We know that some providers have seen material changes to the volume and value of emergency admissions. Where changes to admission volumes and values result from changes in the local health economy, adjustments to the baseline value continue to be necessary. Examples of relevant changes to consider include: a. service reconfiguration at a nearby hospital b. change in the local population because of a new housing development or retirement community 75 76 Some emergency activity is excluded from the marginal rate rule and should not be included in the calculation of baseline values, including: activity that does not have a national price, non-contract activity, activity covered by BPTs (except for the BPT that promotes same-day emergency care), A&E attendances, outpatient appointments, and contracts with commissioners falling in responsibility of DAs. Activity reimbursed by BPTs is not subject to the marginal rate, with the exception of the BPT for same-day emergency care. 147 Error! No text of specified style in document. c. change in the relative market shares of local acute providers, where an increase in admissions at one provider is offset by a decrease at another. 284. Making local adjustments may therefore be necessary to ensure a balance between maintaining positive incentives to manage demand and ensuring providers receive sufficient income to provide safe and sustainable emergency care. Baseline values must therefore be set according to 2008/09 activity levels, but where a provider requests a review of the baseline, a joint review must be undertaken involving both the provider(s) and the commissioner(s). Following a review, baseline adjustments must be made where there have been material changes in the patterns of demand for or supply of emergency care in a local health economy, or when material changes are planned. 285. Baseline values (specified in £s) should then be updated to account for material changes that the affected provider cannot directly control. For example, a change in demand at a provider resulting from the reduction of a nearby hospital’s A&E department opening hours will be considered a change outside the control of the provider and so may require an adjustment to the baseline. On the other hand, changes in the number of admissions that result from a reduction in consultant presence in the provider’s A&E department will not necessitate an adjustment to the baseline. 286. When assessing supply and demand for emergency admissions, commissioners should consider the factors set out in the table below. Table 13: Examples of where adjustments to baseline values may be required Driver of change Reason for change Adjustment necessary? Change in demand for admissions at a provider Movement of demand between acute providers, resulting in altered market shares Yes, if material and off-setting between providers Movement of demand between out-ofhospital care and acute care, or between secondary and tertiary providers Yes, where it reflects a change in commissioning patterns77 Change in total demand in the locality due to demographics Yes, if exceptional and demonstrable Changes in clinical threshold for admissions for certain procedures, for No, unless this reflects a change in Changes in the provision of 77 We expect commissioning patterns to reflect best clinical practice, including where this results in the decommissioning of out-of-hospital activity (eg closure of a walk-in centre) or a change in the arrangements of emergency after-care for post-discharge complications by tertiary providers (eg of cancer patients). 148 Error! No text of specified style in document. Driver of change Reason for change emergency services at a provider example due to increased risk-aversion in clinical assessment in A&E78 Adjustment necessary? commissioning patterns Changes in the emergency services commissioned by CCGs (eg designation as trauma centre or hyperacute stroke unit) Yes, if material Changes in the method for coding or counting emergency admissions Yes, recalculate 2008/09 activity according to new method 287. When calculating baseline values, both increases and decreases in the value of activity should be considered equally according to the criteria in Table 11. 288. Where emergency activity moves from one provider to another in a local health economy (for example, due to service reconfiguration, changing market share or changes in commissioning patterns), the baseline of each provider should be adjusted symmetrically so that, as far as possible, the sum of their baseline values remains constant, all other things being equal. 289. The agreed baseline value (specified in £s) must be explicitly stated in NHS Standard Contracts and in the plans that set out how retained funds are to be invested in managing demand for emergency care. A rationale for the baseline value should also be set out clearly, along with the evidence used to support agreement, for example the support from their local system resilience group. 290. Acute providers or other parties in the local health economy should raise any concerns about baseline agreements with NHS England, through its local offices. Where local consensus cannot be reached, the local NHS England office will provide mediation, in the context of NHS England’s CCG assurance role, to ensure CCG plans are consistent with this guidance. Where necessary, NHS Improvement and NHS England will consider enforcing the rules set out in this guidance through their enforcement powers. Where the local NHS England office is the commissioner, the NHS England regional team will provide mediation. In all cases, NHS Improvement must be notified (via [email protected]) where concerns have been raised, and whether (and how) plans were changed as a result. 78 We recognise that establishing a definitive change to clinical practice may be difficult. We suggest that providers and commissioners examine available data, for example any trends in the casemix or age-adjusted conversion rate, admissions patterns by time of day, or changes to staffing levels or patterns (eg use of locums, consultant cover for A&E). Clinical audits and/or insight from the local system resilience group may also help facilitate agreement. 149 Error! No text of specified style in document. Application of the rule 291. The marginal rate rule is applied individually to any contractual relationship. It is applied to any contract where the value of emergency admissions has increased above the baseline value for that contract. 292. Some providers may have seen an overall reduction in their emergency admissions against their baseline value; this reflects a reduction in admissions in some contracts that is offset by small increases in admissions in other contracts. Such small increases may be due to annual fluctuations in admission numbers over which the provider has limited control. Therefore, small contracts79 are not subject to the marginal rate rule, provided that the overall value of emergency admissions at the provider has decreased relative to their overall baseline value across all of their contracts. 293. The marginal rate emergency rule should be applied to the value of a provider’s emergency admissions after the application of any other national adjustments for MFF, short-stay emergency spells, long-stay payments, or specialised service top-ups. Where more than one commissioner is involved in a particular contractual relationship, arrangements should be agreed locally according to the payment flows to each commissioner set out in the contract. 294. The marginal rate emergency rule does not apply to: a. activity which does not have a national price b. non-contract activity c. activity covered by BPTs, except for the BPT for same-day emergency care80 d. A&E attendances e. outpatient appointments f. contracts with commissioners falling within the responsibility of devolved administrations. 5.3.2. Emergency readmissions within 30 days 295. To provide the most suitable care for patients when they leave hospital, providers need robust discharge planning arrangements. Planning may include 79 80 A small contract is one where the baseline value is less than 5% of the provider’s total baseline value across all contracts. The marginal rate policy will apply to activity covered by the BPT for same-day emergency care only. Although the BPT is designed to encourage providers to care more quickly for patients who would otherwise have had longer stays in hospital, it may also create an incentive for providers to admit patients for short stays who would otherwise not have been admitted. 150 Error! No text of specified style in document. co-ordinating with the patient’s family and GP regarding medication or arranging post-discharge equipment, rehabilitation or reablement with a community or social care provider. 296. The 30-day readmission rule was introduced in 2011/12 in response to a significant increase in the number of emergency readmissions over the previous decade. It provides an incentive for hospitals to reduce avoidable unplanned emergency readmissions within 30 days of discharge. Hospitals may reduce the number of avoidable emergency readmissions by investing in, for example, better discharge planning, more collaborative working and better co-ordination of clinical intervention with community and social care providers. 297. We have retained this national variation. The rest of this section defines an emergency readmission for the purpose of the readmission rule and sets out how the rule should be applied. Further guidance for commissioners on investing retained funds can be found here.81 Definition of an emergency readmission 298. An emergency readmission is any readmission that:82 a. happens up to 30 days from discharge from initial admission b. has an emergency admission method code83 c. has a national price. 299. There will continue to be exclusions from this policy that apply to emergency readmissions following both elective and non-elective admissions. These exclusions were informed by clinical advice on scenarios in which it would not be fair or appropriate to withhold payment. Commissioners should continue to pay providers for readmitted patients when any of these exclusions apply. The excluded readmissions are: a. any that do not have a national price b. maternity and childbirth84 c. cancer, chemotherapy and radiotherapy85 81 https://improvement.nhs.uk/resources/national-tariff-1719-consultation That is, any readmission irrespective of whether the initial admission has a national price, is to the same provider or is non-contract activity and irrespective of whether the initial admission or the readmission occurs in the NHS or independent sector. 83 As defined in the NHS Data Model and Dictionary. 84 Where the initial admission or readmission is in HRG subchapter NZ (obstetric medicine). 82 151 Error! No text of specified style in document. d. patients receiving renal dialysis e. patients readmitted after an organ transplant f. young children (under four years old at the time of readmission) g. patients who are readmitted having self-discharged against clinical advice86 h. emergency transfers of an admitted patient from another provider, where the admission at the transferring provider was an initial admission87 i. cross-border activity where the initial admission or readmission is in Northern Ireland, Scotland or Wales. Application of the rule 300. To implement the 30-day emergency readmission rule, providers and commissioners must: a. undertake a clinical review of a sample of readmissions. Providers and commissioners are not required to undertake a clinical review where there continues to be local agreement on the readmissions threshold b. set an agreed threshold (informed by the clinical review), above which readmissions will not be paid c. determine the amount that will not be paid for each readmission above the threshold. Step 1 clinical review 301. Acute providers and commissioners must work together to clinically review a sample of readmissions to determine the proportion that could have been avoided. The review team should recognise that some emergency readmissions are, in effect, planned for and therefore should not be considered avoidable unplanned readmissions.88 85 86 87 88 Where the initial admission or readmission includes a spell first mentioned or primary diagnosis of cancer (ICD-10 codes C00-C97 and D37-D48) or an unbundled HRG in subchapter SB (chemotherapy) or SC (radiotherapy). Included in discharge method code 2 in the initial admission. Emergency transfers are coded by admission method code 2B (or 28 for those providers who have not implemented CDS 6.2). Codes 2B and 28 include other means of emergency admission, so providers may wish to adopt additional rules to flag emergency transfers. For example, following an operation, a patient may be discharged from hospital and, with appropriate care in the community setting and provision of information, this may be the best course of care for them even if there is a possibility of an emergency readmission occurring within 30 days of discharge. 152 Error! No text of specified style in document. 302. The review team must be clinically led and independent, and reviews must be informed by robust evidence. Relevant clinical staff from the provider trust and primary care services must be included as well as representatives from the commissioning body, local primary care providers and social services. Appropriate consideration should be given to information governance with regard to protecting the confidentiality of patient medical records.89 303. For each patient in the sample, the review team should decide whether the readmission could have been avoided through actions the provider, the primary care team, community health services or social services, or a body contracted to any of these organisations might have taken.90 304. The aim is not to identify poor quality care in hospitals but to identify actions by any appropriate agency that could have prevented the readmission. The analysis should also look at whether there are particular local problems and promote discussion on how services could be improved, who needs to take action, and what investment should be made. Step 2 setting the threshold 305. The clinical review (step 1) will inform local agreement of a readmissions threshold, above which the provider will not receive any payment. Separate thresholds can be set for readmissions following elective admissions and readmissions following non-elective admissions. Step 3 determining the amount that will not be paid 306. The amount that will not be paid for any given readmission above the agreed threshold is the total price associated with the continuous inpatient readmission spell,91 including any associated unbundled costs, such as critical care or high cost drugs. 307. Where a patient is readmitted to a different provider (from that of initial admission), the second provider must be paid. However, the commissioner will deduct an amount from the first provider. 92 89 90 91 92 More information can be found on NHS Digital’s Information Governance website. systems.digital.nhs.uk/infogov The King’s Fund paper Avoiding hospital admissions – what does the research evidence say? illustrates some examples of interventions which are more likely and less likely to succeed in reducing readmissions. The spell in this context includes all care between admission and discharge, regardless of any transfers. The amount to be deducted from the first provider should be considered as equivalent to what would have been deducted had the patient been readmitted to the first provider, but with the second provider’s MFF applied. This also applies where the readmission includes an emergency transfer. 153 Error! No text of specified style in document. 308. The three steps for implementing the readmission rule are summarised in Figure 3. This illustrates how the clinical reviews inform the proportion of readmissions that could have been avoided; which, in turn, informs an agreed threshold above which readmissions will not be paid. Total non-payment is equal to the numbers of readmissions above the threshold multiplied by the price of each readmission. Figure 3: Implementing the emergency readmissions rule Step 1 Number of readmissions Undertake clinical review to determine avoidable readmissions Step 2 Agree threshold, above which readmissions will not be reimbursed Step 3 Determine number of readmissions that will not be reimbursed and the amount that will be withheld for each of these readmissions 5.4. Variations to support transition to new payment approaches 309. New or changing payment approaches can alter provider income or commissioner expenditure. For some organisations, the financial impact can be significant and could be difficult to manage in one step. 5.4.1. Best practice tariff for primary hip and knee replacements 310. Section 4 sets out details of the primary hip and knee replacement BPT introduced in 2014/15 to promote improved outcomes for patients. 311. We will retain the approach adopted in 2014/15 which recognised that there are circumstances in which some providers will be unable to demonstrate that they meet all the best practice criteria, but where it would be inappropriate not to pay the full BPT price. These circumstances are: 154 Error! No text of specified style in document. a. when recent improvements in patient outcomes are not yet reflected in the nationally available data b. when providers have identified why they are an outlier on patient reported outcome measures (PROMs) scores and have a credible improvement plan in place, the impact of which is not yet known c. when a provider has a particularly complex casemix that is not yet appropriately taken into account in the casemix adjustment in PROMs. 312. Under this national variation, commissioners must pay the full BPT if the provider can show that any of the above circumstances apply. The rationale for using a variation in these three circumstances is explained below. Recent improvements 313. Because of the lag between collecting and publishing data, recent improvements in patient outcomes may not show in the latest available data. In these circumstances, providers will need to provide other types of evidence to support a claim that their outcomes have improved since the published data was collected. Planned improvements 314. Where providers have identified shortcomings with their service and can show evidence of a credible improvement plan, commissioners must continue to pay the full BPT. This is necessary to mitigate the risk of deteriorating outcomes among providers not meeting the payment criteria. 315. In this situation, the variation would be a time-limited agreement. Published data would need to show improvements for payment at the BPT level to continue. 316. There are many factors that may affect patient outcomes, and it is for local providers and commissioners to decide how to achieve improvements but the following suggestions may be useful: a. Headline PROMs scores can be broken down into individual domain scores. If required, providers can also request access to individual patient scores through NHS Digital. Providers might look at the questions on which they score badly to see why they are an outlier: for example, those relating to pain management. b. Individual patient outcomes might also be compared with patient records to check for complications in surgery or comorbidities that may not be accounted for in the formal casemix adjustment. It would also be sensible to check whether patients attended rehabilitation sessions after being discharged from hospital. 155 Error! No text of specified style in document. c. Reviewing the surgical techniques and prostheses used against clinical guidelines and National Joint Registry recommendations is another way providers might try to address poor outcomes. As well as improving the surgical procedure itself, providers could scrutinise the whole care pathway to improve patient outcomes by ensuring that weakness in another area is not affecting patient outcomes after surgery. d. Providers may also choose to collaborate with others that have outcomes significantly above average to learn from their service design. Alternatively, they might do a clinical audit. This is a quality improvement process that seeks to improve patient care and outcomes through a systemic review of care against expected criteria. Casemix 317. Providers that have a particularly complex casemix and cannot show they meet the best practice criteria may request that the commissioner continues to pay the full BPT. Although the PROMs results are adjusted for casemix, a small number of providers may face an exceptionally complex casemix that is not fully or appropriately accounted for. These providers will therefore be identified as outliers in the PROMs publications. Commissioners are likely to already be aware of such cases and must agree to pay the full BPT. We anticipate that any such agreement will only be valid until the casemix adjustment in PROMs better reflects the complexity of the provider’s casemix. 156 Error! No text of specified style in document. 6. Locally determined prices 318. National prices can sometimes be adjusted through local variations or, where they do not adequately reimburse efficient costs because of certain issues, through local modifications. Where there are no national prices, local prices must be agreed between commissioners and providers. 319. This section sets out the principles that apply to all locally determined prices (Section 6.1). It contains the rules for local variations (Sections 6.2) and the method used by NHS Improvement to assess local modifications (Sections 6.3). In addition it contains rules on local prices (Section 6.4). It also has guidance on the application of the principles, rules and method.93 320. This section is supported by the following information: a. Annex B5: guidance on currencies with no national price b. Annex B1 which lists high cost drugs, devices and procedures. c. Annex B3: Technical guidance for mental health clusters. d. New payment approaches for mental health services.94 321. It is also supported by the following documents available here:95 a. local variations template (relevant to Section 6.2) b. local modifications template and worked example (relevant to Section 6.3) c. local prices template (relevant to Section 6.4). 6.1. Principles applying to all local variations, local modifications and local prices 322. Commissioners and providers must apply the following three principles when agreeing a local payment approach: a. the approach must be in the best interests of patients b. the approach must promote transparency to improve accountability and encourage the sharing of best practice, and c. the provider and commissioner(s) must engage constructively with each other when trying to agree local payment approaches. 93 Commissioners have a duty to have regard to such guidance – 2012 Act, section 116(7). https://improvement.nhs.uk/resources/new-payment-approaches/ 95 www.gov.uk/guidance/nhs-providers-and-commissioners-submit-locally-determined-prices-tomonitor 94 157 Error! No text of specified style in document. 323. These principles are explained in more detail in sections 6.1.1 to 6.1.3 and are additional to other legal obligations on commissioners and providers. These include other rules set out in the national tariff, and the requirements of competition law, procurement law, regulations under Section 75 of the 2012 Act,96 and NHS Improvement’s provider licence. 6.1.1. Best interest of patients 324. Local variations, modifications and prices must be in the best interest of patients today and in the future. In agreeing a locally determined price commissioners and providers must therefore consider the following factors: a. quality: how will the agreement maintain or improve the outcomes, patient experience and safety of healthcare today and in the future? b. cost effectiveness: how will the agreement make healthcare more cost effective, without reducing quality, to enable the most effective use of scarce resources for patients today and in the future? c. innovation: how will the agreement support, where appropriate, the development of new and improved service delivery models which are in the best interest of patients today and in the future? d. allocation of risk: how will the agreement allocate the risks associated with unit costs, patient volumes and quality in a way that protects the best interests of patients today and in the future? 6.1.2. Transparency 325. Local variations, modifications and prices must be transparent. Increased transparency will make commissioners and providers more accountable to each other, patients, the general public and other interested stakeholders. Transparent agreements also mean that best practice examples and innovation in service delivery models or payment approaches can be shared more widely. In agreeing a locally determined price commissioners and providers must therefore consider the following factors: a. Accountability: how will relevant information be shared in a way that allows commissioners and providers to be held to account by one another, patients, the general public and other stakeholders? b. sharing best practice: how will innovations in service delivery or payment approaches be shared in a way that spreads best practice. 96 See the National Health Service (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 (S.I. 2013/500). 158 Error! No text of specified style in document. 6.1.3. Constructive engagement 326. Providers and commissioners must engage constructively with each other to decide on the mix of services, delivery model and payment approach that delivers the best value for patients in their local area. This process should involve clinicians, patient groups and other relevant stakeholders where possible. It should also facilitate the development of positive working relationships between commissioners and new or existing providers over time, as constructive engagement is intended to support better and more informed decision-making in both the short and long term. 327. In agreeing a locally determined price commissioners and providers must therefore consider the following factors: framework for negotiations: have the parties agreed a framework for negotiating local variations, modifications and prices that is consistent with the existing guidelines in the NHS Standard Contract and procurement law (if applicable)?97 information-sharing: are there agreed polices for sharing relevant and accurate information in a timely and transparent way to facilitate effective and efficient decision making? involvement of relevant clinicians and other stakeholders: are relevant clinicians and other stakeholders, such as patients or service users, involved in the decision-making process? short and long term objectives: are clearly defined short- and long- term strategic objectives for service improvement and delivery agreed before starting price negotiations? 6.1.4. Guidance on applying the principles applying to all local variations, local modifications and local prices Record-keeping 328. Providers and commissioners should maintain a record of how local payment approaches comply with the principles. The content and level of detail of this record will vary depending on the circumstances. For example, more information is likely to be required for high value contracts than for lower value contracts. Further (non-exhaustive) examples are provided in the box below. 97 The NHS Standard Contract is used by commissioners of healthcare services (other than those commissioned under primary care contracts) and is adaptable for use for a broad range of services and delivery models. 159 Error! No text of specified style in document. Examples of what information a record might contain Providers and commissioners should consider whether to include the following in their record: reasons for choosing to use a local payment approach details of any engagement with patients, community groups, carers and other third parties and how their views have been taken into account before agreeing the approach reasons for specifying the services in a particular way rationale for combining payment for several different services as a bundle and the composition of that bundle, if applicable analysis of how the services will be delivered in a way that is co-ordinated from the perspective of patients alongside other healthcare, health-related and social care services details of the due diligence applied to the information used to inform the local payment approach rationale for key terms of the agreement, for example, prices, quality requirements that the provider must satisfy, how performance will be assessed during the contract, the consequences of breaches, and the duration of the contract. How we will assess whether local payment approaches are in the best interests of patients 329. When assessing compliance with the requirement to apply the principle that local payment approaches must be in the best interests of patients, we will examine whether providers and commissioners have considered all relevant factors. The extent to which, and way in which, the four factors listed in Section 6.1.1 of the National Tariff need to be considered will differ according to the characteristics of the services and the circumstances of the agreement. 330. To have considered a relevant factor properly, we would expect providers and commissioners to have: a. obtained sufficient information b. used appropriately qualified/experienced individuals to assess the information c. followed an appropriate process to arrive at a conclusion. 331. It is up to providers and commissioners to determine how to consider the factors set out above based on the matter in hand. 160 Error! No text of specified style in document. Evaluation and sharing of best practice 332. We encourage commissioners and providers to use the rules for locally determined prices as a basis for considering how they can improve the payment system, especially where care is being delivered in a new way. We are interested in learning from commissioners and providers that are implementing new payment approaches to enhance system-wide incentives: for example, to focus on prevention, integration of care, improved outcomes and improved patient experiences. Such payment approaches might include pathway, capitation or outcomes-based payments. 333. To determine whether local payment approaches have achieved their desired objectives and inform future decision-making, we recommend that commissioners and providers plan to evaluate the success of new payment approaches. We encourage commissioners and providers to share the results of any evaluation processes. Guidance on a framework for constructive engagement 334. We believe that the principles will be consistent with existing practice for many providers and commissioners. However, we recognise that this will not always be the case, particularly where providers and commissioners do not have existing contractual relationships. 335. Below we set out a framework that could be used as a guide to facilitate constructive engagement where commissioners and providers do not already have a framework. It has been designed with local payment approaches agreed through negotiation rather than competitive procurement in mind. It includes four stages, which are explained in more detail below. In summary, to implement the framework in full, providers and commissioners would have to: a. establish a working group for contract negotiations in relation to locally determined prices b. define roles and responsibilities for members of the working group, including relevant clinicians and other stakeholders, where appropriate c. agree objectives, timescales and rules for the working group, including rules on information sharing, deadlines and the responsibilities of each party when providing or handling information for contract negotiations d. document progress and outputs for the working group and contract negotiation, including any planned evaluation, if appropriate. 161 Error! No text of specified style in document. Establish a working group 336. Providers and commissioners that use our framework should establish a working group, or designate an existing group, to take responsibility for local variations, modifications and prices in contract negotiations. The working group should: a. include appropriate representatives from the provider and commissioner, including senior clinical, financial and operational representatives b. have the authority to make commitments on behalf of the organisations represented. 337. Providers and commissioners are responsible for establishing a working group and should not require NHS Improvement’s involvement. Define roles and responsibilities 338. For the working group to be effective, it should agree and document the roles and responsibilities its members and the group as a whole. These may include the following: a. selection of a chairperson to lead the working group. The working group could be jointly chaired or the chair could rotate between represented groups if appropriate. Alternatively, an independent, jointly chosen and endorsed chair might be appropriate b. agreement on the representation required at each meeting of the working group for it to be quorate c. agreement on a timetable of meetings for the working group and a process for recording and approving minutes of the meetings, and other administrative processes. 339. Relevant clinicians and patient group representatives should be involved in the negotiation process and be invited to join working group meetings where appropriate. Involving clinicians and patients with front-line experience is important when determining how quality and efficiency may best be balanced, particularly across a range of services. Agree objectives, timescales and rules 340. Under our proposed framework, the working group should agree clear objectives, timescales and rules, including policies on information sharing and, where appropriate, processes to resolve disputes when the working group is not able to achieve its objectives.10 We explain each of these elements below. 162 Error! No text of specified style in document. 341. Providers and commissioners should agree short- and long-term objectives as part of their framework for negotiations. We would generally expect the working group to: a. clearly define the issues and the services within the scope of the working group b. set specific objectives in relation to each issue or group of services that is in scope c. agree when the objectives must be completed and how they should be measured d. agree a process for updating or changing objectives when appropriate e. agree clear long-term objectives that are consistent with the strategic plans of the parties in the working group. 342. Under our framework, we would expect the working group to agree a timescale and a deadline for agreeing local variations, modifications and prices. The timescale should include specific milestones and named individuals responsible for delivery. 343. We would encourage the working group to agree rules or guidelines that facilitate constructive engagement and effective contract negotiation. 344. The working group is most likely to be effective if it has access to relevant and accurate information provided in a timely manner and agreed by all parties. Information requests should be proportionate, recognising the cost of preparing and providing information to the group. 345. On this basis, we would expect the working group to decide what information is needed to agree local variations, local modifications or local prices. We would also expect the working group to set rules or guidelines on the way information is provided and used, including rules or guidelines on maintaining commercial confidentiality. 346. In negotiations on prices that apply under an existing commissioning contract, any dispute should be resolved using the procedure for dispute resolution under that contract. For contracts yet to be entered into (including contracts that will replace existing contracts), the working group may wish to agree a dispute resolution process in case it is unable to reach agreement on local variations, modifications or prices. It may be useful for the working group to: a. consider assistance that could be available from other organisations, for example support and advice from commissioning support units (CSUs) and NHS England’s regional teams 163 Error! No text of specified style in document. b. replicate the provisions for dispute resolution in the NHS Standard Contract98 c. agree when and how the working group should use these dispute resolution options. Document progress and outputs 347. The working group should document its progress and outputs. As well as meeting minutes, we expect it to prepare a constructive engagement report, covering: a. the agreed roles and responsibilities of the working group, including a list of its main representatives and the chair or co-chair b. the agreed objectives of the working group and the services covered c. a list of the meetings of the working group d. a clear statement of the outcome of the process, including points of agreement and disagreement. 348. This information could be used as evidence of compliance with the requirements for constructive engagement set out in Section 6 of the 2017/19 NTPS. 349. As well as the constructive engagement report, we encourage working groups to evaluate the payment approaches they agree, to inform future negotiations. 6.2. Local variations 350. Local variations are adjustments to a national price99 or a currency for a nationally priced service, agreed by one or more commissioner(s) and one or more provider(s). They only affect services specified in the agreement and the parties to that agreement. A local variation can be agreed for more than one year, although it must not last longer than the relevant contract. Each variation applies to an individual service with a national price (ie an individual HRG). However, commissioners and providers can enter into agreements that cover multiple variations to several related services. 98 These provisions allow for support by third party organisations such as the Centre for Effective Dispute Resolution (CEDR) to help resolve disputes 99 Local variations are covered by Sections 116(2), 116(3) and 118(4) of the 2012 Act. 164 Error! No text of specified style in document. 6.2.1. Rules for local variations 351. For a local variation to be compliant with the national tariff, commissioners and providers must comply with the following rules.100 Rules for local variations 1. The commissioner and provider must apply the principles set out in Section 6.1 when agreeing a local variation. 2. The local variation must be documented in the commissioning contract between the commissioner and provider for the service to which the variation relates.101 3. The commissioner must submit a written statement of the local variation to NHS Improvement using the local variation template. NHS Improvement will publish the templates it receives on behalf of the commissioner. 4. The deadline for submitting the statement is 30 June 2017. For local variations agreed after this date, the deadline is 30 days after the agreement. 6.2.2. Guidance on when the use of local variations is likely to be appropriate 352. The local variation rules are intended to give commissioners and providers an opportunity to innovate in the design and provision of services for patients. For example, allowing them to: a. offer innovative clinical treatments, deliver integrated care pathways or deliver care in new settings b. bundle or unbundle existing national currencies to design a new service c. design a new integrated service that combines service elements with national and local currencies d. support wide-scale reconfiguration and integration of primary, secondary and social care services with payment aligned to patient outcomes e. amend nationally specified currencies or prices to reflect significant differences in casemix compared with the national average 100 101 The rules in this section are made under the 2012 Act, Section 116(2). The NHS Standard Contract is used by commissioners of healthcare services (other than those commissioned under primary care contracts) and is adaptable for use of a broad range of services and delivery models. 165 Error! No text of specified style in document. f. share contracting risks and gains between commissioners and providers to incentivise better care for patients g. support changes in the way urgent and emergency care is provided locally. 353. However, it is not appropriate for local variations to be used to introduce price competition that could create undue risks to the safety or the quality of care for patients. Guidance on urgent and emergency care (UEC) local variations 354. To support delivery of local objectives, providers and commissioners delivering sustainability and transformation plans (STP) may wish to move away from nationally specified currencies and/or prices for urgent and emergency care (UEC). Any new payment approach could be a short-term proposal while the local health economy transforms the way it provides UEC, or a longer-term move away from paying for UEC on a wholly activity basis. This guidance sets out how local variations may be developed, tested and adopted locally to support UEC service transformation.102 355. While it may be appropriate for local areas to move away from the current payment approach for UEC, the new payment approach should not be a simple block payment without any link to activity levels, quality of care or consideration of the balance of risk between provider and commissioner. 356. New models of UEC delivery are likely to take several years to fully establish. Local variations can support implementation of the care model as it scales up over time by allowing an alternative payment model to be adopted in the short term, during any transition, and in the longer term. Examples of local variations for UEC services covered by the national tariff 357. Local areas should decide on the payment model and scope that will best deliver their aims locally, ensuring alignment with STP plans and compliance with the rules in Section 6.2.1 and principles outlined in Section 6.1. 358. Examples of the types of local variation that could be considered include: a. payment based on an agreed level of activity and associated spend, overlaid with a gain and loss share b. payment comprised of a fixed (core) element and an activity-based element c. whole population budget (WPB), overlaid with a gain and loss share. 102 www.nhs.uk/NHSEngland/keogh-review/Pages/published-reports.aspx 166 Error! No text of specified style in document. 359. All local variations should also ideally be linked to achieving system-wide quality and outcomes metrics decided locally and aligned with STP objectives. 360. The choice and scope of any local variation will depend on several factors including: a. the stage of service transformation a local area is in b. whether the care model is being delivered by existing provider entities or an integrated care organisation. 361. Areas seeking to explore a system-wide local variation (eg a WPB) for an integrated care organisation or alliance of providers may find existing webinars103 useful and should continue to monitor the NHS Improvement website for future publications.104 362. Support may be available from NHS Improvement and NHS England: we are keen to learn from any new payment approaches being developed. Please contact [email protected]. Commissioners’ responsibility for publishing local variations and submitting information to NHS Improvement 363. Under the 2012 Act, commissioners must maintain and publish a written statement of any local variation.105 They should publish each statement by 30 June 2017 or if the variation is agreed after this date, within 30 days of the variation agreement. These statements (which can be combined for multiple services) must include details of previously agreed variations for the same services.106 Commissioners must therefore update the statement if they agree changes to the variations covered by the statement. 364. The rules on local variations (see Section 6.2.1) require a commissioner to use NHS Improvement’s template when preparing the written statement and to submit that statement to NHS Improvement. 365. NHS England requires commissioners to include their written statement of each local variation in Schedule 3 of their NHS Standard Contracts. Commissioners should use the template provided by NHS Improvement to prepare the written statement. (The template and a worked example can be downloaded from NHS 103 Capitation: context and vision; Population, scope and new care models; Gain and loss sharing; Determining the budget 104 https://improvement.nhs.uk/resources/?keywords=pricing 105 2012 Act, section 116(3). 106 2012 Act, section 116(3)(b). 167 Error! No text of specified style in document. Improvement’s Pricing Portal.107) The completed template should be included in the commissioning contract (Schedule 3 of the NHS Standard Contract). 366. NHS Improvement will publish these templates on its website so that all agreed local variations are accessible to the public from a single location. Where NHS Improvement publishes the template, it will do so on behalf of the commissioner for the purposes of Section 116(3) of the 2012 Act (the commissioner’s duty to publish a written statement). Commissioners may, however, take other additional steps to publish the details of the local variations (eg making the written statement available on their own website). 6.3. Local modifications 6.3.1. What are local modifications? 367. Local modifications are intended to ensure that healthcare services can be delivered where they are required by commissioners for patients, even if the nationally determined price for the services would otherwise be uneconomic. 368. Local modifications can only be used to increase the price for an existing currency or set of currencies. Each local modification applies to a single service with a national price (eg an HRG). In practice several services may be uneconomic as a result of similar cost issues. 369. There are two types of local modification: a. Agreements: where a provider and one or more commissioners agree a proposed increase to a nationally determined price for a specific service. For local modification agreements, NHS Improvement requires commissioners and providers to prepare joint submissions. b. Applications: where a provider is unable to agree an increase to a nationally determined price with one or more commissioners and instead applies to Monitor to increase that price. 370. Local modifications are subject to approval (in the case of local modification agreements) or grant (in the case of local modification applications) by NHS Improvement.108 To be approved or granted, NHS Improvement must be satisfied that that without the local modification providing a service at the nationally determined price would be uneconomic. 107 108 https://ldp.monitor-nhsft.gov.uk/ The legislation governing local modifications is set out in the 2012 Act, Part 3, Chapter 4. The legal framework for local modifications is principally described in section 116, 124, 125 and 126. 168 Error! No text of specified style in document. 6.3.2. Overview of our method for determining local modifications 371. NHS Improvement’s method109 is intended to identify cases where a local modification is appropriate for a provider with costs of providing a service (or services) that are higher than the nationally determined price(s) for that service (or services). Applications and agreements110 must be supported by sufficient evidence to enable NHS Improvement to determine whether a local modification is appropriate, based on our method. 372. NHS Improvement’s method requires that commissioners and providers: a. apply the principles outlined in Section 6.1 b. demonstrate that services are uneconomic in accordance with Section 6.3.3 c. comply with our conditions for local modification agreements and applications set out in Sections 6.3.4 to 6.3.6. 373. NHS Improvement will determine the circumstances or areas in which the modified price is to be payable (subject to any restrictions on the circumstances or areas in which the modification applies). 374. NHS Improvement may take into account previously agreed local modifications when considering an agreement to extend a local modification, in cases where it can be demonstrated that the underlying issues have not changed. 6.3.3. Determining whether services are uneconomic 375. NHS Improvement’s method involves determining whether the provision of the service at the nationally determined price would be uneconomic and applying additional conditions.111 In relation to determining whether the provision of the service is uneconomic, local modifications agreements and applications must demonstrate that: a. The provider’s average cost of providing each service is higher than the nationally determined price. b. The provider’s average costs are higher than the nationally determined prices as a result of issue(s) that are: i. specific: the higher costs should only apply to a particular provider or subset of providers and should not be nationally applicable. For example, 109 Under the 2012 Act, Monitor is required to publish in the national tariff its methods for deciding whether to approve local modification agreements or grant local modification applications. 110 2012 Act, Section 124(4), requires that an agreement submitted to Monitor must be supported by such evidence as Monitor may require. 111 Monitor reserves the right to grant an application, in exceptional circumstances, even if the conditions have not been met. 169 Error! No text of specified style in document. we would not normally consider an issue to be specific if a large number of providers have costs that are similarly higher than the national price ii. identifiable: the provider must be able to identify how the issue(s) it faces affect(s) the cost of the services iii. non-controllable: the higher costs should be beyond the direct control of the provider, either currently or in the past. Previous investment decisions that continue to contribute to high costs for particular services may reflect management choices that could have been avoided (for example private finance initiatives). Similarly, antiquated estate may reflect a lack of investment rather than an inherent feature of the local healthcare economy. In both such cases, we will not normally consider the additional costs to be non-controllable. This means that higher costs as a result of previous investment decisions or antiquated estate are unlikely to be grounds for a local modification. Any differences between a provider’s costs and a reasonably efficient provider when measured against an appropriately defined group of comparable providers would also be considered to be controllable. NHS Improvement also considers CNST costs to be controllable therefore unlikely to be the grounds for a local modification iv. not reasonably reflected elsewhere: the costs should not be adjusted for elsewhere in the calculation of national prices, rules or variations, or reflected in payments made under the Sustainability and Transformation Fund.112 376. Local modifications agreements and applications must also propose a modification to the nationally determined prices of the relevant services which specifies the circumstances, or areas in which the proposed modification is to apply, and the expected volume of activity for each relevant commissioner for the relevant period (which must not exceed the period covered by the national tariff). 6.3.4. Additional condition for local modification agreements 377. The agreement must specify the services that will be affected, the circumstances or areas in which the modification is to apply, the start date of the local modification and the expected volume of activity for the period of the 112 NHS Improvement may take into account any payment received by a provider under the Sustainability and Transformation Fund when determining the amount of the local modification to be approved. 170 Error! No text of specified style in document. proposed local modification (which must not exceed the period covered by the national tariff).113 6.3.5. Additional conditions for local modification applications 378. For local modification applications, five additional conditions must also be satisfied. The applicant provider must: a. demonstrate it has a deficit equal to or greater than 4% of revenues at an organisation level in 2016/17 for applications in 2017/18 or 2017/18 for applications in 2018/19. Our guidance on how providers should calculate deficits for the purpose of this condition is contained in Section 6.3.16 b. demonstrate the services are commissioner-requested services (CRS)114 or, in the case of NHS trusts or other providers that not licensed, the provider cannot reasonably cease to provide the services c. demonstrate it has first engaged constructively with its commissioners115 to try to agree alternative means of providing the services at the nationally determined price and, if unsuccessful, has engaged constructively to reach a local modification agreement before submitting an application to NHS Improvement d. specify the services affected by the proposed local modification, the circumstances or locations in which the proposed modification is to apply, and the expected volume of activity for each relevant commissioner for the current financial year e. submit the application to NHS Improvement by 30 September 2017 for applications in 2017/18 or 30 September 2018 for applications in 2018/19, unless there are exceptional circumstances (for example, where there is a clear and immediate risk to patients). 379. NHS Improvement reserves the right to grant an application, in exceptional circumstances, even if the conditions set out above have not been met. 6.3.6. Guidance on the application of the method 380. When assessing local modification agreements and applications we will review the allocation of costs to other services associated with the service(s) for which a local modification is sought (for example, other services in the same service 113 The start date for a local modification can be earlier than the date of the agreement, but no earlier than the date the national tariff takes effect (as required by the 2012 Act, section 124(2)). 114 See: Guidance for commissioners on ensuring the continuity of health services; Designating commissioner requested services and location specific services, 28 March 2013. 115 Constructive engagement is also required by condition P5 of the Provider Licence, in cases where a provider believes that a local modification is required. 171 Error! No text of specified style in document. line). If it appears that costs have not been properly allocated, for example where there are unexpected variations in the profitability of services, we will take that into account in deciding whether the provider has higher costs in relation to the services for which a local modification is sought. 6.3.7. Local modification template 381. NHS England and NHS Improvement have developed a local modifications template116 for commissioners and providers (providers only in the case of a local modification application)117 to use when recording and submitting a proposed local modification to NHS Improvement. The completed template should be submitted with the supporting evidence described in Section 6.3.3, and a self-certification letter confirming the accuracy of that information, including any extra terms of the proposed local modification that are not included in the template. 382. The local modifications template and a worked example can be downloaded from www.monitor.gov.uk/locallydeterminedprices. It includes detailed instructions on how to fill in each field. Answers should be clear, concise and submitted with evidence where required. 383. The template contains the information that NHS Improvement will publish for all approved local modifications and therefore should not include any information identifying individual patients. It also should not include information which is confidential to third parties, unless consent has been obtained. 6.3.8. Dates Applications 384. If an application for a local modification is successful, NHS Improvement will determine the date from which the modification will take effect. In most cases, applications will be effective from the start of the following financial year, subject to any changes in national prices, to allow commissioning budget allocations to take account of decisions. 385. In exceptional cases (particularly where delay would cause unacceptable risk of harm to patients), NHS Improvement will consider making the modification effective from an earlier date. 116 www.gov.uk/guidance/nhs-providers-and-commissioners-submit-locally-determined-prices-tomonitor 117 In the explanation of summary templates, we refer to information to be submitted by providers and commissioners. However, in the case of a local modification application, we would expect providers at alone to submit all of its information. In the case of an application, relevant commissioners will be given the opportunity to provide their own submissions. 172 Error! No text of specified style in document. Agreements 386. The terms of a local modification agreement should be included in the relevant commissioning contract (using the NHS Standard Contract where appropriate)118 once they are agreed between the provider and commissioner. If the terms of a local modification agreement are included in the commissioning contract before NHS Improvement approves the local modification, the contract may provide for payment of the modified price pending a decision by NHS Improvement. But if NHS Improvement subsequently decides not to approve the modification, the modification would not have effect and the national price applies. The provider and commissioner must then agree a variation to the commissioning contract to stop the modification, and may agree a mechanism for adjustment and reconciliation in relation to the period before the refusal, or possibly a local variation to the national price. 387. The start date for a local modification can be earlier than the date of the agreement, but no earlier than the date the national tariff takes effect (as required by the 2012 Act, Section 124(2)). 6.3.9. Publication of local modifications 388. As required by the 2012 Act (Sections 124(7) and 125(7)), NHS Improvement is required to publish information on all local modification agreements and applications that are approved or granted. 389. NHS Improvement will also publish key information on local modification agreements and applications that are rejected, unless the circumstances of the case make it inappropriate. 6.3.10. Notifications of significant risk 390. Under the 2012 Act, if NHS Improvement receives an application from a provider and is satisfied that the continued provision of CRS (by the applicant or any other provider) is being put at significant risk by the configuration of local healthcare services, it is required to notify NHS England and any CCGs it considers appropriate. These bodies must then have regard to the notice from NHS Improvement when deciding on the commissioning of NHS healthcare as required by the 2012 Act, Sections 126(1) to 126(3). 6.3.11. Guidance on preparing evidence for a local modification 391. The supporting information required for a local modification will depend in part on the specific circumstances faced by the provider. This section provides 118 Providers and commissioners should refer to the latest available guidance on the NHS Standard Contract. See guidance on the variations process for the NHS Standard Contract for 2013/14. 173 Error! No text of specified style in document. guidance on the type of evidence that we would expect providers and commissioners to submit to demonstrate that (i) the relevant services are uneconomic, and (ii) the proposed local modification reflects a reasonably efficient cost of provision, given the cost issues faced by the provider. We set out the process for local modifications below. 392. To prepare the evidence necessary for a local modification, we would expect a provider to: a. demonstrate that its average costs are higher than the nationally determined price for the services covered by the local modification b. benchmark its average costs, operating efficiency and outcome measures against suitable comparators, refining the comparator group as necessary c. present a detailed analysis of its costs which demonstrates that it faces higher costs as a result of issues meeting the criteria set out in Section 6.3.4, and identify potential efficiencies d. propose a local modification that reflects a reasonably efficient cost of providing the services, based on the benchmarking analysis and internal review of costs performed. 393. This process can be broken down further into a number of steps. Figure 4 below summarises the process and the steps required. 174 Error! No text of specified style in document. Figure 4: Process for preparing evidence for a local modification 394. We explain each of these steps in further detail below. Step 1: Identify services with average costs higher than the nationally determined price 395. We would expect a provider to establish that its average costs are higher than the nationally determined price for a service or group of services as part of its ongoing analysis of operations. Providers should then explain why costs are higher, with reference to our criteria for demonstrating services are uneconomic at the national price. 175 Error! No text of specified style in document. 396. We recognise that costing practices differ between organisations and depend on the cost allocation principles applied by each organisation. We therefore expect providers to explain cases where they have deviated from Monitor’s Approved Costing Guidance.119 397. When submitting a local modification to NHS Improvement for approval, commissioners and providers should provide a detailed explanation of the issues they face in their local health economy and the drivers of higher costs. 398. For example, higher costs could be related to: a. Scale: certain services may require a minimum volume of procedures to be provided efficiently, as a result of the fixed or semi-fixed costs of providing them. For example, clinical best practice may require the use of specific expensive equipment, or clinical guidelines may stipulate the staffing mix required for a particular service. Given these requirements, providers with low patient volumes may not be cost-effective compared to the national average.120 b. Casemix: certain groups of patients have greater health needs than others and are therefore more costly to treat. For example, elderly patients and people from economically deprived backgrounds may have, on average, more complex health needs. Providers in an area with a large proportion of elderly people or high deprivation might therefore face higher than average costs for providing the same services. This may not be fully reflected in the nationally determined prices. 399. A hypothetical example is presented below to illustrate how a rural provider that faces scale issues might assess whether it meets our criteria for local modifications. 119 120 www.gov.uk/government/publications/approved-costing-guidance Commissioners may consider the relationship between scale and clinical quality. For example, some services may require a certain volume in order to be provided in a clinically safe and sustainable way. 176 Error! No text of specified style in document. Example 1: Criteria for demonstrating services are uneconomic at the national price Consider an isolated, rural provider with a low catchment population that could face higher average costs due to geographic location and insufficient scale. Here is how they could apply the criteria for identifying cost differences. Specific: An isolated, rural provider might incur specific extra costs which do not apply nationally, for example: need to pay for 24 hour staff cover for a relatively low number of patients not be able to recover fixed costs on certain equipment due to underutilisation, for example, MRI scanning and CT scanning equipment. Identifiable: The provider is able to identify and quantify extra costs outlined above. Step 4 in this section presents guidance on the evidence we would expect providers and commissioners to submit to show how a particular issue affects their reported costs. Non-controllable: In this hypothetical example, the provider may not be able to control its costs for the following reasons: A healthcare service is required by the commissioner to meet the needs of the local population. Obviously, the provider is unable to influence the low population of the area and thus in turn the relatively low case volumes. As a result, it may not be able to achieve reasonable economies of scale in certain services. Certain clinical standards must be met regardless of the low case volumes. For example, under the Royal College of Obstetrics and Gynaecology guidelines, 5,000 births a year would typically be required for a provider to have a 24/7 obstetrics led maternity unit. However, an isolated, rural provider may require this level of specialist input to support a significantly lower level of births to ensure clinical safety. Not reasonably reflected elsewhere: Nationally determined prices may not fully reflect the cost differences faced by the provider. Although the Market Forces Factor (MFF) is intended to adjust for some of the variation in input costs between providers, it does not adjust for differences in case volume which are particularly important to isolated, rural providers. Summary: In this theoretical example, the isolated, rural provider meets the criteria for demonstrating services are uneconomic at the national price. However, this is a simplified, hypothetical example. In reality we would expect the provider to be able to demonstrate that it is operating reasonably efficiently and it has considered alternative models of service provision in deciding how to provide services in the local health economy it serves. 177 Error! No text of specified style in document. Step 2: Benchmarking average costs, operational metrics and outcome measures 400. Providers should benchmark themselves against a suitable comparator group to demonstrate that they are reasonably efficient, given the cost issues they face. This process should include comparisons of average costs, operating metrics and outcome measures. The provider will probably need to refine the comparator group through the process to account for operational efficiency and clinical outcomes. The process should be used to help estimate a reasonably efficient cost of providing the services, given the cost issues faced by the provider. It may also help to identify opportunities for improvements in efficiency. 401. There are a range of publicly available data sources that commissioners and providers may use to benchmark performance. 402. The section below sets out the following processes: a. selecting a suitable comparator group b. comparing average costs c. comparing operational and quality metrics d. refining the comparator group. 6.3.12. Selecting a suitable comparator group 403. Effective benchmarking requires an appropriately defined comparator group. Providers should explain the basis on which they have selected their comparator group in their submissions to NHS Improvement. They should consider the drivers of higher costs when identifying an appropriate comparator group. For example, if a provider believes that service provision is uneconomic due to insufficient case volume, then we would expect its comparator group to include providers with similarly low case volumes.121 CCG groupings (compiled by NHS Digital) could be used as one way of selecting suitable comparators. 404. It is important to consider both the number and relevance of providers included in the comparator group and balance both factors. Reducing the size of the group may focus on the most comparable providers but could also mean that analysis is sensitive to the cost reporting or specific circumstances of particular providers. 121 The provider could use Hospital Episode Statistics (HES) data to identify providers with low case volumes. The HES database records the number of finished consultant episodes (FCEs) for each provider and this could be used as a proxy for scale. 178 Error! No text of specified style in document. 405. The following factors may be relevant when deciding on an appropriate comparator group: a. region type (Office for National Statistics super group) b. demographics (for example, based on age profile) c. deprivation (for example, based on Economic Deprivation Index) d. size of trust or service (by revenue or activity) e. service type (ie A&E with/without trauma, nurse-led, consultant-led, etc). 6.3.13. Comparing average costs 406. Providers should benchmark their average costs for the services covered by a local modification at both specialty and HRG level, where it is possible to do so.122 This analysis should demonstrate: a. whether the provider has higher average costs than the comparator group b. whether other providers in the comparator group have average costs above the nationally determined price for the service(s) in question. 407. Despite data quality issues, which can be challenging when comparing different providers, this analysis could use reference costs, data from patient-level information and costing systems (PLICS) or HRG-level data from commercial benchmarking tools. We encourage the use of PLICS data where possible and practical. 408. Benchmarking should be carried out using the latest available cost data. 409. A table is presented below for a single HRG, using reference costs as an illustrative example. The column titled ‘RCI’ shows the reference cost index for each provider (for one HRG); the RCI shows each provider’s cost relative to the national average (the national average cost has a value of 100). Table 14: Example of average cost benchmarking FCEs123 (2011/12) RCI Provider 1 (Applicant) 50,000 135 Provider 2 45,000 122 Provider 3 57,000 153 Provider 4 51,000 142 Provider 5 53,000 128 Provider 122 123 We would generally expect this benchmarking to be carried out at the HRG root level. Finished consultant episodes. 179 Error! No text of specified style in document. 410. In this example, Provider 1 is applying for a local modification as a result of its low scale and has identified a comparator group with similarly low levels of activity. The table shows that all of the providers face above-average costs for the selected HRG. It also shows that Provider 2 has lower costs than Provider 1 despite also having lower levels of activity. This may suggest that Provider 2 is more efficient, and we would therefore expect Provider 1 to provide an explanation for the difference. 411. If an issue affects multiple HRGs in a particular department, it may be informative to group HRGs together and look at the weighted average cost for the department. The table below illustrates how this information could be presented. Table 15: Illustrative table for benchmarking average costs HRG 1 Activity HRG 2 Unit cost Activity Unit cost Weighted average cost across HRG 1&2 Provider 1 Provider 2 Provider 3 Provider 4 Provider 5 Comparator average National average 6.3.14. Comparing operational and quality metrics 412. As well as comparing their average costs to the comparator group, providers should compare operational and quality metrics. The results of cost benchmarking should be considered in the context of operational performance and clinical outcomes when establishing an efficient cost of providing a service or services. 413. Providers should compare operational metrics at an organisational and department level, where data is available. These metrics could be useful indicators of key cost drivers. It is important to consider both the cost and quality implications of operational metrics – for example, low staff numbers per bed may indicate a lower cost, but this staffing level may not be compliant with clinical guidelines. An illustrative table of operational metrics is presented below. 180 Error! No text of specified style in document. Table 16: Illustrative table for benchmarking operational metrics Provider 1 Provider 2 Provider 3 Staff turnover Bed occupancy Average length of stay – elective Average length of stay – non-elective Theatre utilisation (%) Agency costs as a % of total costs Nurses per bed Staff costs per bed Consultants per bed Drugs and devices cost as % of total 414. Similar analysis should be prepared for quality metrics to understand how clinical outcomes and quality vary across the comparator group. This analysis will depend on the services under consideration and could be carried out in several different ways. We would normally expect quality benchmarking to take place at the department or specialty level. The Acute Trust Quality Dashboard gives examples of a variety of metrics that can be applied to non-specialist acute providers. Providers could also benchmark performance against national targets and relevant clinical guidelines. 415. A range of methods can be used to compare providers and identify particular areas of relative under or over-performance. Depending on the size and characteristics of the comparator group and the type of metric considered, it may be appropriate for providers to compare themselves to the median or mean of the group or upper or lower quartiles. The Acute Trust Quality Dashboard compares providers based on their variation from the mean (measured in standard deviations). 416. We would expect a provider to explain: a. how it compares to the comparator group b. the reasons for any differences identified. 417. Providers should also submit a detailed explanation of potential opportunities to improve operational efficiency and clinical outcomes.124 This will be important when determining the value of the local modification, as there may be steps that the provider could reasonably be expected to take to reduce costs; these 124 We would expect this to include an explanation of trends in operational and quality metrics over time, where data is available. 181 Error! No text of specified style in document. ‘avoidable’ costs should not be included in the value of the proposed local modification. 6.3.15. Refining the comparator group 418. Providers should refine their comparator group following analysis of average costs, operating efficiency metrics and quality metrics. The comparator group should be refined to exclude inefficient providers and providers that perform poorly against quality metrics. We would expect providers to start with a relatively large comparator group and exclude providers at each stage, ie following analysis of costs, operating efficiency and quality. Reasons for including or excluding particular providers in the comparator group should be clearly explained. 419. This process should make the comparator group more relevant when trying to estimate a reasonably efficient cost for the services covered by a local modification. The refined comparator group should reflect, as far as practicable, a set of providers which face the same issues. Providers should then benchmark their costs against this refined comparator group. Step 3: Detailed review of provider’s own costs 420. Providers are expected to review their own costs in detail to demonstrate that services are uneconomic at the national price. Providers should explain their costs in relation to the costs of the comparator group and the nationally determined price. We expect providers to explain cases where they have deviated from Monitor’s Approved costing guidance.125 421. Providers should identify how and at what level the issues they face affect their costs. Providers could be uneconomic at the organisational level, or there might be specific departments, specialties or services which operate uneconomically. For example, it may be that a sub-scale provider faces higher costs for a particular department because it has to employ a certain number of staff across the department to meet clinical guidelines. Other departments may not be affected in the same way. We expect providers to analyse their costs at the level at which issues have an impact and then consider whether there is any reason that specific HRGs would not be affected by the issues faced.126 422. In all cases, providers should submit: 125 These principles are: stakeholder agreement; consistency; data accuracy; materiality; causality and objectivity; and transparency. See Monitor’s Approved Costing Guidance for further information. 126 Local modifications apply at the individual service level (i.e. at the HRG level). However, to the extent that the same issue affects a group of services, we encourage providers to analyse costs at this level. 182 Error! No text of specified style in document. a. a breakdown of cost drivers, by cost pool (for example, direct, indirect and overhead costs) b. an explanation of internal variation in costs, for example across wards, clinicians, year-on-year and seasonal fluctuations c. an explanation and quantification of the additional costs arising from issues meeting the criteria for demonstrating that services are uneconomic at the national price. This could for example include staff costs, where additional staff are required, or depreciation costs where fixed assets are not fully utilised d. an explanation of why the provider’s costs differ from the nationally determined price and the costs of the comparator group e. an explanation and quantification of opportunities for improved efficiency. 423. When submitting this information, we would expect providers to show that existing service delivery models are in line with clinical best practice, for example, by reference to relevant clinical guidelines (such as National Institute for Health and Care Excellence and Royal College guidelines). 424. An example of a rural provider that faces scale issues is presented below. 183 Error! No text of specified style in document. Example 2: Analysing cost drivers Consider a rural provider of Type 1, 24/7 A&E services, with low case volumes. The provider would have to submit a detailed narrative to explain the factors driving its higher costs. This provider might identify direct costs as the key reason for its higher average costs and breakdown those costs into specific cost drivers. An illustrative breakdown of direct costs for A&E services In this particular example, staff costs are the largest component of direct costs. We would expect the provider to explain. In our example of a rural provider of Type 1 A&E services, high staff costs could be driven by the mandatory staffing requirements that are associated with a Type 1 A&E service. This could also affect other services, for example, maternity services where there are also minimum staffing requirements. Providers could also break down total costs into fixed costs, semi-fixed costs and variable costs to explain how particular issues affect their cost base. For example, the high fixed costs associated with certain services could affect the viability of providing these services for a provider with low case volumes. The cost breakdown should identify the structural issues faced by a provider. Where possible, providers should submit details of internal variation in costs, including variation across wards, clinicians and over time. 184 Error! No text of specified style in document. Step 4: Determine efficient cost based on benchmark cost and provider’s review of its own costs 425. A local modification can be used to increase the nationally determined price for a particular service or group of services. When submitting a local modification to Monitor, commissioners and providers (or providers in the case of an application) must propose an increase to the nationally determined price which reflects the efficient cost of providing the service(s). This may not be the actual cost the provider incurs in the provision of the service as some of the extra cost incurred by the provider arises from inefficiency rather than the cost issues identified. The efficient cost should be based on expected activity levels, given the issues faced by a provider. 426. Based on the nationally determined price, cost benchmarking and a review of the provider’s own costs, we expect providers to determine and explain the reasonably efficient cost of providing the services that would be covered by the local modification and therefore the value of the proposed local modification. The reasonably efficient cost may be greater or less than the average cost of the benchmark group, depending on the cost issues faced by the provider in question. The figure below summarises the components of an illustrative provider’s costs and the basis on which the value of a local modification should be calculated. Figure 5: Basis for calculating value of proposed local modification 427. As shown above, in determining the value of the local modification, providers should take account of the potential to improve operational efficiency. Providers facing higher costs may still reasonably be expected to take steps to improve efficiency, while maintaining clinical outcomes and quality of care. For example, providers should engage with commissioners and clinicians to ensure that services are being delivered in the most appropriate way, in line with clinical 185 Error! No text of specified style in document. best practice. Similarly, providers should submit evidence of clinical support for the current configuration of the affected service. 428. Commissioners and providers should submit a supporting narrative to explain how the proposed local modification value has been determined. Step 5: Determine structure of the local modification 429. Once a commissioner and provider (or a provider only, in the case of local modification applications) have decided the value of the proposed local modification, they must then determine the structure of the modification. 430. The proposed modification must apply to each of the services specified, and the level or structure of the modification may be different for each service. 431. As noted above, a local modification can be used to increase the nationally determined price for a particular service or group of services. In many cases local modifications may be applied as a uniform uplift to the unit price: for example, a 25% uplift at all levels of activity. However, it is also possible to propose a modification that is contingent on the volume of activity. For example, a provider and commissioner could agree to a higher modification at low volumes of activity to take into account fixed costs associated with providing certain services. 432. Consider the example again of a rural provider with low case volumes. For a particular HRG, this provider provides 4,000 units of activity per year, compared with the national average of 7,000 units of activity. The nationally determined price (ie after national variations) for this HRG is £1,000 per unit, which means the provider would normally be paid £4.0 million for providing the service. After applying NHS Improvement’s proposed method, the provider and commissioner agree that the provider is unable to cover the fixed costs of providing the service due to its low case volumes. The provider faces total costs of £5.0 million for 4,000 units of activity, and its shortfall on fixed costs is estimated to be £1.0 million in total. 433. In this case, the provider and commissioner could structure the local modification so that the nationally determined price is increased by £250 to £1,250 for each unit of activity between 1 and 4,000 (the expected annual level of activity) and maintained at £1,000 for all units above 4,000. In this simplified example, the commissioner and provider may wish to agree an exceptional clause to account for the possibility that the provider’s actual activity levels significantly exceed projections. 186 Error! No text of specified style in document. 6.3.16. Guidance on the provider deficit condition for local modification applications 434. To comply with our method for local modification applications, a provider must demonstrate that it has a deficit equal to or greater than 4% of revenues at an organisation level in the previous financial year (ie 2016/17 for an application in 2017/18: 2017/18 for an application in 2018/19). This requirement does not apply to local modification agreements. 435. In this guidance, we set out how our method requires that providers calculate their deficit. 436. We use a measure of the deficit before impairments and the gain/loss on transfers by absorption. This measure of the deficit is intended to reflect the underlying performance of the organisation by removing transitory shocks to revenue which are not related to the ongoing delivery of services. 6.3.17. Technical definition of deficit 437. The table below shows the formula to use in order to calculate the ‘adjusted’ provider deficit that Monitor will consider when assessing local modification applications. Table 17: Components of ‘adjusted’ deficit calculation Account Component Calculation Surplus/deficit after tax + Gain/loss on transfers by absorption - Total impairment losses/reversals - Adjusted provider deficit 438. The components of the ‘adjusted’ deficit calculation are explained below in the context of NHS foundation trusts and NHS trusts, given the differences in reporting systems between the two types of organisation. 439. We would expect providers submitting applications to inform us of any one-off costs or revenue which would have a material impact on their deficit that are not included in the ‘adjusted deficit’ calculation above. NHS foundation trusts 440. Providers should submit audited financial information if it is available at the time of submitting the local modification application. We would expect NHS foundation trusts to calculate their deficit using foundation trust consolidation (FTC) form data. 187 Error! No text of specified style in document. 441. If audited data are not available at the time of submitting a local modification application, we would expect providers to calculate their deficit based on annual plan review (APR) data. NHS trusts 442. We expect NHS trusts to calculate their deficit using Financial Information System (FIMS) data. 443. If audited data is not available at the time of submitting a local modification application, we would expect providers to calculate their ‘adjusted’ deficit based on unaudited planning data. 444. Providers should express their deficits as a percentage of total revenue. 6.4. Local prices 445. For many NHS services there are no national prices. Some of these services have nationally specified currencies, but others do not. In both cases, commissioners and providers must work together to agree prices for these services. The 2012 Act confers on Monitor the power to set rules for local pricesetting of such services, as agreed with NHS England, including rules specifying national currencies for such services.127 We have set both general rules and rules specific to particular services. There are two types of general rule: a. Rules that apply in all cases when a local price is set for services without a national price. See Section 6.4.1. b. Rules that apply only to local price-setting for services with a national currency (but no national price). See Section 6.4.2. 446. As well as the general rules, there are rules specific to particular services. See Sections 6.4.3 to 6.4.7. 447. Table 18 below shows which rules apply to which area of activity. Table 18: Application of pricing rules Rule Acute Mental Health Community Ambulance 1 2 3 4 5 6 127 2012 Act, section 116(4)(b) and (12) and section 118(5)(b). 188 Error! No text of specified style in document. Rule Acute Mental Health Community Ambulance 7 8 9 10 6.4.1. General rules for all services without a national price 448. Rules 1 and 2 apply when providers and commissioners agree local prices for services without national prices. The rules apply irrespective of whether or not there is a national currency specified for the service. Local pricing rules: General rules for all services without a national price Rule 1: Providers and commissioners must apply the principles in Section 6.1 when agreeing prices for services without a national price. Rule 2: Commissioners and providers should have regard to the efficiency and cost uplift factors for 2017/18 and 2018/19 (as set out in Sections 4.7 and 4.8 of this document) when setting local prices for services without a national price for 2017/18 and 2018/19, respectively.128 6.4.2. General rules for services with a national currency but no national price 449. Services that have national currencies but no national price are: a. working age and older people mental health services b. ambulance services c. the following acute services i. specialist rehabilitation (25 currencies based on patient complexity and provider/service type) ii. critical care – adult and neonatal (13 HRG-based currencies) iii. HIV adult outpatient services (three currencies based on patient type) iv. renal transplantation (nine HRG-based currencies) v. dialysis for acute kidney injury 128 . For 2017/18, the efficiency factor is 2% and the cost uplift factor is 2.1%. This gives a net increase of 0.1%. For 2018/19 the efficiency factor and cost uplift factors are 2% and 2.1% respectively. This results in a net increase of 0.1%. 189 Error! No text of specified style in document. vi. Positron emission tomography and computed tomography (PET/CT) 450. The following rules apply when providers and commissioners are setting local prices for these services. Local pricing rules: general rules for services with a national currency but no national price Rule 3: (a) Where a national currency is specified for a service, it must be used as the basis for local price-setting for the service covered by that national currency, unless an alternative payment approach is agreed in accordance with Rule 4 below. (b) Where a national currency is used as the basis for local price-setting, providers must submit details of the agreed unit prices for those services to NHS Improvement using the standard templates provided by NHS Improvement. (c) The completed templates must be submitted to NHS Improvement by 30 June 2017. For local prices agreed after this date, the deadline is 30 days after the agreement. (d) The national currencies specified for the purposes of this rule and Rule 4 are the currencies specified in Annex B5. Rule 4: (a) Where there is a national currency specified for a service, but the commissioner and provider of that service wish to move away from using it, the commissioner and provider may agree a price without using the national currency. When doing so, providers and commissioners must adhere to the requirements (b), (c), (d) and (e) below, which are intended to mirror the requirements for agreeing a local variation for a service with a national price, set out in Section 6.2. (b) The agreement must be documented in the NHS Standard Contract between the commissioner and provider which covers the service in question. (c) The commissioner must maintain and publish a written statement of the agreement, using the template provided by NHS Improvement, within 30 days of the relevant contract being signed or in the case of an agreement during the term of an existing contract, the date of the agreement. (d) The commissioner must have regard to the guidance in Section 6.2 when preparing and updating the written statement. (e) The commissioner must submit the written statement to NHS Improvement. 190 Error! No text of specified style in document. 451. The templates referred to in Rule 3 can be found here,129 6.4.3. High-cost drugs, devices and listed procedures 452. A number of high-cost drugs, devices and listed procedures are not reimbursed through national prices. Instead, they are subject to local pricing in accordance with the rule below. Annex A sets out the updated list of excluded drugs, devices and procedures for the 2017 to 19 NTPS that are subject to local prices. Local pricing rules: rules for high-cost drugs, devices and listed procedures Rule 5: (a) As high-cost drugs, devices and listed procedures are not national currencies, Rules 3 and 4 in Section 6.4.2, including the requirement to disclose unit prices to NHS Improvement, do not apply. (b) Local prices for high-cost drugs, devices or listed procedures must be paid as well as the relevant national price for the currency covering the core activity. However, the price for the drug, device or procedure must be adjusted to reflect any part of the cost already captured by the national price. (c) The price agreed should reflect the actual cost to the provider, or the nominated supply cost, or any national reference price, whichever is lower. (d) As the price agreed should reflect either the actual cost, or the nominated supply cost, or any national reference price, the requirement to have regard to efficiency and cost uplift factors detailed in Rule 2 does not apply. (e) The “nominated supply cost” is the cost which would be payable by the provider if the device or drug was supplied in accordance with a requirement to use a supplier or intermediary, or via a framework, specified by the commissioner, pursuant to a notice issued under SC 36.50 of the NHS Standard Contract (nominated supply arrangements). The national reference prices are nationally set by NHS England and are based on the current best procured price achieved for a product or group of products by the NHS. 6.4.4. Guidance on local price rules 453. Where prices are determined locally, it is the responsibility of commissioners to negotiate and agree prices having regard to relevant factors, including opportunities for efficiency and the actual costs reported by their providers. 129 www.gov.uk/guidance/nhs-providers-and-commissioners-submit-locally-determined-prices-tomonitor 191 Error! No text of specified style in document. Providers and commissioners should also bear in mind the requirements as set out in the NHS Standard Contract, such as in relation to counting and coding. NHS England includes an adjustment in commissioner allocations to reflect the unavoidable pressures of rurality and sparsity. When adjusting prices agreed in previous years, commissioners and providers may agree to make price adjustments that differ from the adjustments for national prices where there are good reasons to do so. 454. Rule 2 requires commissioners and providers to have regard to national price adjustments. In effect they should be used as a benchmark to inform local negotiations. However, these are not the only factors that should be considered. 455. Relevant factors may include, but are not restricted to: a. commissioners agreeing to fund service development improvements b. additional costs incurred as part of any agreed service transformation c. taking account of historic efficiencies achieved (eg where there has been a comprehensive service redesign) d. comparative information (eg benchmarking) about provider costs and opportunities for local efficiency gains e. differences in costs incurred by different types of provider, for example differences in indemnity arrangements (such as contributions to the Clinical Negligence Scheme for Trusts); or other provider specific costs (such as the effects of changes to pensions and changes to the minimum wage). Guidance on applying local price rules to acute prescribed services not subject to a national price 456. In negotiating prices for an acute prescribed specialised service not subject to a national price, NHS England and the provider should: a. make steps towards convergence to efficient benchmark values (subject to significant differences in service specifications) b. be informed by full disclosure by the provider of the actual costs of care, including at a patient level where these are available, and analysis of the provider’s relative position on the reference cost index for each service c. review any existing arrangements for gain sharing for high cost drugs and devices that are currently paid for on a pass through basis d. adhere to maximum reference prices when determining high cost drug and device spending, and 192 Error! No text of specified style in document. e. take into account activity plans that support agreed service redesigns, which may include some services being decommissioned or changes to clinical thresholds 6.5. Mental health services 457. This section sets out the local pricing rules for mental health services for working age adults and older people and for IAPT services. In addition to rules 1 to 4, providers and commissioners must adhere to the requirements of rules 6 to 9. Guidance on the application of Rule 7 458. Guidance on capitation, episode of care payment models and on linking outcomes to payment for mental health can be found here.130 In all cases (including where an alternative payment approach is agreed under Rule 7(b)iii) these care models must be based on outcomes. Guidance on the application of Rule 8 459. Regardless of the payment approach agreed locally, prices must be linked to outcomes 460. An outcomes-based payment model under Rule 8(a) should include two components: a. basic service price - includes an amount for assessment and an amount for the package of care provided taking into account of the severity and complexity of a service user; and b. outcomes payment – the contract allows for use of a suite of metrics that are collected locally and submitted to NHS Digital. This includes 10 national outcomes measures (5 access targets and 5 outcome measures): i. Access: 1.a.i.1. Waiting times 1.a.i.2. Black or minority ethnic 1.a.i.3. Over 65 1.a.i.4. Specific anxieties 1.a.i.5. Self referral ii. Percentage achieving good clinical outcomes 130 improvement.nhs.uk/resources/new-payment-approaches/ 193 Error! No text of specified style in document. iii. Percentage with reduced disability and improved wellbeing iv. Percentage with good employment outcomes v. Patient experience 1.a.v.1. satisfaction 1.a.v.2. choice of therapy 461. We recognise that the above outcomes are not exhaustive and it is expected that there will be other outcomes that may be agreed that reflect local needs and priorities. 462. It is known that complexity of patient need as identified from the Mental Health Clustering Tool affects the cost of treatment. Prices should reflect service user severity and complexity. 463. All IAPT providers should submit monthly data to NHS Digital in accordance with the NHS Standard Contract. 464. We expect providers and commissioners to shadow test their preferred payment approach in 2017/18. To further support shadow testing and implementation NHS Digital is developing a tool to support payment for IAPT services. 465. We will provide further guidance to support the implementation of outcomes based payment approaches for IAPT services. 6.6. Ambulances services 466. This section sets out the rules for local price setting for ambulance services with and without national currencies. 467. In addition to rules 1 to 4, providers and commissioners must adhere to the requirements of Rule 10. Local pricing rules: Rule for ambulance services Rule 10 Quality and outcome indicators must be agreed locally and included in the commissioning contracts covering the services in question. 6.7. Primary care services 468. Primary care is a core component of NHS care provision. It enables local populations to access advice, diagnosis and treatment. Primary care services cover a range of activities, including: a. providing co-ordinated care and support for general health problems 194 Error! No text of specified style in document. b. helping people maintain good health c. referring patients on to more specialist services where necessary. 469. Primary care is also a key part of the provision of community-based health services, interacting with a number of other community-based health teams, such as community nurses, community mental health teams and local authority services. Primary care payments determined by, or in accordance with, the NHS Act 2006 framework 470. The rules on local price-setting (as set out in Section 6.4) do not apply to the payments for primary care services which are determined by, or in accordance with, regulations or directions, and related instruments, made under the primary care provisions of the National Health Act 2006 (chapters 4 to 7). This includes, for example, core services provided by general practices under General Medical Services (GMS) contracts. For 20176 to 19/17, the national tariff will not apply to payments for these services. Primary care payments that are not determined by, or in accordance with, the NHS Act 2006 framework 471. The national tariff covers all NHS services provided in a primary care setting where the price payable for those services is not determined by or in accordance with the regulations, directions and related instruments made under the NHS Act 2006. Therefore, where the price for services is determined by agreement between NHS England, or a CCG, and the primary care provider, the rules for local payment must be applied. This includes: a. services previously known as ‘locally enhanced services’ and now commissioned by CCGs through the NHS Standard Contract (eg where a GP practice is commissioned to look after patients living in a nursing or residential care home) b. other services commissioned by a CCG in a primary or community care setting using its power to commission services for its local population (eg walk-in or out-of-hours centre services for non-registered patients). 131 472. The price paid to providers of NHS services in a primary care setting in most of these instances will be locally agreed, and providers and commissioners of these services must therefore adhere to the general rules set out in Section 6.4.1. 132 These are arrangements made under the NHS Act 2006, Sections 3 or 3A. 195 Error! No text of specified style in document. 6.8. Community services 473. Community health services cover a range of services that are provided at or close to a patient’s home. These include community nursing, physiotherapy, community dentistry, podiatry, children’s wheelchair services and primary care mental health services. The services provided by community providers are a vital component in the provision of care to elderly patients and those with longterm conditions. 474. Community providers often work closely with other NHS and social care providers, such as GPs and local authority services, and are a key contributor to developing more integrated health and social care and new models of care. 475. Payment for community health services must adhere to the general rules set out in Section 6.4.1. This allows continued discretion at a local level to determine payment approaches that deliver quality care for patients on a sustainable basis. 476. Where providers and commissioners adopt alternative care pathway payment approaches that result in the bundling of services covered, at least in part, by national prices, the rules for local variations must be followed (see Section 6.2). 196 Error! No text of specified style in document. 7. Payment rules 477. The 2012 Act allows for the setting of rules relating to payments to providers where health services have been provided for the purposes of NHS (in England).132 7.1. Billing and payment 478. Billing and payment must be accurate and prompt, in line with the terms and conditions set out in the NHS Standard Contract. Payments to providers may be reduced or withheld in accordance with provisions for contractual sanctions set out in the NHS Standard Contract (eg sanctions for breach of the 18-week referral to treatment standard). 7.2. Activity reporting 479. For NHS activity where there is no national price, providers must adhere to any reporting requirements set out in the NHS Standard Contract. 480. For services with national prices, providers must submit data as required under SUS guidance.133 481. The dates for reporting activity and making the reports available will be published on the NHS Digital website.134 NHS Digital will automatically notify subscribers to its e-bulletin when these dates are announced. 482. NHS England has approval from the Secretary of State to allow CCGs and commissioning support units (CSUs) to process a limited set of personal confidential data when it is absolutely necessary to do so, for invoice validation purposes. This approval is subject to a set of conditions. NHS England has published advice online135 about these conditions and sets the actions that CCGs, CSUs and providers must take to ensure they act lawfully. 132 2012 Act, section 116(4)(c) http://content.digital.nhs.uk/susguidance 134 www.hscic.gov.uk/sus/pbrguidance 135 See: Who pays? Information Governance Advice for Invoice Validation at www.england.nhs.uk/wpcontent/uploads/2013/12/who-pays-advice.pdf 133 197 . 2017/19 National Tariff Payment System consultation: glossary Term Description 2012 Act The Health and Social Care Act 2012 Admitted patient care (APC) A hospital’s activity (patient treatment) after a patient has been admitted. Allied Health Professionals (AHP) Registered healthcare practitioners who deliver diagnostic, therapies and other types of care. Average length of stay (av LOS) The number of days a patient is in hospital, from admission to discharge. Average length of stay describes the average stay for a group of patients at a provider or for all patients within an HRG. Best practice tariffs (BPTs) Tariffs designed to encourage providers to deliver best practice care and reduce variation in the quality. Different BPTs with different types of incentives cover a range of treatments and types of care. British Association of Day Surgery (BADS) An organisation that promotes the provision of quality care in day surgery and encourages providers to manage most of their elective patients with stays of under 72 hours. Capitation Capitated payment is where a provider or a group of providers are paid to cover a range of care for a identified population, made on a per person basis and adjusted to reflect the different needs Care clusters National currencies that group patients of mental health services according to common characteristics, such as level of need and resources required. Casemix A way of describing and classifying healthcare activity. Patients are grouped according to their diagnoses and the interventions carried out. NHS e-Referral Service The national electronic referral service which gives patients a choice of place, date and time for their first outpatient appointment in a hospital or clinic. Classification Clinical classification systems are used to describe information from patient records using standardised definitions and naming conventions. This is required for creating clinical data in a format suitable for statistical and other analytical purposes such as epidemiology, benchmarking and costing. Clinical Negligence Scheme for Trusts (CNST) This scheme, administered by the NHS Litigation Authority, provides an indemnity to members and their employees for clinical negligence claims. It is funded by contributions from member trusts. In the method for calculating national prices, cost increases associated with CNST payments are targeted at certain prices to take account of cost pressures 198 . . Term Description arising from these contributions. Commissioning dataset (CDS) Information on care provided for all NHS patients by providers, including independent providers. Commissioning for Quality and Innovation (CQUIN) A national framework for locally agreed quality improvement schemes. It allows commissioners to reward excellence by linking a proportion of payment for services provided to the achievement of quality improvement goals. Cost uplift factor An adjustment to prices that reflects expectations of the cost pressures providers will face, on average, in a given year. Currency A unit of healthcare activity such as spell, episode or attendance. A currency is the unit of measurement for which a price is paid. A package of local variations to national prices adopted by 88% of commissioners and providers in 2015/16. An episodic payment approach is the payment of an agreed price for all the healthcare provided to a patient during an agreed time period – the episode. Extra reimbursement for patients who for clinical reasons remain in hospital beyond an expected length of stay (also sometimes referred to as a longstay payment). Enhanced Tariff Option (ETO) Episode of care Excess bed day payment Finished consultant episode (FCE) A completed period of care for a patient requiring a hospital bed, under the care of one consultant within one provider. If a patient is transferred from one consultant to another, even within the same provider, the episode ends and another begins. Grouper Software created by the NHS Digital, which classifies diagnosis and procedure information from patient records into clinically meaningful groups. The outputs from the grouper are used as currencies for costing and pricing. Healthcare resource groups (HRGs) Groupings of clinically similar treatments that use similar levels of healthcare resource. HRG4 is the current version of the system in use for payment. HRGs are used as the basis for many of the currencies. HRG4+ is the proposed version for 2017/19 Hospital Episode Statistics (HES) A data warehouse containing details of all admissions, outpatient appointments and A&E attendances at NHS hospitals in England. This data is collected during a patient’s treatment at a hospital to enable hospitals to be paid for the care they deliver. HES data are designed to enable secondary 199 . . Term Description use for non-clinical purposes. Improved Access to Psychological Therapies (IAPT) The IAPT programme supports the frontline NHS in implementing National Institute for Health and Clinical Excellence guidelines for people suffering from depression and anxiety disorders. Indexation In the context of setting national prices using a model based on reference costs, indexation refers to adjustments made to modelled prices to reflect increases or achievable reductions in efficient costs of providing NHS healthcare services for the years between when the relevant reference costs were collected and the tariff year. Integrated care Defined by the World Health Organization as bringing together inputs, delivery, management and organisation of services related to diagnosis, treatment, care, rehabilitation and health promotion. Integration is a means to improve services in relation to access, quality, user satisfaction and efficiency. International Classification of Disease (ICD10) The ICD is a medical classification list produced by the World Health Organisation. It codes for diseases, signs and symptoms and is regularly updated. Joint Advisory Group (JAG) A clinical organisation whose core objectives are to: agree and set acceptable standards for competence in endoscopic procedures; quality assure endoscopy units; quality assure endoscopy training; and to quality assure endoscopy services. Local modifications A modification to the price for a service determined in accordance with the national tariff where provision of the service at the nationally determined price is uneconomic (as provided for in sections 124 to 126 of the 2012 Act). The modification is intended to ensure that healthcare services can be delivered where required by commissioners, even if the cost of providing them is higher than the nationally determined prices. Local prices For many NHS services, there are no national prices. Some of these services have currencies specified in the national tariff, but others do not. In both instances commissioners and providers must work together to set prices for these services. The 2012 Act provides that Monitor may set rules for local price setting. Local variations Local variations can be used by commissioners and providers to agree adjustments to national prices, or the currencies for determining national prices, particularly where it is in the best interests of patients to support a different mix of services or delivery 200 . . Term Description model. This includes cases where services are bundled, care is delivered in new settings or there is use of innovative clinical practices to change the allocation of financial risk. Locally determined prices/ local payment arrangements Many prices, or variations to prices, for NHS healthcare services are agreed locally (ie between commissioner(s) and the provider(s) of a service) rather than determined nationally by the national tariff. We refer to arrangements for agreeing prices and service designs locally as ‘local payment arrangements’. There are three types of local payment arrangements: local modifications to a national price; local variations to a national price or a currency for a service with a national price; and local prices (sometimes based on nationally specified currencies). Market forces factor (MFF) An index used in tariff payment and commissioner allocations to estimate the unavoidable regional cost differences of providing healthcare. Mental Health Services Dataset (MHSDS) MHSDS Information Standard is the specification of a patient-level data-extraction (output) standard intended for mental health service providers in England. This includes both NHS and independent providers. National Heart Failure Audit The National Heart Failure Audit was established in 2007 to monitor the care and treatment of patients in England and Wales with acute heart failure. The audit reports on all patients discharged from hospital with a primary diagnosis of heart failure, publishing analysis on patient outcomes and clinical practice. National Joint Registry (NJR) NJR collects information on all hip, knee, ankle, elbow and shoulder replacement operations and monitors the performance of joint replacement implants. National tariff (National Tariff Payment System) The document published by Monitor under s116 of the 2012 Act. It specifies national prices for specified healthcare services, national variations, and rules, principles and methods for local payment arrangements. Where it is used in conjunction with a particular year the acronym NTPS will be used, eg 2014/15 NTPS. NHS Litigation Authority The NHSLA manages negligence and other claims against the NHS in England on behalf of their member organisations. NHS Mandate Sets out the government's objectives for NHS England, as well as its budget. 201 . . Term NHS standard contract Description The contract published by NHS England and mandated for use when commissioning NHS healthcare services (other than those commissioned under primary care contracts). It is adaptable for use for a broad range of services and delivery models, and is available in both full-length and shorter-form versions on the NHS standard contract web page. Versions of the contract suitable for use when commissioning new care models will also be available shortly. Pathway payments (eg maternity pathway payment) Single payments that cover a bundle of services that may be provided by a number of providers covering a whole pathway of care for a patient. Patient Level Information and Costing Systems (PLICS) Systems that support the collection and recording of patient level costs. Patient Reported Outcome Measures (PROMS) These allow the NHS to measure and improve the quality of treatments and care that patients receive. Patients are asked about their health and quality of life before they have an operation, and about their health and effectiveness of the operation afterwards. Payment by Results (PbR) An approach to paying providers on the basis of activity undertaken, in accordance with a national tariff. The term is often used to refer to the tariff published by the Department of Health before 2014/15. Personal health budget (PHB) An amount of money to support a person's identified health and wellbeing needs, planned and agreed between the person and their local NHS team. Prescribed Specialised Services (PSS) Specialised health services commissioned directly by NHS England under regulations made under section 3B(1)(d) of the National Health Service Act 2006. Quality, Innovation, The QIPP programme is a large scale programme Productivity and Prevention developed by the Department of Health to drive (QIPP) forward quality improvements in NHS care at the same time as making significant efficiency savings. Reference costs The detailed costs to the NHS of providing services in a given financial year which are collected in accordance with national guidance. NHS healthcare providers are required to submit reference costs data to the Department of Health. The costs are collected and published on an annual basis. Reference cost design The currencies according to which reference costs are reported. 202 . . Term Description Secondary Uses Service (SUS) A single comprehensive repository for healthcare data in England which enables a range of reporting and analyses to support the delivery of NHS healthcare services. Short stay emergency tariff (SSEM) Mechanism for ensuring appropriate reimbursement for lengths of stay of less than two days, where the average HRG length of stay is longer. Spell The period from the date that a patient is admitted into hospital until the date they are discharged, which may contain one or more episodes of treatment. Treatment function code (TFC) Outpatient attendance national prices are based on TFCs. Main specialty codes represent the specialty within which a consultant is recognised or contracted to the organisation. Outpatient activity is generally organised around clinics based on TFC specialties and they are used to report outpatient activity. Trend efficiency Trend efficiency is the average sector-wide efficiency gain we observe over time Trim point For each HRG, the trim point is calculated as the upper quartile length of stay for that HRG plus 1.5 times the inter-quartile range of length of stay. After the spell of treatment exceeds this number of days, a provider will receive payment for each additional day the patient remains in hospital. This is referred to as an excess bed day payment or a long stay payment. UK specialist Rehabilitation Set up through a DH National Institute for Health Outcomes Collaborative Research Programme Grant to develop a national (UKROC) database database for collating case episodes for inpatient rehabilitation. 203 . Contact us NHS Improvement Wellington House 133-155 Waterloo Road London SE1 8UG T: 0300 123 2257 E: [email protected] W: improvement.nhs.uk NHS Improvement is the operational name for the organisation that brings together Monitor, NHS Trust Development Authority, Patient Safety, the National Reporting and Learning System, the Advancing Change team and the Intensive Support Teams. This publication can be made available in a number of other formats on request. NHS Improvement Publication code: C 08/16 1 NHS England Publications Gateway Reference: 05995 NHS England Document Classification: Official