Every year after a lengthy period of consultation with various stakeholders, NHS England and NHS Improvement publish something known as ‘national tariffs’. NHS England defines the national tariff as ‘a set of prices and rules used by providers of NHS care and commissioners to deliver the most efficient, cost effective care to patients’.
A simple way to understand the tariff system is to look at them as a set of statutory pricing structures, essentially a pricing list, which commissioners (buyers of the health services) use to determine the cost of services they would like to buy (mostly acute care) for its populations. For providers (deliverers of services) the tariffs determine how much they will get paid.
To determine a tariff, things such as Healthcare Resource Groups (HRGs) are taken into account. HRGs are useful to determine the cost for activity as they look at levels of healthcare resources need for groupings of clinically similar conditions or treatments. Some unavoidable variation in cost between healthcare providers needs to be taken into account therefore something known as ‘Market Force Factors’ is applied. This is where tariffs are adjusted ‘in proportion to these cost differences, so that patients aren’t advantaged or disadvantaged by the relative level of unavoidable costs in different parts of the country’.
The national tariffs cover a vast array of activities ranging from minor to complex interventions, from day case activities to activities that require a patient to stay in hospital. Let’s take an outpatients appointment for pain management as an example, the national tariff indicates that a ‘first attendance with a single professional’ appointment is priced at £197 and ‘first attendance with multiple professional’ appointment is priced at £259. In a world where variables in the NHS are constantly changing, the tariffs act as a fixed certainty for when commissioners and providers meet at the negotiating table to decide activities for the next year.
Taking our example of pain management, commissioners and providers will map out the pathway using clinical guidance and patient advice i.e. amount of appointments required, types of scans needed, number of scans etc. to determine the care a patient should expect to receive, now using the tariffs a cost is attached to this pathway – that’s the easy part! Commissioners and providers at this point will have the task of agreeing the level of activity that will take place in the year, so in this case: approximately how many patients will be seen and paid for through the pain management services that year.
This process, with the aid of tariffs gives ‘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’ and for providers the agreed pathway payment will ‘incentivise them to reduce their unit costs by finding ways of working more efficiently’.
This is a very simple guide but you can look into how tariffs are used to influence the different payment models in the NHS which include block contracts, payment by results (PbR) and blended payment approaches.
This is where I will place a small caveat to my point about the tariffs being a constant – although these prices are set nationally there is an opportunity for commissioners and providers to negotiate local variations, this only occurs where the national tariff does not adequately reimburse efficient costs, in this case local modifications are taken into account. So in some areas you will see a deviation from the national tariffs and it’s worth investigating why this may be the case by talking to commissioners or providers.
How can you as an innovator use tariffs to help build a business case?
For innovators the NHS can feel like a large beast and hard to unpick, making it very difficult to interact with. However tariffs can be your shining light as they provide you with a part of the puzzle that would usually be very difficult to find in other sectors.
My advice would be to play commissioner and provider for a second and use the ‘The National Tariff Workbook’ to map out the pathway your innovation will influence, as our NHS colleagues would do. This will help you determine how much commissioners would be paying their providers for your area of interest. Now ask the questions:
- Does your innovation change that pathway?
- Does your innovation change the cost of the pathway?
- Are you able to stop patients from entering into the services?
- Are you able to lower the unit cost for providers?
This will help you determine who your customer is and who you should be building your case for.
If you are looking for support to understand tariffs in more detail then feel free to contact me:
Further reading and useful links:
- NHS Improvement, Tariff webpage
- 2019/20 National Tariff Payment System: A joint publication by NHS England and NHS Improvement
- ‘Annex A: The National Tariff Workbook’ to view the pricing structures that are in place for 2019/20
- A guide to the market forces factor: A joint publication by NHS England and NHS Improvement
- 2019/20 National Tariff Payment System: Annex G Guidance on locally determined prices
Author
Aisha Ajij - Project Support and Industry Liaison Officer