GP commissioners need tighter control of non-tariff hospital activity

There is a big difference between payments to acute providers under tariff and not under tariff, and the latter can have a major impact on the ability of commissioners to get value for money from their budgets.

Unless GPs can realise the financial returns for spending on primary care from reducing the healthcare spend in hospitals then there seems little point in them trying to make changes. These, after all, are the form of contracts that GPs are used to using when running their existing businesses.

There is an Audit Commission briefing from December 2010 which enlarges on this theme in a number of important ways. The briefing, called More for Less, looked at the overall financial data for 2009/10 (and the first three months of 2010/11) and tried to make sense of where improvements in value might come from.

Everyone recognises that some healthcare needs to move out of hospitals into the community. The PCTs have been trying to organise that transition of care for some time.

The Audit Commission found that PCTs invested heavily in community services, with a 12% increase in 2009/10 following a 13% increase in 2008/9. This is a 25% increase in two years and reflects a very considerable investment in the community sector.

However, the briefing found that: ‘There was no nationally identifiable shift to providing more cost-effective care outside of hospitals.’

This could be the rather sad epitaph for a bankrupt NHS: ‘We raised investment in community care but failed to shift care out from the hospital’.

There is a lot of interesting detail in the briefing but what I want to highlight is the specific way in which, over the past two years, hospitals have increased their income.

Total patient care income from PCTs increased between 2007/8 and 2008/9 by 6.9% and a year later by 6.3%. This meant that acute trusts as a sector increased their income by about one eighth at a time when PCTs were trying to hold it steady.

Breaking this into the two categories of resources – income from tariff, and from non-tariff – there is a very marked difference.

The increase over those two years on tariff income was 2.8% and 1.1%. This showed that, when there was a clear tariff, commissioners could just about hold their outturns steady.

The income from non-tariff sources over those two years rose by 22.9% and 21.5%. So it was here, where there are no national prices, where PCTs were taken to the cleaners by secondary care trusts.

The Audit Commission thinks that there are two reasons for this. First, PCTs are vulnerable in negotiating contracts for more specialised high-profile services. With these services PCTs struggle to know whether service levels and local prices paid for non-tariff services are reasonable.

Second, whilst there is much debate within the current reforms about tariff setting – who should set them and how should they be set – the crucial thing for commissioners is that the tariff must be set to provide PCTs with some guidelines.

If there continues to be a large number of services that lie outside of the scope of tariff, this will limit the capability of commissioners to get control of their budgets.

What does this mean for GP commissioners? First, of course they need to keep bearing down on tariff referrals. They need to be able to check what is being spent in the acute provider with all of these cases.

But they also need to find a way of pricing non-tariff work. If this is not done then that part of the cost balloon will do just that – balloon.

So, alongside the much better contract for tariff referrals, they also need, either by themselves as groups of commissioners or at a national level, to ensure that there are clear prices for more and more types of activity.

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