More Squeezing of Hospital Income

Currently all hospitals are paid at a rate called the National Tariff. This is calculated as the average price for performing a treatment across all hospitals in England (there is also a regional variation). Since this is an average it means that some hospitals generate a surplus and some generate a deficit on the treatment. Since no hospital wants to go into debt the effect of this payment system is that all hospitals will try to be more efficient and perform the treatment at the average price or less. The long term effect of this is to drive down the cost of the procedure.

In some cases a hospital cannot become more efficient (for example, they do not perform the treatment on enough patients to get the economies of scale). Such hospitals accept that the treatment will always generate a deficit but they provide the treatment as a service to the community, and subsidise it with the surplus generating services.

Andrew Lansley intends to change this system so that the Tariff is "best practice" and hence the cheapest rate. This rate will be determined by the economic super-regulator, Monitor. GP Commissioning will mean that GP consortia will determine which hospital will provide your treatment, and each GP consortium will agree a contract with the hospital for the number of patients who will have the treatment and the level of payment. Lansley intends the Tariff to be the maximum rate that a hospital will be paid and that consortia can negotiate a low rate. This means that under Lansley, the maximum rate that a hospital will be paid will be the minimum rate currently being paid. This is a system intended to slash hospital budgets.

Hospitals are not awash with cash. At the moment the most efficient hospitals generate surpluses in the region of 5% of income, but few hospitals are that efficient. Lansley's plans will drastically cut the income of hospitals and this will inevitably move us back to the situation we were during the 90s where hospital waiting lists were lengthy and hospitals became dilapidated through lack of investment. The only way out of the problem of falling NHS income is for a hospital to seek other sources of income and that means taking on private patients, and as I mentioned yesterday, this will lead to a two-tier system.

The problem with the NHS is not that it is inefficient, but that there is simply not enough money. Lansley assumes that there is too much money and he is doing everything he can to make it have less money.

Currently treatments are paid by PCTs, they have contracts with the hospitals, and the PCTs pay the Tariff to the hospitals. Some PCTs have deficits. There are many reasons for this, but the bottom line is that there simply isn't enough money. Lansley has said that when GP consortia take over the responsibility for commissioning they will also take over the debts of the PCT. It is argued, quite correctly, that some of the expenditure of PCTs occurs from GPs referring patients yo hospitals, and that these PCT debts can be reduced by not treating patients. The logic is impeccable. The possibility of this transfer of debt has angered GPs and is one of the sticking points. Lansley will not budge. He will not write off the debts of PCTs and allow the GPs to start with a clean slate.

Now Healthcare Republic report that

Ministers have also announced plans to allow GP consortia to drive down the cost of NHS services by adjusting the tariffs for these services.

In other words, the Tariff is going to be adjusted down so that in the few remaining years of their existence PCTs will be paying less for hospital treatment to enable them to generate surpluses to pay off their historical debt. This means that hospitals will have less money, thereby move us back to the situation we were in during the 90s where waiting lists were lengthy and hospitals became dilapidated through lack of investment. Oh and expect several hospitals (particularly in London and the Home Gounties) to close.

This is the reality in an NHS run by Andrew Lansley.