Draft National Health Service (Licensing and Pricing) (Amendment) Regulations 2015

Jim Fitzpatrick Excerpts

Monday 30th November 2015 General Committees

[Ben Gummer]

I thank the shadow Minister for taking the care—I mean this in all sincerity—to look at a complicated area of health economics and for providing me with so many questions and challenges; he is right to do so. It is good for the House that we are considering the regulations in such detail, because the mechanism by which the tariff operates lies at the heart of how the NHS has worked not only since the 2012 Act but for several decades, under different Administrations.

I will provide a quick gloss for why the tariff is a difficult mechanism to get a perfect line on at any one time. It is, by its nature, a complicated beast, encompassing a huge number of procedures. Having to set a price is a function of the NHS, which is effectively a monopoly purchaser. The tariff is not the product of a whim of Monitor. Monitor does not sit down one day and say, “I believe the tariff for a cardiac procedure should be x, and for a knee joint procedure it should be y,” although I know the shadow Minister is not suggesting that to be the case. The tariff goes through a rigorous costing process to try to understand what advances in efficiency and medical technology can be brought to bear and how the costs of different procedures have gone down, remained the same or increased. At the termination of that process, which involves clinicians all the way through and a whole gamut of health economists, the tariff is put to providers across the country.

There is a balance that we have to strike as a Government. It was acknowledged in the passage of the 2012 Act—which I remember, though mercifully I was not on the Public Bill Committee that scrutinised it—that the changes would need to be finessed over time. That was the nature of the reforms to the health economy that were proposed and then passed by Parliament. The initial thresholds of 51% were not drawn scientifically, but on the basis of probing Ministers and Parliament and on the understanding that they would have to be reviewed in future. It is important that we get the balance between the tariff setting and the tariff challenge absolutely correct.

The situation that we have found ourselves in, as the hon. Gentleman said, is that a proportion of providers that do not represent in totality a significant number—a proportionate majority—can challenge the tariff successfully if it is not in their interest. It is our judgment that at the moment we are not correctly balancing the ability to challenge and the threshold at which we find that ability to challenge, and the interests of commissioners who are acting on behalf of patients and of taxpayers.

We consulted on three different thresholds, including a continuation of 51% and a higher threshold of 75%. We took a slightly different view from the hon. Gentleman of the outcome of the consultation. He mentioned some figures, but I merely repeat that 46% of respondents to the consultation, many of whom were commissioners and mental health providers, agreed that the tariff needed to be changed. Those who opposed a change to the tariff were, not surprisingly, providers. That is their right and it is not surprising in many instances that they chose to do so. One should question, however, whether it is right that 37% of providers by number—even if they make up a larger proportion by revenue—have the ability to challenge the tariff set by Monitor in its extensive process and consultation. That tariff also has to be used by commissioners on behalf of patients.

There are two effects. The first is to delay the implementation of the tariff at all, which creates massive financial uncertainty in the system. I am conscious that, with time, with the 51% threshold and given the number of providers able to reach the bar, that that would become a constant. Financial planning in the NHS would therefore become less about planning and more about responding to challenge after challenge. Secondly, and perhaps more importantly for why we need to look at things again, we have to balance the interests not only of providers by number and revenue throughout the entire sector, but of commissioners, the people buying care on behalf of local people. In order to buy that care, the commissioners are using a significant part of the revenue raised in taxes.

Members of all parties understand that achieving the move that we all want to a care system based on primary care, strong community services, full integration with social care and increasing resource committed to mental health services is about addressing the balance between providers and others modes of care rather more subtly that has been done in the past. I think we agree on that.

The question is how we go about that. That process will bring some challenges to some providers, who will have to do things more efficiently and differently. That is in the nature of creating a more productive NHS. It is precisely the kind of productivity challenge that Simon Stevens indicated in his five-year forward view.

Our contention is that we have to create a realistic objection threshold that can be met if there is overwhelming response to a tariff in one particular area that is unfair, but that, on the other hand, does not create a continued roadblock because a proportion, even a smaller proportion within the NHS as a whole, continues to hold up tariff changes—the tariffs discovered scientifically by Monitor.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

The Minister is being generous and patient in the way in which he is trying to explain this to the rest of the Committee, because we are not all quite as well briefed as my hon. Friend the Member for Ellesmere Port and Neston. However, the Minister seems to be saying—he will forgive me if I have got this wrong—that we have moved to 66% because there was an agreement, or an understanding, that 51% was basically a finger in the air, and we would have to adjust it at some point in the future. The Minister wants to remove what he sees as a veto by providers, whereas my hon. Friend says that if all the providers got together, they would never reach the 66%. So what is the gap between the two?

[Ben Gummer]

That is not entirely the gloss I would give to my comments.

There is no veto to all providers, because we are talking about 66% of providers in total meeting the objection threshold. This means that one particular bloc in the healthcare system as a whole that uses the tariff—it is not just used by NHS providers—will not be able to block the proposed tariff. Currently a smaller proportion of NHS providers—it is not even the full number—can block the tariff. It is not a scientific process, but in trying to balance the interests of commissioners and a healthy provider sector, which incidentally we will fund considerably more in years to come, we feel it is not right to give an objection threshold of 51%, and that we need to show a more significant number. That is why 66% of all providers would have to meet the objection threshold.

I would not like to speak for Earl Howe, who I know spent many hours explaining this matter and going through it in detail during the passage of the 2012 Act, but I think it was understood at the time—this was why the Bill developed as it did during its gestation—that, as with any health economy, the regulations would need to be finessed as issues emerged. To be blunt, we are at a time when NHS spending has gone up over the past few years, although it has been under significant pressure, as the hon. Member for Ellesmere Port and Neston said, because of changing demographics, and the way in which the tariff system and the changes made in the 2012 Act have enabled the tariff and the whole health economy to operate has allowed us to manage funds in an efficient manner.

I am conscious that others may want to speak, so I want to cover some of the other issues that the hon. Gentleman raised. He mentioned patient safety. I hope that I can place the issue in the larger context of all our reforms around the Care Quality Commission, introducing a simple grading system that gives complete transparency, and our additional funding to the commission over the past five years. By everyone’s estimation, the commission has improved its performance significantly, although we all want to it to improve still further.

We believe that patient safety is ensured by a raft of measures, not just by increasing NHS funding, but by increasing transparency on outcomes, by better regulation and inspection, and by giving a voice to NHS workers—giving them freedom to speak out through the whistleblowing champions that we have introduced and the efforts we are making to bring in a learning culture in the NHS. We are making those efforts in order to develop an NHS that learns from mistakes, can point out and shout about failures in patient safety, and can improve patient care in an iterative process.

That cannot, and can never be, about just pumping money in at one end and expecting to get improved care out at the other. We know that increased resources are one component, but to characterise tariff as a patient safety alarm is itself a little alarmist. It is one part of a health economy. As I explained, it is set by clinicians and economists, and the whole architecture that the Government have tried to reinforce and in parts introduce is there to underpin patient safety in the round. This is merely one component of that.

The hon. Gentleman raised specialised services. He could also have raised the issue of emergency admittances. Both those things are being looked at in the current tariff proposals. I understand the concerns that he raised, and I know that officials and Monitor will have heard them.

I must finally address the consultation process itself. I am not sure that the hon. Gentleman’s characterisation is fair on this. The consultation lasted a month. I do not think we can count a Spanish summer as happening in the NHS in the way he might suggest, as if everyone had vanished and was unable to respond. We received a significant number of responses. Given the fact that there are roughly 147 NHS acute trusts and a significantly larger number of commissioners—we are not talking about thousands, however—receiving 221 responses is good. They were full responses and I was completely open about their nature and the fact that, frankly, they were split, if not 50:50, about as close to 50:50 as a public consultation gets, on the quality of the Government’s proposals. The Lords sits in the summer months in a way that the House of Commons does not when we are back in our constituencies, but the 20-day scrutiny period is significant, and their lordships will have looked over it with due care and attention.

I understand the hon. Gentleman’s concerns about the nature of the changes, and it is understandable that he wishes to raise them. In part, they are the objections of some providers, and I am glad that he has brought them to the Committee’s attention, but I hope that, after this discussion, he understands that the regulations are part of a larger balance between different parts of the NHS to ensure that the additional money that we are putting into the NHS—the NHS budget will exceed half a trillion pounds over the course of this Parliament—goes towards reforming the system, new models of care and the primary, social, community and mental healthcare that all our constituents want improved on the ground. This tariff reform will help the process by ensuring that a bloc of providers cannot obstruct that change without significant enough numbers.