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

Justin Madders Excerpts

Monday 30th November 2015 General Committees

[Justin Madders (Ellesmere Port and Neston) (Lab)]

The Opposition are deeply concerned about the regulations, and we hope the Government will consider their position as a matter of urgency. There are four principal reasons for our concerns, which I will outline before going into more detail about the regulations. I will welcome any responses the Minister can give.

The first area of concern is the removal of the share of supply percentage as part of the objection mechanism, which will create an imbalance. It will, for example, give a large NHS teaching hospital with a turnover of more than £1 billion the same voting weight as a private minor injuries unit with a turnover of just £150,000.

Secondly, the regulations effectively disband the tariff objection mechanism entirely, as it would be mathematically impossible to trigger the mechanism even if every NHS trust and foundation trust objected. Every NHS trust and foundation trust taken together would constitute 62% of providers, but the regulations establish a 66% threshold to trigger the objection mechanism.

Thirdly, the regulations effectively silence those on the NHS frontline in tariff setting. Setting the tariff without an effective mechanism for those delivering patient care to object could constitute a risk to patient safety and care quality.

Finally, the regulations directly contradict assurances given by Earl Howe on behalf of the Government during the passage of the Health and Social Care Act, when he said:

“I am clear that we must have a process for adjudicating on Monitor’s proposals if a sufficient number of those who will be affected by them object; otherwise, in these circumstances, either Monitor would have no way of proceeding with disputed proposals or those affected would have no other way of disputing proposals other than by judicial review.”—[Official Report, House of Lords, 6 March 2012; Vol. 735, c. 1740.]

In addition to those four major areas of concern, I have heard nothing of substance from the Minister today to suggest that anything is wrong with the objection mechanism as it stands. The Minister said the mechanism inhibits new models of care, but I am afraid he did not set out why. The Department of Health certainly did not put that forward as a justification in its consultation document. It actually said that the current system allows a

“relatively small number of large trusts”

to disrupt NHS planning, but that is simply not borne out by the facts. The last objection—indeed, the only objection—was made by 37% of all providers, which is, granted, not a majority, but which is still a reasonable amount. However, when we consider that, between them, those providers carry out about 75% of all NHS work, it is clear that this is not a fringe group seeking to disrupt things for the majority and that those involved do a significant proportion of all NHS work. That 37%—or 75%, depending on which way we want to count it—actually had a point, because the Government changed their plans as a result of the objections that were made. We therefore question whether it is embarrassment rather than effectiveness that is driving these proposals.

Let us take a moment to consider the current system and whether there really is a fundamental problem that needs to be fixed. The national tariff is the payment system for the majority of secondary care in England, and it covers £72 billion of the overall £116 billion NHS budget. It therefore affects all acute hospital, ambulance, community and mental health NHS providers and the care they can deliver.

The tariff is set annually by NHS England and the health sector regulator Monitor. To date, the objection mechanism has been a vital safeguard in the national tariff. It allows NHS providers and commissioners to formally lodge objections to the methodology used to develop the tariff.

The methodology is based on historic service costs, inflation and required efficiency savings. If 51% of commissioners or providers, either individually or based on the proportion of services they provide, object to the proposed tariff, the objection mechanism is triggered. That is not a low bar, and a significant amount of concern must exist across the sector for the mechanism to be used. It is designed not to be triggered regularly by a minority, and, indeed, it has not been. Rather, it is a patient safety alarm, reserved for use when providers and/or commissioners feel that the proposed tariff prices will not allow them to deliver safe and high-quality NHS services. It is clear from what we have heard today that, when it is used, it actually works.

In 2014-15, the mechanism was triggered for the first time, with 75% of providers, calculated by share of supply, objecting. Their reasons were substantial, and the decision to object was taken reluctantly. As the Minister said, the objection is to be used in exceptional circumstances only, so it is worth looking at the circumstances of that objection to understand why it was exceptional.

The basis for the objection was an unrealistic efficiency requirement for the fifth year in a row, making it impossible for providers to cover their costs, as well as changes to the way specialised services were paid for, significantly reducing essential funding for the care of some of the most vulnerable patients, such as those suffering from cancer. That would have introduced a marginal rate for specialised services, whereby providers would have been paid just 50% of the tariff price for services that exceeded their own projections of patient demand. Such projections are not a perfect science, in particular as conditions that require specialised treatment proliferate as our population grows and ages. It simply would not be safe or sustainable for providers to agree to carry out some of the most complex and cutting-edge treatment in the NHS at half the agreed cost. The proposals also sought the continuation of a punitive lower rate for emergency admissions, which effectively penalises hospitals for admitting patients in accident and emergency despite such demand increasing.

The objection allowed NHS England and Monitor to go back to the drawing board and return with a solution: they moved £500 million over to providers from the commissioning side, increased the marginal rate for specialised services to 70% and allowed providers the option of remaining on the previous year’s tariff. NHS Providers, the association of NHS trusts and foundation trusts, highlights that the commission now forecasts a budget surplus of £500 million this year and providers project a deficit of £2 billion to £2.5 billion. The mechanism was triggered responsibly and produced a better overall outcome for the NHS. Will the Minister therefore explain the rationale for changing the law to make the important elements of the tariff objection process effectively redundant, when this year’s experience shows that the process enabled a better outcome for the NHS and patients alike?

I will turn to the regulations, which, in a nutshell, we consider to be unbalanced, risky and rushed. They simultaneously remove the providers’ ability to object on a weighted or share of supply basis, and raise the threshold for triggering the objection mechanism to 66%. That has two effects. First, it gives every licence provider the same say over the tariff. Non-NHS providers who deliver just 4% of NHS tariff services will, in the future, have as much influence over how the NHS tariff develops as NHS trusts and foundation trusts even though they provide just a fraction of those services. What is the Minister’s rationale for not distinguishing between the NHS public providers for whom the national tariff is a matter of fundamental importance and non-NHS providers for whom it is of peripheral relevance?

Secondly, the regulations increase the trigger threshold from 51% to 66%. That, along with the ability of providers to vote for share of supply being removed, will mean that even if all NHS trusts and foundation trusts object to a proposed tariff, they would account for only 62% of all providers. That is the 62% of providers who deliver 96% of all services under the NHS, so 96% of all NHS services could effectively be denied a voice and a transparent mechanism of opposition.

By removing the weighted vote from NHS trusts and foundation trusts, I do not think it is possible to suggest that the intent behind these regulations can be anything other than to remove the objection mechanism in all but name. I therefore ask the Minister why the Government who introduced the 2012 Act recognised that it was fair to give providers the right to object to the tariff and a greater voice to those providing the most tariff services, but this Government take a different view?

That the NHS is under an unprecedented period of financial pressure is beyond dispute, even with the additional funds announced in the comprehensive spending review for NHS England’s budget next year. We know that 80% of all providers are currently in deficit, with a provider sector deficit of about £2.2 billion by the end of the year looking likely. It is therefore not the time to seek to stop providers from being able to raise concerns about unviable tariff prices. The stakes we are dealing with are too high and the risks to patient care and safety are real.

As I set out earlier, if the objection mechanism had not been triggered last year, the providers’ finances would be in an even more parlous state than they are now. In the light of those risks, it is vital that we understand in full the potential impact of the regulations. It seems irresponsible that the regulations have been laid so rapidly, without an impact assessment having been prepared.

The Lords Secondary Legislation Scrutiny Committee noted that the consultation on these regulations, which relate to a highly complex area of NHS policy, ran for just 29 days, from 13 August to 11 September. The Department suggested to that Committee that such a short window of time during a summer holiday period was appropriate because it had forewarned informed bodies. However, that is not an appropriate basis on which to conduct proper, meaningful and transparent consultation and I hope that the Minister will acknowledge that.

The consultation is all the more extraordinary because not only was it done at a time of year when people are not traditionally about, but the Department has completely ignored its responses. The 221 commissioners and providers that were able to respond in the consultation timeframe delivered a pretty unambiguous verdict: 82% of respondents stated that the objection threshold should not be raised from 51%, and just shy of two thirds—65%—disagreed that the weighted vote of providers should be removed. Another point that came out of the consultation, as the Minister highlighted, was that it is too soon to evaluate properly the effectiveness of the current system. Will he explain in his closing comments why he has shown complete disregard for the views of the bodies responsible for planning and delivering NHS services? What level of response would be needed for a different reaction— 85%? Ninety per cent.?

If passed, the regulations will effectively make the statutory consultation process the sole means for providers and commissioners to raise concerns about any risk associated with the proposed tariff. Given the clear evidence that the Government have not been effective in their consultation on the matter, does the Minister agree that providers and commissioners have every right to be concerned that their views will not be heard through a consultation process alone in the future?

The Department has set a damaging precedent with the consultation on the regulations, and strong assurances must be offered on how the tariff consultation process will respect and respond to concerns expressed by those working at the NHS coalface. There was clearly a rationale for introducing the tariff objection system in the first place, and I struggle to see what has changed in the past few years to warrant this change, other than the system being seen to do what it was set up to.

Our fundamental concern is that the regulations appear to remove the ability of those providing services on the NHS frontline to raise an early warning signal that proposals will not be sustainable. We know that efficiency savings proposed in the five-year forward view are at best challenging, at worst impossible, and there will be a temptation to pile more and more of those savings through this system. Without an effective mechanism in place to force a pause in such proposals, there is a real risk to the safety and quality of patient care and the sustainability of local health economies. In the words of the House of Lords Secondary Legislation Scrutiny Committee:

“The opposing views of the Department and the major Providers are a significant cause for concern and raise the question whether these Regulations may imperfectly achieve their policy objective.”

For that reason and the others I have set out, the Opposition strongly believe that the regulations are unbalanced, risky, rushed and should not be passed.

--- Later in debate ---

[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.

[Justin Madders]

I am grateful to the Minister for his gracious comments at the start of his speech. Does he accept that, under the regulations, if all NHS providers objected, they still would not reach the objection threshold? Can he explain why NHS providers are being put on an equal footing with non-NHS providers?

[Ben Gummer]

I hope the hon. Gentleman understands that the tariff, because it is a set price across the entire sector, has to treat every provider with equality. We cannot have a tariff of one price that accounts for one provider differently from another. All providers operate under the same tariff system, which means that no single bloc in the NHS or the healthcare system can obstruct tariff reform.

In summary, I hope that the Committee understands why these changes are necessary. They have been consulted upon in full, which is why I continue to commend these regulations to the House.

Question put,