Clause 66 - The NHS payment scheme

Part of Health and Care Bill – in a Public Bill Committee at 12:45 pm on 23rd September 2021.

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Photo of Alex Norris Alex Norris Shadow Minister (Health and Social Care) 12:45 pm, 23rd September 2021

I am grateful for that clarification. If I am interrupted by colleagues in order to meet the conventional times, I will not take that as a kindness.

The clause governs how billions and billions of pounds will be spent every year, so it is surprising that it is so thin: three lines under clause 66 and a rather broad schedule 10. People could read into it whatever they want. My hon. Friend the Member for Bristol South made a good point that we could be in the business of filling that out for a very long period.

I am also surprised that the Minister is so reticent about the Secretary of State’s involvement and that this power is solely reserved for NHS England. We are not suggesting that the Secretary of State would want to set payment levels for specific treatments; but the Secretary of State, either today or in the future, may want some sort of say over what is being incentivised in the system and how that extraordinary purchasing power works in practice, whether that is about innovation, prevention or incentivising buying British, for example. That is something in which I would expect there to be some political interest.

The Minister talked about using clause 37, but that is a rather blunt tool. What we offer in amendment 100 is much lighter and much less drastic than using the clause 37 powers. If the Government will not accept our amendment, I am surprised that they have not introduced a similar one of their own. Perhaps they may yet do so.

The history of the tariff and payments bears an airing here, because it informs our future. It is an itinerant journey, which all Governments of the day, of different political persuasions, have their fingerprints on. This is not a partisan issue; it is about getting this right for the future. The purchaser-provider split in the ’90s and the development of various market and quasi-market systems was patchy and sporadic. That is a topic that has launched a thousand dissertations. Sometimes it feels like we aimed for payment by results, which is a noble cause, but in reality we can very easily get to payment by volume, and that is our challenge.

Going back even further than that, it was even less satisfactory. Traditionally, we had funding mechanisms that were very hard to understand and worked by adding a bit to the previous year’s allocations, and then really sophisticated people might make some downward adjustments for efficiencies and upward adjustments for assumed increases in activities. Inevitably, bits of the health service would get into trouble and would need bailing out, and new ideas would be dolloped out without much of a process. We have, to a certain extent, returned to that during covid. Block funding has given trusts one less thing to worry about. That was probably wise, but we would not want to do it forever.

The idea of the tariff was a variant of the 2012 Act. It could, I guess, incentivise competition on quality, but not really on price, as in a real market, as the Minister said. Prior to that, in the first decade of the century, the introduction of payment by results was one of the factors that allowed the longest successful period in the history of the NHS, which saw waiting lists come tumbling down—so much so that the demand for queue-busting private options evaporated and private providers became suppliers to the health service, rather than suppliers of private healthcare.

Payment by results, or pricing, can be a tool to tackle waiting lists. Given that Conservative Governments leave office with spiralling waiting lists, that is worth remembering for the future. Although that may be a discussion for another day, I want to ask the Minister whether he thinks NHS pricing is likely to be part of the recovery strategy. It is all well and good saying that this may take years and years to come to fruition, but what about now?

The historic decision back in the first decade of this century was that private providers should be paid the same as the cost of the NHS, so that there is no financial incentive to use the private sector. I think that is a wise principle, but it can and has been worked around. We have seen some very dodgy, spurious outsourcing of services, such as cleaning, which was an absolute disaster in Nottingham.

There are and have always been large swathes of the health services where payment by results or volume did not apply. One was mental health, where defining the product was far from easy, so it was very difficult to price. For many years, the mental health sector wanted to be part of this, but that never happened. That is much less of a priority for the sector now; it is just desperate for proper funding. It continues to struggle.

Of course, in such a system we will always have gaming and bureaucracy. Any system such as this gets gamed. Upcoding is one example, where the work that is billed for gets put into the highest-paying category. We have invoicing, chasing errors, and disputes over such coding, the actual volumes of work done and all the rest. That was hugely prevalent when payment by results first arrived for primary care trusts, and I think it is still with us in some form today. The cost of the market systems, data collection and processing is well above the cost of providing entirely necessary management information about cost and volumes.

Of course, that is not to make an argument for no prices at all. For decades, the NHS as a system did not really have any idea what anything cost. The accounts were not particularly well kept, and there were no data collection systems and staff doing analysis. As a result, the variations were huge, and that did not work in the interests of the system. I am arguing not for a no-cost regime, but for one that lands in a sensible place and does not become an industry in itself. At the moment, we have no idea, because what is on the face of the Bill is so broad, and the Minister is promising quite a long walk into the future with not a lot of certainty.

Many discussions about the long term plan, the formation of STPs—then accountable care systems, then integrated care systems, and now ICPs—and the rest have been about co-operation and collaboration, a return to non-market days, and a dilution of the commissioner-provider split, at least so far as NHS bodies are concerned. There will still be a strong current to say that there has to be some sort of tariff and benchmark as a guide, but some will say that there may be some sort of ability to vary as circumstances dictate—a kind of “Trust me, guv” arrangement whereby people of good will and common purpose can decide what is best, and that would be acceptable. To an extent, that flexibility is understandable if we are talking about the internal workings of an integrated, publicly provided NHS.

However, when we are talking about £10 billion more a year of contracts with private acute care providers, that is real money exiting the NHS bank account, so we need to be much more careful. That is where amendment 84 comes in: there has to be some sort of limitation on what private providers are paid. I was not at all convinced by the Minister’s explanation that there might be different costs, because of course there are different costs, the No. 1 cost being the need to derive profit from the contract. That is already a big cost. Of course, that can be met by compromising on quality or through downward pressure on what staff receive, but that is also a bad thing, so I did not think that was a particularly persuasive argument.

When it comes to all this money going out to private providers, there really ought to be some standardisation of the contract. If amendment 84 were accepted, we would have greater assurance that this is something done based on need, not cost or convenience. We would much rather invest in the NHS itself, taking away any perverse incentives to lean on the private sector as a resource pool and any risk of sweetheart deals due to our reliance on the good will of for-profit organisations.

In conclusion, we do not want the Secretary of State to price up a hip operation, but we do think there ought to be some interest in what our purchasing does in this country, to ensure that it is as good as possible. I do not think we should be using the blunt and brutal tools in clause 37, so I hope that the Minister will think again about amendment 100—if not now, then at a later point in proceedings.