But the data presented at a recent joint Monitor–NHS England stakeholder workshop on their review of the marginal rate rules presented a more positive picture. Total emergency admissions have levelled off since 2009/10, after growing at 4.6 per cent a year in the previous three years though there was growth of a little under 2 per cent in 2012/13. Average lengths of stay and the number of acute beds have continued to fall, emergency bed days have fallen for all age groups except the over 95’s, and delayed transfers of care are not increasing, though reference costs for non-elective care are rising. It looks like the NHS on the whole has improved its management of emergency inpatient demand and use of acute capacity since the marginal tariff was introduced in 2010.
So was this improvement a direct result of these tariff rules? They were intended to reduce inappropriate emergency admissions by paying hospitals only 30 per cent of the full price for treating patients once they had reached a set level of emergency admissions, and asking strategic health authorities to allocate the remaining 70 per cent to demand management initiatives. However, many other factors were at work in the same period: flat budgets, effort around the ‘Nicholson challenge’, joint working on alternative pathways for urgent care, among others.
Furthermore, the national data presented did not reflect the local experiences of some of the workshop participants. Monitor and NHS England could not find a relationship between changes in recent emergency activity in a locality and changes in the known long-term drivers of demand – prevalence of long-term conditions, demographics or social deprivation. Recent work by the Fund has also found that available data does not explain the recent pressures in A&E, and that there is wide local variation in managing emergency care pressures. The impact of the marginal rate is a question we’ve also put forward in our latest finance directors’ survey, as part of our September Quarterly monitoring report.
Some commissioners report good experiences of using the 70 per cent savings from the marginal rate to increase whole-system engagement in demand management and alternatives to hospital admission. But many health economies have negotiated pragmatic variants on rules or additional payments for emergency care for good reasons: to enable them to create innovative pathways, invest in expanded or reconfigured capacity, or respond to quality and safety recommendations. Changing the rules could, of course, have unintended consequences: rewarding poor management in some localities, destabilising some commissioners, more contract negotiations going to arbitration, and commissioners holding larger contingency funds. But until the longer term direction of payment reform is clearer, it may be that offering local flexibility would be the best way to mitigate the problems in the existing emergency care payment system.
The Health and Social Care Act demands increased rigour in the use of evidence in tariff pricing methodology. The debate about the marginal rate underlines the importance of evaluation of major financial incentive policies. But the current state of the payment system for emergency care makes evaluation difficult and evidence hard to interpret. There is concern about many aspects of the tariff for non-elective care: cross subsidies between services, rising complexity of rules and incentives, and local variation. Perhaps the most fundamental concern is that, in a world of flat budgets, NHS commissioners cannot manage the risks of activity-based payment for non-elective care and are looking for a system that encourages whole-system working within a constrained budget. The emergency care payment system needs a thorough overhaul.