The King's Fund responds to the NHS Operating Framework 2010/11

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Reacting to the NHS Operating Framework 2010/11 published today, Anna Dixon, director of policy at The King's Fund, said:

'The Operating Framework sends a strong message to the NHS about the scale of the financial challenge ahead and the action that needs to be taken now. Specific priorities for the service remain the same as last year – reducing healthcare-acquired infections and maintaining target waiting times – but the efficiency and productivity requirements appear greater than ever.

'Although next year is the last year that the NHS can expect any growth in resources, the requirements to carry forward £1 billion of surplus, to spend 2 per cent of budget on non-recurrent activities each year, and to take responsibility for funding ophthalmology, dentistry and pharmacy through efficiencies, will not leave PCTs much room for manoeuvre.

'Providers faced with an effective real cut of around 3.5 per cent in the prices they can charge PCTs face significant financial challenges in meeting their contractual demands with greatly reduced resources.

'The government is sending a clear signal that it wants to see more cooperation between organisations, particularly to keep people well and avoid unnecessary trips to hospital. This is likely to involve integration between hospitals and community or primary care services.

'Success will depend on whether the changes to the financial incentives proposed in the Operating Framework have the desired impact. The tariff is being adapted to give incentives to hospitals to reduce admissions and pay more attention to quality. It is unlikely that financial incentives alone can drive the level of co-operation within the NHS that is needed to make the transformation.

'The proposal to abandon the fixed-price tariff system after 2011 in favour of maximum prices has significant implications for the NHS. Although this may open up opportunities for commissioners to secure better value, it is likely to lead to higher transaction costs as PCTs return to bargaining with hospitals over prices. Commissioners will need to stay focused on quality and value for money when negotiating prices.'

Notes to editors

  1. For further information or interviews, please contact The King’s Fund media and public relations office on 020 7307 2585, 020 7307 2632 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. The King’s Fund seeks to understand how the health system in England can be improved. Using that insight, we help to shape policy, transform services and bring about behaviour change. Our work includes  research, analysis, leadership development and service improvement. We also offer a wide range of resources to help everyone working in health to share knowledge, learning and ideas.