Health and Social Care Bill

My Lords, I think that this debate has clearly demonstrated the importance of having a robust pricing system in the NHS. At a minimum, it must deliver sustainable reimbursement for efficient providers and promote value for taxpayers’ money. In addition, it must support the role of commissioners in securing continuous improvement for patients by strengthening incentives for providers to improve quality and efficiency. Perhaps I could address one aspect of the opening speech made by the noble Baroness, Lady Thornton. She spoke rather disparagingly, I thought, about the Secretary of State palming issues off on to quangos. Listening to the noble Baroness, the Committee may get the impression that it is this Government who have created quangos for the first time. I make no apology for being part of a Government who believe that arm’s-length bodies can play a very valuable role in public services, especially when given the autonomy to deliver those services free of political micromanagement. The Government also believe that the number of such bodies has grown over recent years to an unsustainable level, and that is why the Bill abolishes a large number of them. So I gently urge the noble Baroness to stop complaining quite so much about quangos and remind herself that she was part of a Government who created a very large array of such bodies. I begin by addressing the amendment tabled by the noble Baroness which proposes a delegated power for the Secretary of State to make regulations on commissioners regarding a duty as to continuous improvement. I am sure that we all agree with much of the apparent intention behind this amendment, first, that commissioners should act with a view to securing continuous improvement in the provision of services in terms of both quality and efficiency, and indeed in reducing inequalities; that is fundamental to their role. The second intention is that there is a role for regulations in ensuring that commissioning processes operate as means to this end; in other words, that tools such as service reviews, procurement and competition are used transparently and effectively to secure continuous improvement in the provision of services in the interests of patients. Our proposal is that such regulations would be made under Clause 71. They could be updated from time to time, subject to parliamentary resolution. While we would not disagree with some of the suggestions proposed under Amendment 277B—which, I recognise, has been carefully crafted—it may be a bit too detailed for the face of the Bill. In any event, we would want to consult publicly on these matters before putting firm proposals before Parliament. The role of the pricing system is to underpin and enable continuous improvement—for example, by strengthening incentives for providers to adopt best-practice models of care, in line with commissioning priorities. The noble Baroness, Lady Murphy, was quite right in all that she said on that point. Furthermore, the payment by results programme, introduced by the previous Government, has gone a long way to strengthening pricing within the NHS. It has ensured that reimbursement better reflects the volume and complexity of patients treated, and it has helped to reduce transaction costs. However, a number of problems have been identified with this system over the last few years, including by the previous Administration. These problems have not yet been fully addressed, and we want to do so. The problems are as follows. The methodology for setting prices is not transparent for either commissioners or providers. That makes the system unpredictable, and there is evidence of significant variations in the tariff from year to year. That undermines investment and innovation. The scope of services covered by the tariff has not been increased in line with the published timetables. That has made commissioning decisions more difficult due to lack of understanding about potential costs. For example, it has made shifting care from hospital to community settings more difficult. The quality of data used to set the tariff is unacceptably weak. There is a three-year time lag, and costs are based entirely on averages. The previous Government promised to improve the quality of data through sampling providers. Had they been re-elected, I am sure that they would have pursued that, but in fact they did not deliver on that commitment. Finally, prices can be inaccurate, and sometimes they do not reflect the best variations in complexity. That results in perverse incentives for cherry-picking and risks underfunding treatment for complex patients. It might be helpful if I explain to the Committee how the Bill seeks to improve on this system. Monitor, with its understanding of provider costs and structures, and the NHS Commissioning Board, with its understanding of patient needs and clinical best practice, are well placed to deliver a more effective pricing system; that is the vision. Prices would continue to be regulated through a national tariff, building on and improving the system of payment by results. We want this system to reflect best practice and extend the scope of the tariff where it is in the interests of patients. Prices would be based on a published methodology, which would be subject to consultation and independently reviewed by the Competition Commission. Where services were not covered under the national tariff, there would be rules to govern these prices locally. The national tariff would be a fixed price, with any competition based on quality and choice, not price. I will come to the points raised by the noble Lord, Lord Davies, in a moment. There must, however, be provision to vary the tariff in defined circumstances. These flexibilities would not allow price competition, but would prevent cherry-picking, allow innovation, and secure continued access of essential NHS services. Put simply, these flexibilities would only be allowed where the effect is to improve the efficiency or quality of the services provided for the benefit of patients and the taxpayer. I hope that that is helpful. I will now address some of the amendments in more detail. The noble Lord, Lord Butler, took us to the heart of the very important issue of innovation. I entirely agree with him that innovation is vital, and we expect Monitor and the Commissioning Board to incentivise innovation through the tariff—providing it was in the patients’ best interests, as I have indicated. We recognise that, in some cases, innovative ideas, technologies, systems and processes have often taken an unnecessarily long time to become common practice across the whole of the NHS. I reassure the noble Lord that the national tariff would not act as a disincentive to innovation but would, in conjunction with other initiatives—such as those announced by the Prime Minister in his life sciences speech last week—look to create an environment where innovation in the NHS is commonplace. The NHS Commissioning Board may also set out rules that allow commissioners and providers to agree to vary the way a service is specified in the national tariff, and subsequently the way the service is priced. This would prevent the tariff being a straitjacket—which, I think, is the fear of some noble Lords—so that it would support innovative service specification with an appropriate price. These variations would be published so that other providers could see what innovations were possible and what price they could receive for delivering such services. I hope that it is instructive for the noble Lord to note that Clause 117 explicitly establishes a requirement for Monitor and the NHS Commissioning Board to increase the scope of the tariff in the way that I have been describing. The noble Baroness, Lady Gould, took us to the subject of sexual health. I thank her very much for setting out her concerns so eloquently. Public health is indeed an area that deserves our consideration, and I am sure that the noble Baroness would agree that we discussed this subject at some length in previous debates. However, let me be clear that the purpose of the national tariff is to facilitate the fair reimbursement to providers for NHS services only. It would be inappropriate for Monitor and the NHS Commissioning Board to impose public health tariffs on local authorities. I see no reason why Monitor and the NHS Commissioning Board could not provide expert advice to Public Health England or local authorities on implementing a current tariff or—