Editorial Thursday 23 February 2012: Monitor chair Dr David Bennett welcomes the NHS to its economically real future

The FT's indefatigable data diva Sally Gainsbury and public policy editor Sarah Neville have just dropped a striking story, based on an exclusive interview with FT regulator Monitor's chair and acting CE Dr David Bennett.

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It can be too easy in amid all the current political turbulence, incompetence and just plain fun to forget the eternal verity of healthcare: follow the money.

Dr Bennett, whose infamous intervention about competition a year ago caused a few waves, has done something rather shocking, which is unlikely to catch on in NHS management-land: he has admitted to the existence of economic reality.

Speaking ahead of the issuing of a report into NHS prices commissioned by Monitor from management consultancy PwC, Dr Bennett told Gainsbury and Neville that Monitor will do its job as an economic regulator if the Health And Social Care Bill passes relatively un-emasculated economically.

This means that bungs to inefficient services will be outed by Monitor - which is pretty much what we would expect an economic regulator to do.

The PwC report will apparently state that NHS tariff prices vary from year to year without obvious cause. This is a slightly naive conclusion, as ex-UK policy deity and UnitedHealth maestro Simon Stevens pointed out in our interview last year: the tariff is being asked to do the heavy lifting of making acute trusts meet The Nicholson Challenge.

Financial 'bungs' also exist, which once again is not a big surprise to NHS management geeks. Indeed, last September we pointed out that Monitor had been given an explicit role in 'the bungs formula' under the DH's proposed failure regime. Readers with elephantine memories will recall that this allows Monitor to grant providers above-tariff prices in 'special circumstances' without the commissioner's consent.

More recently, last month we observed that Monitor also proposed a new role for itself in setting up a 'fuck-up fund' to keep failed providers afloat - be they public, private or third sector. On this, Dr Bennett said, “If you’re providing an essential service to users of the NHS, then ... you jolly well should be doing your best to make sure that that service is available on a continuing basis. I’m afraid that’s the nature of providing these sorts of services".

More average
Dr Bennett told the FT that he wants to see tariff prices more closely linked to true average costs adjusted for case mix, and moving away from the block contract approach.

This seems an economically rational approach. It would clearly extend the scope and granularity of the tariff considerably: one legitimate question would be whether the system has the bureaucrats to do such work.

There is also (as ever, when changing anything in NHS funding) a question about how fast to make such a change.

Competition: may have downside risks too
Dr Bennett's comments sanely acknowledge that NHS providers in more 'competitive' areas (such as cities, with multiple acute providers) have "services that may find themselves in this position where there may be neighbouring services which provide perfectly good access for patients, and therefore it’s a basis for saying ‘we cannot support both these services. I think it’s all about making limited resources go as far as possible”.

He listed this as the rationalisation for the aforementioned bungs formula. It will, of course, do interesting things to the relevant CCGs - but that will be the NHS Commissioning Board's problem, rather than Monitor's.

Dr Bennett also echoed the Bill's prohibitions of "cherry-picking", but was tragically silent on the picking of plums, apricots, pears, apples and indeed sloes.

He acknowledged that private sector aspiring NHS providers will be subject to economic regulation, which again is clear in the Bill but has passed most non-policy geeks by serenely. Dr Bennett told the FT that Montitor will "obviously have to be very cautious in not imposing an excessive burden on the system in terms of the demands we make”".

As a builder might say, 'Yeah. Regulation. Cah. What cowboy put this regulation in, squire? Nah, can't do you a fixed price on this. Tricky job.'