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Making the NHS more efficient: Oxera responds to Monitor’s consultation on the 2016/17 national tariff

Monitor, the sector regulator for health services in England, today published a summary of the consultation responses on the 2016/17 national tariff that it launched in February.[1] As part of this, it has referred to our independent submission that looks at how Monitor has estimated what efficiency gains are realistic. In particular, Monitor is seeking to design an effective incentive mechanism for NHS management.

Our submission reviews Annex B5 of Monitor’s consultation document,[2] which describes the evidence base used to determine the efficiency factor for the healthcare trusts.
When conducting and applying efficiency analysis, there are many nuances and refinements that may have a substantial impact on the result. In our review, we have identified many positive elements of Monitor’s approach and areas where the methodology could be developed further, or where the application of the efficiency factor may need careful consideration in order to achieve a balance between cost control and incentivising an improved offering to patients. Getting the efficiency factor ‘right’ is an important building block in creating the right incentives for institutions to deliver efficiency gains, by either catching up or pushing the efficiency frontier forwards.

In the spirit of further strengthening the regulatory structure, we have made some suggestions for the development and application of Monitor’s analysis. These suggestions might result in a more robust estimation of efficiency, both across trusts and over time.

Full submission available here.

Dr Srini Parthasarathy
Senior Consultant
Direct: +44 (0) 20 7776 6612
Tel: +44 (0) 20 7776 6600

[2] Monitor and NHS England (2016), ‘2016/17 National Tariff Payment System: A consultation notice’, February.