Understanding the National Tariff: The Cornerstone of the NHS’s Payment System

Healthcare financing is a complex subject that has far-reaching implications for the provision of healthcare services. In the UK, a key component of this is the National Tariff, a system that dictates how payments are made for secondary healthcare services.

The Roots of the National Tariff

The National Tariff has its origins in the Payment by Results (PbR) system, introduced in 2003 by the then Department of Health in England. Prior to this, hospitals were paid a fixed amount, regardless of the number of patients they treated. PbR was designed to enhance patient choice, reward efficiency and quality, reduce waiting times, and foster conversations about quality and innovation over price.

The 2012 Health and Social Care Act introduced a statutory national tariff, shifting responsibility for the pricing system from the Department of Health to Monitor and the NHS Commissioning Board (now NHS England and NHS Improvement, respectively).

What Exactly is the National Tariff?

The National Tariff sets the prices and rules that commissioners use to pay providers (like acute hospital trusts) for NHS services. It encompasses almost all forms of NHS healthcare, whether physical or mental, and covers services commissioned by Clinical Commissioning Groups (CCGs), NHS England, or local authorities acting on behalf of NHS commissioners under partnership arrangements.

Pricing in the National Tariff is based on two key principles: reflecting efficient costs and providing appropriate signals. This means prices should reflect the costs an efficient provider should incur in supplying quality services, and they should give providers incentives to reduce their unit costs and find more efficient ways of working. Furthermore, they should provide information for commissioners to make the best use of their budgets and decide which services will offer the most value to the populations they serve.

The Elements of the National Tariff

The National Tariff comprises several elements, including national prices, national variations, and local pricing rules.

National prices are the basis for paying a provider for a service specified in the National Tariff. National variations adjust these prices to reflect location-specific costs, patient need complexity, and to support the transition to new payment approaches.

Local pricing rules apply when agreeing on local pricing arrangements. In situations where services do not have nationally-set prices, or if providers and commissioners want to deviate from them, tariff rules permit local payment approaches.

Blended Payments and Locally Determined Prices

The NHS Long Term Plan made a commitment to move to a blended payment approach, which combines various types of payments into a single payment mechanism. This approach was introduced for emergency care and adult mental health services in 2019/20, and arrangements were also introduced for outpatient attendances and maternity services in 2020/21.

In situations where nationally-set prices are not available, or where providers and commissioners wish to deviate from them, local payment approaches can be used. These locally determined prices must promote transparency, be in the best interest of patients, and result from constructive engagement between providers and commissioners.

Services Outside the Tariff’s Scope

Certain healthcare services fall outside the scope of the National Tariff. These include public health services, such as local open access sexual health services, public health screening programmes, and services for people in prisons. Primary care services, such as general practice and community pharmacy, are also outside the scope of the National Tariff.

In conclusion, the National Tariff is a crucial aspect of healthcare financing in the UK. It helps ensure that providers are incentivised to deliver efficient, high-quality care, and that commissioners can make the best use of their budgets to serve their populations.

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