09 January 2009

Payment by Results Team

Department of Health

Quarry House

Quarry Hill

Leeds

LS2 7UE

Dear PbR Team

PbR Road Test – Response from Royal National Orthopaedic Hospital

Thank you for the opportunity to respond.

Overall, the RoyalNationalOrthopaedicHospital welcomes the direction of travel that is being taken with HRGv4. We also note that there has been some improvement in the impact on specialist organisations since the sense check tariff particularly in orthopaedics and paediatrics. However, at this stage in the HRGv4 implementation the intended outcome that the tariff more accurately reflects complexity is not yet working in orthopaedics, and in spinal surgery in particular. The majority of complex work in England takes place in the specialist orthopaedic providers. Under the road test tariff, these centres will receive less income under HRGv4 compared to the same activity under HRGv3.5 at 08/09 prices (and excluding any changes in MFF). Such income volatility is fundamentally destabilising and continues to delay longer term planning and service development investment in centres where the complex work is carried out.

Under the road testtariff, the RNOH is losing £7.8m income which is 20% of PbR income or 9% of turnover. Within this, it is important to note that the RNOH loses income on ALL categories of HRGv3.5 when these are mapped into the HRG v4 tariff with the exception of HRG v3.5 H10 Arthroscopies which shows a minor gain. Therefore, although we are highlighting a limited number of major loss making areas in our proposed solutions it is important to note that these are not mitigated by gains in other HRGs. We would reiterate that this was not the intended consequence of the move to version 4 and is contrary to the initiatives in the NHS to ensure specialist work is focused in specialist centres to drive up high quality outcomes for patients.

The vast majority of the loss arises because local prices agreed for spinal surgery in HRG v3.5 R03 and R10 are significantly higher than the equivalent in the HRG v4 sense check tariff. This could not have been picked up in national modelling or sense checking phase 1 as no information on local prices for PbR exclusions has been shared nationally.

The RNOH would support moving complex spinal deformity work to be separately commissioned specialised service as a mechanism for agreeing highly specialised HRG national tariffs for specialist complex work in this area.

It is a major concern that much of the work that has taken place in the Expert Working Group for Orthopaedics has not yet been reflected in the tariff design used for this version of the tariff. The RNOH is represented on Orthopaedics Expert Working group and is keen to continue to work constructively on interim solutions whilst the full benefits of HRGv4 are brought in over the next few years.

The Specialist Orthopaedic Alliance is providing a separate response with further details on the impact of the road testtariff. The proposed solutions for 2009/10 proposed by the Alliance are endorsed by the RNOH and are summarised in the proforma attached. On the current projections, unless progress can be made on the proposed solutions for 2009/10, significant transitional funding will be needed to avoid fundamental destabilisation of specialist centres. We would envisage either transitional funding or continuation of interim “fixes” (exclusions and/or specialist top ups) to continue to be required for 2-3 years whilst HRGv4 continues to develop and specialist commissioning models develop.

Yours sincerely

Rob Hurd

Chief Executive