Jennifer Shepherd (On Behalf of 999 Call for the NHS), R (On the Application Of) v (1) NHS Calderdale Clinical Commissioning Group (2) Monitor

Under the Health and Social Care Act 2012, the price payable for a specified health care service is determined in accordance with the national tariff and on the basis of its national price. The tariff may therefore contain lawful mechanisms for varying both a service specification and its national price.

A local variation under section 116(2) is distinct from a local modification under sections 124 and 125. A local variation may alter a specification, price, or both, subject to the tariff rules. A local modification concerns an uneconomic service and is subject to Monitor’s approval.

The statutory scheme permits flexible specification and bundling of health care services. It does not require a separately visible price fixed in advance for every individual treatment episode. A whole-population annual payment may therefore be lawful where agreed and operated under the applicable tariff rules.

The claimant, acting for a campaign group, sought judicial review of the proposed Whole Population Annual Payment mechanism in the draft Integrated Care Provider Contract. The mechanism would pay a provider an annual sum for an integrated package of services for a defined population, rather than payment by individual treatment episode.

Kerr J dismissed the claim in the Administrative Court: [2018] EWHC 1067 (Admin). The claimant appealed, contending that the pricing provisions of the Health and Social Care Act 2012 required individual service prices and did not permit the proposed arrangement.

The central issue was whether section 115 required visible prices fixed in advance for each individual treatment episode, or instead allowed the payment mechanism through tariff-compliant local variations.

1. Appeal dismissed. The court unanimously held that Kerr J was correct. Section 115 of the Health and Social Care Act 2012 does not require visible prices fixed in advance for every individual treatment episode.

2. Section 115(1) provides for a price determined in accordance with the national tariff, on the basis of the national price for the service. Those words must be given effect. The price payable may consequently differ from the original national price through mechanisms permitted by the tariff. The national tariff is not merely a list of fixed prices; it also contains methods, rules and guidance governing local and national pricing arrangements.

3. Local variations under section 116(2) and local modifications under sections 124 and 125 are separate mechanisms. A local variation may vary the service specification, the national price, or both. It may increase or decrease the price and is governed by tariff rules. A local modification alters a price already determined under the tariff, requires Monitor’s approval, and is available only where provision at that price would be uneconomic.

4. The Act gives Monitor substantial flexibility in specifying health care services. Services may be specified by components, as bundles, or as standardised groups. The scheme does not require payment to be linked to treatment of a particular patient. A Whole Population Annual Payment can constitute the price payable under section 115 where the relevant specified services are subject to a valid local variation and non-specified services are priced under the applicable local-price rules.

5. Primary care services remain health care services for the statutory pricing regime. The court rejected the submission that section 115 imposed a free-standing liability to pay a provider irrespective of contractual agreement. It also held that questions about the comparative merits of payment systems were political rather than legal. The proposed mechanism was lawful in principle, subject to compliance by the particular commissioner and provider with the national tariff rules.

• Court of Appeal (Civil Division): Dismissed the claimant’s appeal and upheld the lawfulness in principle of the proposed Whole Population Annual Payment mechanism: [2018] EWCA Civ 2849.
• Administrative Court: Kerr J dismissed the application for judicial review challenging the mechanism: [2018] EWHC 1067 (Admin).