MPs have criticised Monitor, England’s health services regulator, for not doing enough to reform the NHS system of tariff payments which, they say, currently and frequently creates perverse incentives for providers and inhibits necessary service change.

A year ago, the House of Commons Health Committee had called on Monitor, which had taken over joint responsibility with NHS England for the NHS payment system, to attach a high priority to reforming the tariff.  However, since then, Monitor had told the Committee that its proposed national prices for 2014/15 would be broadly similar to those in 2013/14, having been adjusted only for efficiency (4%) and inflationary factors such as drug price increases.

“To fully redesign the payment system to underpin a sustainable NHS, we need reliable evidence about the likely impact of innovation in service delivery and quality, complete information about provider costs and patient outcomes,” Monitor told the MPs.

“Unfortunately, the quality of information available at the present time is generally poor. We therefore decided to keep the tariff largely the same during the first year for which we had pricing responsibility,” said the regulator. But it added that it was “considering changes” to the 2015/16 payment system, as well as “developing a shared long-term strategy with NHS England.”

This does not constitute an adequate response, says the Health Committee, reporting today on its latest annual inquiry into Monitor’s work, and it repeats the call it made last year for the regulator to attach a higher priority to this issue.

The MPs also call on Monitor and NHS England to initiate a formal joint process for a prioritised review of the NHS tariff arrangements, “with the objective of identifying and eliminating perverse incentives and introducing new tariff structures which incentivise necessary service change,” and to present this to them before June 30.

Monitor must also do more to explain the rules for competition and procurement, and to review its relationships with providers in primary care and the third sector - it has not yet developed a sufficient understanding of either of these sectors, they add.

The clear message from the MPs's latest inquiry is that, under the current funding regime, the NHS will only be able to deliver the care required from it by significant innovation in the provision of health care. However, insufficient change has yet been made, says the Committee.

“More emphasis on prevention and community support, and proper use of digital technology, among many other changes, will allow tomorrow’s generation to enjoy not only a length of life but also a quality of life which has never been possible before. But the system has to change faster if these opportunities are to be realised – the pace of change is often too slow and the obstacles to change are often too powerful,” said the panel’s chair, Conservative MP Stephen Dorrell.

“Monitor has a vital role to play in promoting change and removing obstacles to change. It must identify problems earlier, and act quicker to resolve them,” he concluded.