This paper uses an illustrative case study to explore the potential impact that different tariff levels have on the likely uptake of a new technology.

A case study is used to demonstrate the financial outcomes associated with the uptake of a new intervention for atrial fibrillation with does not require anticoagulation monitoring, compared with an older technology which does require additional monitoring. Importantly, the analysis is undertaken from three different perspectives within the NHS, namely ‘the Provider’ (i.e. a local hospital), ‘the Commissioner’ (regional authority) and the health system as a whole. Various levels of tariff payment are assessed, some of which reflect the ‘true’ cost of monitoring, and others that reflect values based on other incentives.

In the example, it would be clearly beneficial for the NHS as a whole to approve the new therapy since it saves £50 per patient. However, this would not be in the Provider’s interest since the Provider receives compensation for monitoring costs by way of a tariff. By switching to the new drug, the Provider would lose out on substantial income from tariff payments for monitoring that is associated with the older therapy. There is a small ‘window’ (in this case study, between £75 and £125) where the preferred decisions of the Provider and the Commissioner match that of the system as a whole. A value above this window will mean that the Provider prefers does not wish to use the new drug, whilst a value below this window means that the Commissioner prefers to stay with the older therapy.

To create an optimal incentive, the tariff value should be set within a specific range, based on modelled outcomes. The important finding is that this range does not need to be based on the actual cost of the service which is being compensated.