Hospitals in England are to be paid a fixed fee for the first time for treating NHS patients.
Hospitals will be paid a fixed price for each operation
The aim is to ensure the NHS gets better value for money by stamping out variations in the cost of operations.
Ministers say the "fundamental reform" will make the NHS more efficient but critics say it could cause some trusts to cut services.
It comes as the government confirms that treating NHS patients in private hospitals is proving expensive.
The NHS paid private hospitals £100m last year to treat 60,000 patients as part of efforts to cut waiting times.
However, the operations cost 43% more than if they had been done on the NHS.
The new NHS tariff sets a fixed price for 48 different procedures, ranging from cataract surgery to a heart bypass operation.
The tariffs will be phased in over the next four years. However, foundation trusts will be able to adopt them from April.
There are currently huge variations in the amount of money hospitals are paid for carrying out certain operations.
The price of a heart bypass operation ranges from £2,540 to £6,911. The cost of cataract surgery varies between £763 and £1,164.
Ministers say a fixed fee will force many hospitals to become more efficient. Hospitals that fail to reduce their costs will face losing millions of pounds a year.
Those that succeed in providing the operations below the tariff price will be able to keep the profit. That money could be spent on new equipment.
Ministers hope the system will also drive up quality and improve choice for patients.
Health Minister John Hutton said: "By fixing a national tariff, we can minimise bureaucracy and unnecessary transaction costs associated with local price negotiation, allowing trusts and PCTs to focus on quality and speed of access.
"And secondly, it will allow patients to exercise greater choice over when and where they are treated."
However, the British Medical Association expressed concerns.
"The tariff system could cause the NHS problems," said its chairman James Johnson.
"Some tariffs will be far lower than the real costs of providing care, putting undue pressure on hospitals to make cuts.
"Given that the NHS cannot afford to lose staff, how will these savings be made?"
Liberal Democrat spokesman Paul Burstow added:
"These government plans don't take into consideration that the same operation has a very different price tag depending on the patient. The danger is that this will force hospitals to run up huge debts."
Mr Hutton defended the government's use of private hospitals to cut NHS waiting lists despite the relatively high cost.
"Our use of the private sector allowed nearly 60,000 NHS patients to have their operation more quickly than would otherwise have been possible. That was absolutely the right thing to do."
However, trade union Unison condemned the policy.
Karen Jennings, its head of health, said the private sector was "ripping off the NHS... at the expense of patient care".
NHS Price List
£763 to £1,164
Heart valve surgery
£7,294 to £9,788
£2,540 to 6,911
£4,111 to £5,319
£658 to £1,219
£4,695 to £5,788
Major breast surgery
£1,641 to £2,497
Varicose vein removal
£752 to £1,376
Source: Department of Health
Do you think standards will slip as a result of fixed fees? Send us your views using the postform below.
Surely this policy puts teaching hospitals at a disadvantage? Operations naturally take longer in a teaching context, so less procedures can be carried out, however the costs associated with running an operating theatre and maintaining expensive equipment aren't any lower. This makes it very hard for a teaching hospital to be as economical as other hospitals.
Alice, Oxford, UK
Flat rates in 2008 in some cases lower than the present costs? Can anyone really believe that is realistic? And is this system dependent on Britain going into a deflationary spiral or on all of the pensioners on waiting lists passing away before they can get the help they worked 40 plus years to qualify for?
The sooner that individuals can choose and pay for their medical requirements the better. Every one should be able to spend their own money for the sake of their health, with finance from the NHS pot that the government hold in order to encourage an open healthcare service.
Roy del Rio, London
The reason this is particularly appealing is that it puts pressure on hospitals to cut down on admin and pen pushing and consider how they really are going to achieve output - something that currently is clearly not being addressed
Alistair Jenkins, London UK
My late father had his cataract operated on while he had chronic emphysema. This hugely increased the cost of his care, but without it, he would have been left completely blind. Would the hospital have performed the operation had "tariffs" been in force, or would they have done two or three "normal" cataract operations instead?
David Williams, Devizes, Wiltshire
If costs have got to fall then standards will also. Working in business I know that you get what you pay for. If you pay 75% of the cost then you get a 75% service
Sam D, Reading, UK
The prices are per operation performed, and does not include recovery after operation. Looking at the rates they are somewhere between the current costs and some are even higher, surely this will stop surgeons picking the less complicated patients in front of the complicated cases as they are paid a flat rate regardless of how long the operation takes and the geographical location.
TFD, Liverpool, UK
A fixed price for operations is surely not possible because each person reacts differently to surgery. Unless you have a fixed base price to forecast the future base costs and allow for extras to cover the differentials.
John L Clark, Gloucester. UK
My mother is in her 70s and has just had to pay £11,000 to have a hip replacement done privately after being on the NHS waiting list for ever and a day. If this stops pensioners having to use their life savings to buy medical care then it has to be a good thing. My mother can put a price on pain since she has suffered for severe pain for two years waiting on the NHS.
Andrew Montgomery, Glasgow, UK
This is a step in the right direction, giving the hospital administrators themselves a figure to aim for. However, it might well mean that hospitals are reluctant to work on patients with more complicated cases making them even more vulnerable.
Sophie Tsangari, Leatherhead, Surrey
I am concerned that there will be an inevitable fall in standards by fixing fees. When taking into account the cost difference between the 2008 tariffs and the current upper end costs detailed in the limited list of procedures provided above, there appears to be very little margin for firstly general inflation, but more importantly possible advances in medical/surgical procedures and techniques which may result in cost increases.
Mrs Brigid Dowsett, Bristol, UK
Some fundamental points have been missed; surely the cost for a heart bypass for example would be cheaper and quicker on a young, healthy patient than a more elderly patient (who also requires additional post op care). The plans would mean this differential is not accounted for. Secondly, if a hospital cannot meet the tariffs and stops the ops, the local patients then have to foot the bill to travel to nearest suitable hospital, they then end up footing the additional cost differential
Greg, Basingstoke, England
How can one national price be set? When the cost of living varies so much from city to city, and therefore the salary expectations of the staff, property prices etc. surely the base cost must vary widely. Again, a single dictate for an individualist nation.
Andy Cooper, London, England
Dangerous ground. Fixed costs assume a non-variable requirement at the treatment stage but, the patient, for whom there are many, who requires additional cover because of other illnesses or conditions, will need extra resources, For example, take a simple cat scan with contrast, the patient can't have MRI but has a slight allergic reaction to the contrast, addition drugs must be given to prevent that reaction and standby facilities have to be set up in case a life threatening reaction does occur. This can't be done without extra costs unless of course you want to up the risk level and skip the precautions. A simplistic solution to a complicated question.
Ken Lockren, Nuneaton, Warks
I'm concerned that this idea is 'Stakhanovite' in its inception! i.e. designed to make NHS hospitals work harder for less money! Who fixes the tariffs? Will it be by government decree or by consultation with the NHS? Will there be provision for the review of tariffs? (Who's calling the tune...who's paying the piper?)
E.P. Aliferis, London, UK
The problem as I see it is that sicker patients may well require more intensive care and possibly more expensive drugs for the same operation; surely any pricing system has to take this into account? Also, many operations have substantial variation in how long they take to complete - is there not a temptation for surgeons to rush if they know they'll get only a flat rate?
Matthew, Cambridge, UK
By equating time and cost we are putting a price on pain. A totally unacceptable concept!
L London, Wymondham - Norfolk
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