25.  One way of improving the management of neonatal services is through effective commissioning and financial management of services. Commissioning of neonatal services is complicated and not yet sufficiently integrated. The three types of neonatal care are planned and commissioned separately. Primary Care Trusts commission neonatal special care and the ten Specialised Commissioning Groups commission high dependency and intensive care.[47] The three types of care are, however, mutually inter-dependent as a baby's condition can improve or deteriorate very rapidly and most babies move between the different levels of care as their condition changes. Furthermore, although maternity services are a key determinant of demand for neonatal services, there is no formal link between them for commissioning and planning purposes.[48] In one region, the Kent and Medway network, all three types of neonatal care are commissioned together to improve the planning of the care pathway.[49]

26.   Effective commissioning is constrained by Primary Care Trusts, Acute and Foundation Trusts not understanding the costs of providing neonatal services, which is partly explained by inconsistency in calculating such costs.[50] Figure 4 shows the variations in the costs per cot for each type of neonatal unit.[51]

DESIGNATION OF UNIT	ANNUAL COST PER COT (2006-07)
	MINIMUM	MAXIMUM
LEVEL 1	£43,672	£205,740
LEVEL 2	£46,310	£180,718
LEVEL 3	£61,218	£246,339
LEVEL 3 PLUS SURGERY	£96,583	£256,248

27.  Daily charges for neonatal care vary across all levels of care, with little consensus on the basis on which these charges were determined (Figure 5). In 41% of units, charges were based on historic costs adjusted for inflation. Foundation Trusts' average charges were lower than NHS trusts and in a third of units charges did not cover their costs. These charges form the basis of contracts with commissioners which are a fundamental component of how the service is run.[52]

28.  No common method exists for tracking and allocating the costs of each neonatal unit, with nursing salaries and equipment consumables the only common features in the units' cost estimates. The estimates of running costs did not reconcile with the estimates of income received. On average income exceeded expenditure by £559,000. All of these discrepancies point to a fundamental lack of understanding in Trusts of the cost of providing neonatal care. While some improvements in financial management have been achieved, further progress is needed, both in the way financial information is collected and the way costs are apportioned. In the medium term the Department expects staffing cost data to be more accurate and transparent, but information on pharmaceuticals, for example, will not be available until the Department's electronic prescribing is fully implemented, which is not expected for several years.[53]

29.  The NHS expects the introduction of Payment by Results and the development of a national tariff for neonatal services to help promote better financial planning in the way it relates costs to actual levels of patient activity.[54] There is currently some confusion however on how this will be done in practice for neonatal care.[55]

30.  The NHS has not yet introduced Payment by Results for neonatal care, largely due to the inherent difficulties in developing a robust tariff for such complex services. Units have concerns about the practicalities of implementing Payment by Results and there is uncertainty as to how the development of a tariff is being taken forward. There are also concerns about the extent to which a tariff would recognise transport costs.[56]

31.  The Department expects that in the next couple of years they should have a national tariff for neonatal services. For 2008-09, each of the specialist commissioning groups, which have overall responsibility for securing adequate levels of health provision, is providing a baseline and setting out clearly what the costs and expectations are against the amount of money it intends to spend.[57]