relation to the trust in accordance with that order or any subsequent orders
under this section which apply to the trust.

(6) In the case of a trust which was authorised after 1 April 2014 (including a trust
authorised on or after 1 April 2016 if, at the time it is authorised, section 109 still
5has effect), section 109 ceases to have effect in relation to the trust—

(a) if no order under this section is made before the end of the initial two-
year period, at the end of that period;

(b) if an order under this section is made in reliance on subsection (2)(a)
before the end of the initial two-year period, on whichever is the later
10of—

(i) the end of that period, and

(ii) the day on which that order or a subsequent order under this
section ceases to apply to the trust;

(c) if an order under this section is made in reliance on subsection (2)(b)
15before the end of the initial two-year period, in accordance with section
111(8) to (11).

(7) In this section and section 111—

(a) “the initial two-year period”, in relation to an NHS foundation trust, is
the period of two years beginning with the day on which the trust is
20authorised;

(b) a reference to being authorised is a reference to being given an
authorisation under section 35 of the National Health Service Act 2006.

(8) Section 109 is repealed as soon as there are—

(a) no NHS foundation trusts in relation to which it has effect, and

(b) 25no NHS trusts in existence (whether because they had all ceased to exist
without section 176 having come into force or there are none continuing
in existence by virtue of subsection (3) of that section).

111 Orders under section 110 that apply to only some trusts

(1) Where the Secretary of State proposes to make an order under section 110 in
30reliance on subsection (2)(b) of that section (“a section 110(2)(b) order”), the
Secretary of State must notify Monitor.

(2) Monitor, having received a notification under subsection (1), must set the
criteria that are to be applied for the purpose of determining to which NHS
foundation trusts the order should apply.

(3) 35Before setting criteria under subsection (2), Monitor must—

(a) consult the Care Quality Commission and such other persons as
Monitor considers appropriate, and

(b) obtain the approval of the Secretary of State.

(4) If the Secretary of State approves the proposed criteria, Monitor must—

(a) 40publish the criteria,

(b) determine, by applying the criteria, to which trusts the order should
apply,

(c) notify the Secretary of State of its determination, and

(d) publish a list of the trusts concerned.

(5) 45If the Secretary of State does not approve the proposed criteria, Monitor must
propose revised criteria; and subsections (3)(b) and (4) apply in relation to the

proposed revised criteria as they apply in relation to the criteria previously
proposed.

(6) If, having received a notification under subsection (1), Monitor proposes to set
criteria the same as those it set on the last occasion it received a notification
5under that subsection, it need not comply with subsection (3)(a).

(7) A section 110(2)(b) order—

(a) must apply to all the trusts that are determined under subsection (4)(b)
as being the trusts to which the order should apply (and to no others);

(b) may specify the trusts to which it applies by reference to their inclusion
10in the list published under subsection (4)(d).

(8) Subsection (9) applies where—

(a) a section 110(2)(b) order is in force at a time when there is in existence
an NHS foundation trust authorised after 1 April 2014, and

(b) the initial two-year period in relation to that trust has yet to come to an
15end.

(9) Monitor must—

(a) determine, by applying the criteria it applied under subsection (4)(b),
whether section 109 should continue to have effect in relation to the
trust after the end of the initial two-year period,

(b) 20notify the Secretary of State of its determination, and

(c) publish its determination.

(10) If Monitor determines under subsection (9)(a) that section 109 should so
continue to have effect, the trust is to be treated as if it had been authorised on
or before 1 April 2014 and as if the order referred to in subsection (7)(a) applied
25to it; and section 110(5) is accordingly to apply in relation to the trust.

(11) If Monitor determines under subsection (9)(a) that section 109 should not so
continue to have effect, section 109 ceases to have effect in relation to the trust
immediately after the end of the initial two-year period.

112 Repeal of sections 110 and 111

(1) 30Sections 110 and 111 are repealed immediately after section 109 is repealed;
and in consequence of that—

(a) in section 63(2)(a), omit “or under sections 109 and 111 of this Act
(imposition of licence conditions on NHS foundation trusts during
transitional period)”,

(b) 35omit section 63(3),

(c) in section 86(4), after paragraph (a) insert “and”,

(d) in section 86(4), omit paragraph (c) and the preceding “and”, and

(e) omit section 298(5)(e) and (11).

(2) This section is repealed immediately after sections 110 and 111 are repealed.

CHAPTER 4 Pricing

113 Price payable by commissioners for NHS services

(1) If a health care service is specified in the national tariff (as to which, see section
114), the price payable for the provision of that service for the purposes of the
5NHS is (subject to sections 122 and 123) such price as is determined in
accordance with the national tariff on the basis of the price (referred to in this
Chapter as “the national price”) specified in the national tariff for that service.

(2) If a health care service is not specified in the national tariff, the price payable
for the provision of that service for the purposes of the NHS is such price as is
10determined in accordance with the rules provided for in the national tariff for
that purpose.

114 The national tariff

(1) Monitor must publish a document, to be known as “the national tariff”, which
specifies—

(a) 15certain health care services which are or may be provided for the
purposes of the NHS,

(b) the method used for determining the national prices of those services,

(c) the national price of each of those services, and

(d) the method used for deciding whether to approve an agreement under
20section 122 and for determining an application under section 123 (local
modifications of national prices).

(2) The national tariff may provide for rules under which the commissioner of a
health care service specified in the national tariff and the providers of that
service may agree to vary—

(a) 25the specification of the service under subsection (1)(a), or

(b) the national price of the service.

(3) Where a variation is agreed in accordance with rules provided for under
subsection (2), the commissioner of the service in question must maintain and
publish a written statement of—

(a) 30the variation, and

(b) such other variations as have already been agreed in accordance with
rules provided for under that subsection in the case of that service.

(4) The national tariff may also—

(a) specify variations to the national price for a service by reference to
35circumstances in which the service is provided or other factors relevant
to the provision of the service,

(b) provide for rules for determining the price payable for the provision for
the purposes of the NHS of health care services which are not specified
under subsection (1)(a), and

(c) 40provide for rules relating to the making of payments to the provider of
a health care service for the provision of that service.

(5) Rules provided for under subsection (4)(b) may specify health care services
which are not specified under subsection (1)(a).

(6) The national tariff may also provide for rules for determining, where a health
care service is specified in more than one way under subsection (1)(a) or in
more than one way in rules provided for under subsection (4)(b), which
specification of the service is to apply in any particular case or cases of any
5particular description.

(7) The national tariff may include guidance as to—

(a) the application of the method specified under subsection (1)(d),

(b) the application of rules provided for under subsection (2), (4)(b) or (6),

(c) the discharge of the duty imposed by subsection (3), or

(d) 10the application of variations specified under subsection (4)(a),

and a commissioner of a health care service for the purposes of the NHS must
have regard to guidance under this subsection.

(8) Different methods may be specified under subsection (1)(b) for different
descriptions of health care service.

(9) 15The national tariff may, in the case of a specified health care service or health
care services of a specified description, specify different national prices or
different variations under subsection (4)(a) in relation to different descriptions
of provider.

(10) A description for the purposes of subsection (9) may not be framed by
20reference to—

(a) whether the provider is in the public or (as the case may be) private
sector, or

(b) some other aspect of the status of the provider.

(11) The national tariff may not specify a national price for a health care service
25provided pursuant to the public health functions of the Secretary of State, or of
a local authority, under the National Health Service Act 2006.

(12) The national tariff has effect for such period as is specified in the national tariff
(or, where a new edition of the national tariff takes effect before the end of that
period, until that new edition takes effect).

(13) 30In exercising its functions under this Chapter, Monitor must (in addition to the
matters specified in section 62) have regard to the objectives and requirements
for the time being specified in the mandate published under section 13A of the
National Health Service Act 2006.

115 The national tariff: further provision

(1) 35The ways in which a health care service may be specified in the national tariff
under section 114(1)(a), or in rules provided for in the national tariff under
section 114(4)(b), include in particular—

(a) specifying it by reference to its components,

(b) specifying it as a service (a “bundle”) that comprises two or more health
40care services which together constitute a form of treatment,

(c) specifying it as a service in a group of standardised services.

(2) In the case of a service specified in the national tariff under section 114(1)(a),
the national tariff must—

(a) if the service is specified in accordance with subsection (1)(a), specify a
45national price for each component of the service;

(b) if it is specified in accordance with subsection (1)(b), specify a national
price for the bundle;

(c) if it is specified in accordance with subsection (1)(c), specify a single
price as the national price for each service in the group.

(3) 5In the case of a service specified in rules provided for in the national tariff
under section 114(4)(b), the rules may—

(a) if the service is specified in accordance with subsection (1)(a), make
provision for determining the price payable for each component of the
service;

(b) 10if it is specified in accordance with subsection (1)(b), make provision for
determining the price payable for the bundle;

(c) if it is specified in accordance with subsection (1)(c), make provision for
determining the price payable for each service in the group.

(4) Neither a component specified in accordance with subsection (1)(a) nor a
15service comprised in a bundle specified in accordance with subsection (1)(b) is
to be treated for the purposes of this Part as a service capable of being provided
separately for the purposes of the NHS except—

(a) where the component, or the service comprised in the bundle, is
specified separately under subsection (1)(a) of section 114 or (as the
20case may be) in rules provided for under subsection (4)(b) of that
section, or

(b) in accordance with rules under subsection (2) of that section.

(5) Where the commissioner of a health care service for the purposes of the NHS
agrees to pay a price for the provision of the service other than the price that is
25payable by virtue of this Chapter, Monitor may direct the commissioner to take
such steps within such period as Monitor may specify to secure that the
position is, so far as practicable, restored to what it would have been if the
commissioner had agreed to pay the price payable by virtue of this Chapter.

(6) Where the commissioner of a health care service fails to comply with rules
30provided for under section 114(2), (4) or (6), Monitor may direct the
commissioner to take such steps within such period as Monitor may specify—

(a) to secure that the failure does not continue or recur;

(b) to secure that the position is, so far as practicable, restored to what it
would have been if the failure was not occurring or had not occurred.

116 35Consultation on proposals for the national tariff

(1) Before publishing the national tariff, Monitor must send a notice to—

(a) each clinical commissioning group,

(b) each licence holder, and

(c) such other persons as it considers appropriate.

(2) 40Monitor must also publish the notice.

(3) The notice must specify—

(a) the health care services which Monitor proposes to specify in the
national tariff,

(b) the method or methods it proposes to use for determining the national
45prices of those services,

(c) the prices, determined in each case by using the applicable method
specified under paragraph (b), that Monitor proposes as the national
prices of those services, and

(d) the method it proposes to use for deciding whether to approve an
5agreement under section 122 and for determining an application under
section 123 (local modifications of national prices).

(4) The notice may specify such rules as Monitor proposes to provide for in the
national tariff under which the commissioner of a health care service and a
provider of the service would be entitled to vary—

(a) 10the specification of the service in the national tariff, or

(b) the national price of the service.

(5) The notice may also specify—

(a) such variations (by reference to circumstances in which a service is
provided or other factors relevant to its provision) as Monitor proposes
15to specify to the prices that it proposes as the national prices,

(b) such rules as Monitor proposes to provide for in the national tariff for
determining the price payable for the provision for the purposes of the
NHS of health care services not specified for the purposes of subsection
(3)(a), and

(c) 20such rules as Monitor proposes to provide for in the national tariff for
determining, where a health care service is specified in more than one
way for the purposes of subsection (3)(a) or in more than one way in
rules specified for the purposes of paragraph (b), which specification of
the service is to apply in any particular case or cases of any particular
25description.

(6) The notice may include guidance as to—

(a) the application of the method specified for the purposes of subsection
(3)(d);

(b) the application of rules specified for the purposes of subsection (4) or
30 (5)(b) or (c);

(c) the application of variations specified for the purposes of subsection
(5)(a).

(7) The health care services specified for the purposes of subsection (3)(a) are only
such services as the National Health Service Commissioning Board considers
35should be so specified and—

(a) as the Board and Monitor agree will be so specified, or

(b) in default of agreement, as are determined by arbitration as being
services that will be so specified.

(8) A method specified for the purposes of subsection (3)(b) or (d) is only such
40method, and such guidance on the application of the method specified for the
purposes of subsection (3)(d) as is included for the purposes of subsection (6)
is only such guidance, as Monitor considers should be so specified and
included and—

(a) as Monitor and the Board agree will be so specified and included, or

(b) 45in default of agreement, as is determined by arbitration as being the
method that will be so specified and the guidance that will be so
included.

(9) The prices specified for the purposes of subsection (3)(c) are only such prices
as Monitor considers should be so specified and—

(a) as Monitor and the Board agree will be so specified, or

(b) in default of agreement, as are determined by arbitration as being the
prices that will be so specified.

(10) Such variations as are specified for the purposes of subsection (5)(a), and such
5guidance on the application of those variations as is included for the purposes
of subsection (6), are only such variations and such guidance as Monitor
considers should be so specified and included and—

(a) as Monitor and the Board agree will be so specified and included, or

(b) in default of agreement, as are determined by arbitration as being the
10variations that will be so specified and the guidance that will be so
included.

(11) Such rules as are specified for the purposes of subsection (4) or (5)(c), and such
guidance on those rules as is included for the purposes of subsection (6), are
only such rules and such guidance as the National Health Service
15Commissioning Board considers should be so specified and included and—

(a) as the Board and Monitor agree will be so specified and included, or

(b) in default of agreement, as are determined by arbitration as being the
rules that will be so specified and the guidance that will be so included.

(12) Such rules as are specified for the purposes of subsection (5)(b), and such
20guidance on those rules as is included for the purposes of subsection (6), are
only such rules and such guidance as Monitor considers should be so specified
and included and—

(a) as Monitor and the Board agree will be so specified and included, or

(b) in default of agreement, as are determined by arbitration as being the
25rules that will be so specified and the guidance that will be so included.

(13) A notice under this section must specify when the consultation period in
relation to the proposals ends; and for that purpose, the consultation period is
the period of 28 days beginning with the day after that on which the notice is
published under subsection (2).

(14) 30For the purposes of subsection (1) in its application to the first performance of
the duty under that subsection, the reference to licence holders is to be read as
a reference to such persons as are at that time providing health care services for
the purposes of the NHS.

117 Consultation: further provision

(1) 35For the purpose of securing that the prices payable for the provision of health
care services for the purposes of the NHS are such as to result in a fair level of
pay for providers of the services, the National Health Service Commissioning
Board and Monitor must, in exercising functions under section 116, have
regard to—

(a) 40differences in the costs incurred in providing health care services for
the purposes of the NHS to persons of different descriptions, and

(b) differences between providers with respect to the range of health care
services that they provide for those purposes.

(2) In exercising functions under section 116(7), the Board and Monitor must act
45with a view to securing the standardisation throughout England of the
specification of health care services in the national tariff under section
114(1)(a).

(3) In exercising functions under section 116(12), Monitor and the Board must act
with a view to securing the standardisation throughout England of the
specification of health care services in rules provided for in the national tariff
under section 114(4)(b).

(4) 5In carrying out the duty under subsection (2) or (3), the Board and Monitor
must have regard to whether, or to what extent, standardisation is likely to
have a significant adverse impact on the provision of health care services for
the purposes of the NHS.

118 Responses to consultation

(1) 10If Monitor receives objections from one or more clinical commissioning groups
or licence holders to a method it proposes under section 116(3)(b), Monitor
may not publish the national tariff unless—

(a) the conditions in subsection (2) are met, or

(b) where those conditions are not met, Monitor has made a reference to
15the Competition Commission.

(2) The conditions referred to in subsection (1)(a) are that—

(a) the objection percentage for clinical commissioning groups is less than
the prescribed percentage,

(b) the objection percentage for licence holders is less than the prescribed
20percentage, and

(c) the share of supply percentage is less than such percentage as may be
prescribed.

(3) In subsection (2)—

(a) the “objection percentage” is the proportion (expressed as a percentage)
25of clinical commissioning groups or (as the case may be) licence holders
who objected to the proposed method, and

(b) the “share of supply percentage” is the proportion (expressed as a
percentage) of licence holders who objected to the proposed method,
weighted according to their share of the supply in England of such
30services as may be prescribed.

(4) A reference under subsection (1)(b) must require the Competition Commission
to determine whether the method proposed under section 116(3)(b) is
appropriate.

(5) The functions of the Competition Commission with respect to a reference
35under this section are not to be regarded as general functions of its for the
purposes of Part 2 of Schedule 7 to the Competition Act 1998; instead, Schedule
12 to this Act (procedure on a reference under this section) has effect.

(6) Regulations prescribing a percentage for the purposes of subsection (2)(c) may
include provision prescribing the method used for determining a licence
40holder’s share of the supply in England of the services concerned.

(7) Where subsection (14) of section 116 applies, references in this section to licence
holders are to be construed in accordance with that subsection.

119 Determination on reference under section 118

(1) In carrying out a determination on a reference under section 118, the
45Competition Commission must have regard, to the same extent as is required

of Monitor, to the matters to which Monitor must have regard in carrying out
the functions of its to which the determination relates.

(2) In carrying out the determination, the Competition Commission must also
have regard to such representations as are made to it by licence holders who
5made objections to Monitor in accordance with paragraph 2 of Schedule 12
about the method proposed under section 116(3)(b).

(3) In carrying out the determination, the Competition Commission—

(a) may also have regard to matters to which Monitor was not able to have
regard in the case to which the determination relates, but

(b) 10must not, in the exercise of the power under paragraph (a), have regard
to a matter to which Monitor would not have been entitled to have
regard in that case had it had the opportunity to do so.

(4) The Commission may determine that the method proposed under section
116(3)(b) is not appropriate only if it is satisfied that Monitor’s decision to
15propose the method was wrong on one or more of the following grounds—

(a) that Monitor failed to have regard to the matters referred to in
subsection (1),

(b) that the decision was based, wholly or partly, on an error of fact,

(c) that the decision was wrong in law.

(5) 20Where the Commission determines that the method proposed under section
116(3)(b) is appropriate, Monitor may use that method for the purposes of the
national tariff accordingly.

(6) Where the Commission determines that the method proposed under section
116(3)(b) is not appropriate, it must remit the matter to Monitor for
25reconsideration and decision in accordance with such directions as the
Commission may give.

(7) A direction under subsection (6) may, in particular, require Monitor to make
such changes to the method in question as are specified in the direction.

(8) A determination on a reference under section 118—

(a) 30must be contained in an order made by the Commission,

(b) must set out the reasons for the determination, and

(c) takes effect at the time specified in the order or determined in
accordance with provision made in the order.

(9) The Commission must give notice of a determination on a reference under
35section 118 to—

(a) Monitor,

(b) the National Health Service Commissioning Board, and

(c) such licence holders as made representations in accordance with
paragraph 2 of Schedule 12.

(10) 40The Commission must also publish the determination; but it must exclude
from what it publishes information which it is satisfied is—

(a) commercial information the disclosure of which would, or might,
significantly harm the legitimate business interests of an undertaking
to which it relates;

(b) 45information relating to the private affairs of an individual the
disclosure of which would, or might, significantly harm that person’s
interests.

120 Changes following determination on reference under section 118

(1) Where the Competition Commission remits a matter to Monitor under
subsection (6) of section 119, Monitor must make such changes to the method
to which the matter relates as it considers necessary, having regard to the
5reasons specified for the purposes of subsection (8)(b) of that section.

(2) Monitor must give the Competition Commission and the National Health
Service Commissioning Board a notice specifying—

(a) the changes it proposes to make, and

(b) its reasons for proposing to make them.

(3) 10Monitor must make the changes specified in the notice unless it is given a
direction under section 121 before the end of the period of 28 days beginning
with the day after that on which it gave the notice.

(4) If Monitor is given a direction under that section before the end of that period,
it must make such of the changes as are not specified in the direction.

121 15Power to veto changes proposed under section 120

(1) The Competition Commission may, within the period of 28 days beginning
with the day after that on which it is given a notice under section 120, direct
Monitor—

(a) not to make the changes specified in the notice, or

(b) 20not to make such of those changes as may be specified in the direction.

(2) Monitor must comply with a direction under this section.

(3) The Secretary of State may, within that period and on the application of the
Commission, direct that the period for giving a direction under this section
(and, accordingly, the period referred to in section 120(3)) is to be extended by
2514 days.

(4) The Competition Commission may give a direction under this section only in
respect of such of the changes specified in the notice under section 120 as it
considers are necessary in consequence of its determination on the reference.

(5) If the Commission gives a direction under this section, it—

(a) 30must give notice specifying the changes proposed by Monitor, the
terms of the direction and the reasons for giving it, and

(b) must itself make such changes to the method to which the reference
relates as it considers necessary in consequence of its determination on
the reference.

(6) 35In exercising its function under subsection (5)(b), the Commission must have
regard to the matters to which Monitor must have regard when determining
the method to which the reference relates.

(7) Before making changes under subsection (5)(b), the Commission must give
notice to Monitor and the National Health Service Commissioning Board
40specifying—

(a) the changes it proposes to make,

(b) its reasons for proposing to make them, and

(c) the period within which representations on the proposed changes may
be made.