Can Payment by Results be reformed?

The Payment By Results (PbR) system, first announced by the Department of Health in 2002, has to date had little to do with outcomes or results. Criticised by the British Medical Association back at its introduction for encouraging unequal competition between the public and private sector, PbR has also faced condemnation for funding arrangements that seemingly incentivise results in terms of quantity, rather than quality, and giving providers a ‘perverse incentive’ to carry out outdated, more invasive treatments that attract higher tariffs. However, it must be recognised that PbR was a successful financial tool to increase activity, which at the time, was much needed to clear the backlog of patients and was arguably instrumental in reducing waiting lists under the previous government’s 18 weeks initiative.

Changing system
But the NHS has changed. Speaking to the Nuffield Trust in March 2011, health secretary Andrew Lansley said: “We have a system in the NHS misleadingly called ‘Payment by Results’. But organisations aren’t paid for results. They are paid for activity. They are rewarded for processes and ticking boxes, for doing stuff and not actually for delivering the best possible patient care.”

He added further concerns on the limitations of PbR, saying: “Payments based on the historic average cost of a treatment can’t hope to keep up with often fast-paced developments in care.”1

In moves to address this, the government initially proposed a Maximum Price Tariff, which would’ve allowed commissioners and providers to negotiate on the cost of treatments. However, the Medical Technology Group (MTG) voiced concerns about both quality and patient safety under this system.

Under the policy, some hospitals would have been able to cut prices to please commissioners, simply by cross-subsidising. However, other hospitals on a less stable financial footing may not have that option – in such cases, they may have been pressed into cutting quality and possibly taking short-cuts on safety. This clause was removed from the Bill during the committee stage as MPs, health organisations and practitioners raised concerns that the quality of the health service would suffer as commissioners prioritised price over quality.

With quality being much harder to measure than price, the MTG also questioned whether the numerous new Clinical Commissioning Groups (CCGs) will have the expertise to identify any decline in quality and react accordingly

Sir David Nicholson, NHS chief executive, gave evidence to the House of Commons Public Accounts Committee and expressed similar views. He advised that without good quality measures or patients not being qualified to judge the quality of their treatment, price competition is “very dangerous”2.

Assessing care

In order to ensure the best experiences and outcomes for patients receiving treatment on the NHS, it is vital that all treatments are assessed in terms of their effectiveness, safety and their capacity to deliver good patient outcomes and high quality care – care that will deliver significant cost savings in the future, rather than low-level short term savings.

In a fairly unsophisticated cost-driven culture, there remains a risk that shrinking budgets combined with major structural reorganisation will result in the continued prioritisation of short term, price-based decision making. Taking this approach in favour of seeking high quality outcomes for the longer term is likely to be a false economy and moreover jeopardise the future viability of a taxation-based health system such as the NHS. Instead the focus for the service must be provision of services that take account of patient choice and preferences which balance sound long term financials with clinical outcomes befitting a modern NHS.

Best Practice Tariff
One of the proposed antidotes to costly or myopic commissioning could be the new Best Practice Tariff (BPT) programme, of which a small number have already been introduced and more are expected over the next few years. However, the nature of these Best Practice Tariffs vary considerably from additional payments, which are linked to fulfilling aspects of best clinical practice, to an overall reduction in the tariff value to remove the equivalent value of one days stay as an inpatient. An example of the former is the Hip Fracture BPT and the latter is the current BPT for Primary Hip and Knee Replacement.

Anecdotally the Best Practice Tariffs work best when they are linked to clinical indicators or aspects of best practice care and really change the way services are delivered. Conversely the impact of a punitive BPT, which simply removes £232 from the tariff value to encourage a reduction in length of stay, remains to be seen but is unlikely to have had the same impact across the country.

By extending the BPT further still, the NHS can lay the solid guidelines for commissioners to judge how best clinical practice will play out. The criteria laid out in these tariffs mean that providers are paid according to the costs of excellent care, rather than the average price3.

True results
Where Best Practice Tariffs describe the clinical characteristics of best practice and the structure, prices, and arrangements for implementation this is a welcome development in the movement from payment for activity to true “payment by results”.

For hip and knee replacements, for example, the pathway includes the pre-operative assessment, care during the hospital admission and immediate post discharge including outreach care. There is an expectation based on a range of publications that utilisation of such pathways should improve the patient experience and satisfaction, reduce lengths of stay and shorten post-operative rehabilitation4. However, the challenge for providers is that in some instances pathway redesign requires investment, particularly for the highly championed enhanced recovery programmes for orthopaedics which utilise community outreach teams that visit patients at home after an early discharge from hospital.

Despite the intention to increase the enhanced recovery programmes across the country and reduce length of stay this presents a significant challenge for trusts to deliver when the tariff value is decreasing year on year. Indeed for this approach to best practice tariffs to deliver the necessary change it would need to offer incentives to change which could be used to invest in the programme.

Structured tariffs

According to the Department for Health: “The aim is to have tariffs that are structured and priced appropriately both to incentivise and adequately reimburse for the costs of high quality care.”5 Whether this is the goal or the reality remains to be seen but it should be the guiding principle for the Best Practice Tariff programme if an erosion of quality is to be averted.

Extending clinically-based Best Practice Tariffs to cover a wider range of conditions will ensure care is truly designed around the patient, and focused firmly on the entire patient pathway. It is imperative that Best Practice Tariffs are based on clear clinically-based indicators of best clinical practice and draw upon relevant national guidelines. The alternative is punitive tariffs that are labelled BPTs but which threaten quality of care and patient outcomes.

However powerful it is, Payment by Results cannot solve everything. Commissioners around the country are refusing to pay for evidence-based, proven, safe, cost-effective procedures and/or technoogies whether a tariff, or a best-practice tariff is available or not. This short-term strategy to manage budget constraints is unsustainable and will jeopardise patient access to appropriate treatments and is likely to actually increase the overall cost to the NHS in the coming years.

For more information

1. Nuffield Trust Annual Health Strategy Summit: NHS modernisation and the way we pay for care (2 March 2011)
2. Health Service Journal (p.5, 20 January 2011)
3. Equity and Excellence: Liberating the NHS
4. Department of Health: Payment by Results Guidance 2011
5. Department of Health website

About the MTG
The Medical Technology Group (MTG) is a coalition of patient groups, research charities and medical device manufacturers working to make medical technologies available to everyone who needs them. Uptake of medical technology in the UK is not as good as it should be given its great potential to provide value for money to the NHS, patients and taxpayers. The MTG believes that patients and clinicians need better information about medical technologies so that they can make informed choices about their medical care.