Payment by results reform needs vision and realism

Payment by results has received criticism of late with evidence suggesting it is being used less each year. The system was first introduced for use in foundation trusts in 2004 and sees money following the patient.

‘There is, I doubt, hardly anybody who doesn’t believe that payment by results has to adapt to the new financial reality’

The introduction of the payment by results system meant there would be a national tariff and negotiations would focus on quality and quantity of service provided rather than price. Payment by results would apply as long as you were an acute provider, although a maximum of two thirds of your activity would be covered by the national tariff. Nearly a decade on, we are still waiting for tariffs for community services, ambulance services and mental health services.

The system worked tolerably well when the financial growth graph seemed to stretch forever skyward. Waiting lists, for the most part, came under control; the number of consultants doubled although productivity remained stubbornly resistant to improvement. Data capture and data quality improved dramatically.

System evolution

The Healthcare Financial Management Association in conjunction with the King’s Fund has recently published a briefing document, Future Payment Systems in the NHS, discussing how payment by results should evolve.

‘What are required are clear objectives for the payment system and reasonable expectations of what it can deliver’

There is, I doubt, hardly anybody who doesn’t believe that payment by results has to adapt to the new financial reality and the need to put quality first. We must design a payment/reward system that incentivises positive outcomes and good patient experience. It must also support patient choice, pay trusts in a fair and transparent way, reduce transaction costs and disputes, provide stability, minimise unintended consequences and − finally − “do no harm”.

We identified several principles that should be included in any revised system. These are: providing full coverage and encouraging whole system working; linking payment to outcomes; incentivising service transformation; supporting planning; and ensuring the system is rules based.

Multiple levers

However, no payment system can deliver all of these objectives on its own. What are required are clear objectives for the payment system and reasonable expectations of what it can deliver. Payment by results must work in conjunction with other performance levers. These include performance management, enhancing delivery of capability and capacity, users shaping services and market incentives.

As we redesign the payment system we must recognise its limits. The other levers must be balanced to work in harmony so that each element can produce the system response required to deliver a 21st century NHS. And I haven’t even mentioned a market forces factor…

Chris Calkin is chair of policy at the Healthcare Financial Management Association and a consultant. The HFMA has produced a webinar called An Introduction to Payment by Results