1. Payment reform in the NHS
Richard Murray
Chief Economist, Department of Health

2. Issues
Payment reform in the NHS
• Reflections on the NHS
• Payments and `Payment by Results’
• PbR and reform
• Other payment systems
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3. Health and social care payment systems
Current methods include: Future methods will add:
Payment reform in the NHS
• Payment by Results: • Payment by Results:
-National tariff per unit of -Year of Care
activity;
-Expansions to scale and
-Best Practice Tariffs, scope
marginal tariffs, Never
• New incentive elements: the
Events
Quality Premium, the Health
• GP and Dental national Premium and pay-for-
contracts performance pilots in drug and
alcohol recovery
• Local discretion
• Related reforms on personal
• Needs-weighted allocations
budgets
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4. PbR: impact on cost, quality and activity
Over 2003/04 to 2007/08, evaluations show positive
Payment reform in the NHS
impacts on cost and quality
Cost Reduced costs, as proxied by length of stay and
the day case rate
Quality At least, no reduction in quality on the measures
available:
-hospital mortality;
-30 day mortality following CABG
-28-day unplanned re-admission following
emergency admission for hip fracture
Activity Increases in both elective and non-elective
admissions
HERU, Payment by Results: consequences for key outcome measures across HRGs, providers
and patients.
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5. PbR, integration and competition
Initial objectives
On competition, PbR
Payment reform in the NHS
• Facilitating patient choice by remains:
ensuring money followed the patient.
• an alternative to price
• Supported the best use of capacity competition;
by ensuring those that could expand
received additional payment to do • a supporting
so. measure for
comparing quality and
• Avoiding price competition and choice
allowing commissioners to focus on
quality.
PbR had no initial
• `Rational’ payment system for newly remit on integration
autonomous providers
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6. PbR: current priorities
Key priorities for the reform of PbR
Payment reform in the NHS
Objectives 2011/12 examples
Quality and Outcomes Best Practice Tariffs, cQUIN
Efficiency and value for money Setting tariffs below average, high
efficiency requirements
Integration and patient responsiveness Measures on reablement, year of care
Expanding the scope of tariff Measures on renal dialysis, adult and
neonatal critical care, community
services
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7. Innovations: improving quality
PbR is moving into directly incentivising quality of care
Payment reform in the NHS
Innovation Motivation
No payment for `never events’ Covers mainly serious, preventable
accidents
CQUIN – 1.5% of contract value An incentive for quality, with two
linked to quality indicators nationally mandated areas but
otherwise locally driven
Best practice tariffs Providing incentives for quality
and/or efficiency including:
-A simple pathway (cataracts)
- Payments related to achievement
of quality markers (Stroke, hip
fracture)
- Incentives for day cases
(Cholecystectomy)
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8. Innovations: integration and bundling
Integration and bundling:
Payment reform in the NHS
within providers: e.g. tariffs for pathways within acute
providers such as cataracts or for
packages of care now under
development e.g. podiatry
across healthcare: national currency for year of care for
cystic fibrosis
between health & no reimbursement for emergency
social care: readmissions within 30 days of
elective discharge; reablement
tariffs
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9. Payment systems other than PbR
PbR is far from being the only payment or organisation
Payment reform in the NHS
tool to target integration and quality:
•integration and choice driven directly by users through personal
budgets;
• payment by results – where `results’ are outcomes - for providers of
alcohol and drug rehabilitation programmes;
• the Health Premium for Local Authorities to reward progress on
health inequalities and public health;
• NHS funding for social care, where benefits accrue to both
• Value-Based Pricing for pharmaceuticals; and
• integration through institutional change and other reform, e.g. the
creation of CCGs and the shift of Community Providers away from
commissioners.
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10. Summary
Payment reform in the NHS
• Major extension to the scale and scope of PbR,
though at relatively early days in terms of formal
evaluation;
• Part of a wider thrust to reform incentives,
payments and allocations towards outcomes,
patient-centred care and value-for-money.
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