Payment by ResultsPayment by Results

Dr. Jacky DavisDr. Jacky Davis

Background to PbRBackground to PbR

• a central plank of the NHS reforms a central plank of the NHS reforms • It will provide 90% of all income by 2008.It will provide 90% of all income by 2008.• Providers receive a fixed payment Providers receive a fixed payment

(national tariff) for every patient treated. (national tariff) for every patient treated. • Providers rewarded for volumes of work Providers rewarded for volumes of work

adjusted for differences in case mix. adjusted for differences in case mix. • Casemix defined by the Healthcare Casemix defined by the Healthcare

Resource Group (HRG)Resource Group (HRG)

Stated purpose of PbRStated purpose of PbR

• Reward efficiency and low costs (DoH)Reward efficiency and low costs (DoH)• Reward good performance (money follows patients)Reward good performance (money follows patients)• providers should be encouraged to find ways of cutting providers should be encouraged to find ways of cutting

costs and reducing lengths of stay in order to increase costs and reducing lengths of stay in order to increase capacity (DoH)capacity (DoH)

• primary care organisations will have strong incentives to primary care organisations will have strong incentives to prevent referral or admission (DoH)prevent referral or admission (DoH)

In order for PbR to achieve these objectives patients need In order for PbR to achieve these objectives patients need to have ‘choice’ about where to go and to have ‘choice’ to have ‘choice’ about where to go and to have ‘choice’ they need competing institutionsthey need competing institutions

DoH = Department of Health websiteDoH = Department of Health website

Real purpose of PbR?Real purpose of PbR?

• it is a health policy designed for marketised it is a health policy designed for marketised health care. By measuring patients as health care. By measuring patients as business and financial units the system can business and financial units the system can become the basis for wholesale contracting become the basis for wholesale contracting out of the health service to the private out of the health service to the private sector. It is necessary to have a market sector. It is necessary to have a market orientated pricing system to make orientated pricing system to make privatisation of clinical services possible.privatisation of clinical services possible.

• It is payment by activity and not by results. It is payment by activity and not by results. It is about volume of activity and speed of It is about volume of activity and speed of delivery. It does not reflect outcomes.delivery. It does not reflect outcomes.

General problemsGeneral problems

• Risk enters the clinical equation. There is more profit to be Risk enters the clinical equation. There is more profit to be made from a procedure on a young fit patient rather than an made from a procedure on a young fit patient rather than an elderly patient with co-morbidity. Market players offload risk. elderly patient with co-morbidity. Market players offload risk. The essential ‘risk pooling’ function of the NHS is lost.The essential ‘risk pooling’ function of the NHS is lost.

• Perverse incentive not to provide services for ‘unprofitable’ Perverse incentive not to provide services for ‘unprofitable’ patients nor to provide ‘unprofitable’ servicespatients nor to provide ‘unprofitable’ services

• PbR cannot work in a financially capped system. In such a PbR cannot work in a financially capped system. In such a system, ‘demand management’ systems are inevitablesystem, ‘demand management’ systems are inevitable

- referral management centres- referral management centres - CATS centres (Clinical Assessment and Treatment centres, - CATS centres (Clinical Assessment and Treatment centres,

run by private companies and replacing local hospital out run by private companies and replacing local hospital out patient services)patient services)

and a desire to come in below tariffand a desire to come in below tariff -CATS centres-CATS centres -‘Care in the Community’-‘Care in the Community’ -Non medically qualified practitioners-Non medically qualified practitioners

General problemsGeneral problems

• ‘‘levels of activity must match commissioner levels of activity must match commissioner requirements’. Hospitals accused of ‘overperformance’requirements’. Hospitals accused of ‘overperformance’

• Money may not follow patients - one hospital lost £2.5 Money may not follow patients - one hospital lost £2.5 milllion when it cleared a backlog of patients and the milllion when it cleared a backlog of patients and the PCT refused to pay. Surgeons told to delay operations PCT refused to pay. Surgeons told to delay operations until targets breached.until targets breached.

• ‘‘Two speed’ waiting lists – one hospital in Devon could Two speed’ waiting lists – one hospital in Devon could see the patients from one PCT immediately while those see the patients from one PCT immediately while those from a neighbouring bankrupt PCT had to wait.from a neighbouring bankrupt PCT had to wait.

PCT = Primary Care Trust, usual commissioning bodyPCT = Primary Care Trust, usual commissioning body

Problems in primary careProblems in primary care

• Incentives to keep patients within primary care even when Incentives to keep patients within primary care even when inappropriate. GPs taking on specialist services to avoid inappropriate. GPs taking on specialist services to avoid cost of referring patients to hospitalcost of referring patients to hospital

• ‘‘Care in the Community’. Plan to treat conditions such as Care in the Community’. Plan to treat conditions such as ectopic pregnancy and pulmonary embolism in the ectopic pregnancy and pulmonary embolism in the community, giving patients instructions about returning if community, giving patients instructions about returning if symptoms deteriorate. symptoms deteriorate.

• Incentives to use non medically-qualified practitioners - to Incentives to use non medically-qualified practitioners - to cuts costs and come in below tariffcuts costs and come in below tariff

• Incentives to use CATS type arrangements with Incentives to use CATS type arrangements with destabilisation of local NHSdestabilisation of local NHS

• 80% of PCTs believe that PbR encourages gaming. Already 80% of PCTs believe that PbR encourages gaming. Already financial disputes between primary and secondary care financial disputes between primary and secondary care

Problems in secondary careProblems in secondary care

• Incentives lead to gaming – hospitals making Incentives lead to gaming – hospitals making unnecessary internal referrals unnecessary internal referrals

• Incentives to admit more patients and treat in Incentives to admit more patients and treat in complex environments. Overall ER attendances complex environments. Overall ER attendances have gone up by 3%, but in foundation trusts have gone up by 3%, but in foundation trusts (first hospitals to operate under PbR) short term (first hospitals to operate under PbR) short term admissions from ER have gone up by 18% admissions from ER have gone up by 18%

• Cross subsidy of specialist services lost through Cross subsidy of specialist services lost through diversion of basic profitable work to the private diversion of basic profitable work to the private sector. Specialist services under threat or closedsector. Specialist services under threat or closed

• Hospitals competing eg one London hospital Hospitals competing eg one London hospital won’t share scanning protocols for thalassaemia won’t share scanning protocols for thalassaemia because they are money makers.because they are money makers.

Problems in secondary careProblems in secondary care

• PbR is a factory model of care. Drives down average length PbR is a factory model of care. Drives down average length of stay in hospital. NHS managers behave like bailiffs for a of stay in hospital. NHS managers behave like bailiffs for a ruthless landlord, eager to evict one set of patients to make ruthless landlord, eager to evict one set of patients to make way for anotherway for another

• Early discharges lead toEarly discharges lead to– pressures on social servicespressures on social services– rise in emergency readmissions (from 5.9% 2004/5 to 7.1% rise in emergency readmissions (from 5.9% 2004/5 to 7.1%

2005/6)2005/6)• 85% of hospital costs are fixed. Overheads and fixed costs– 85% of hospital costs are fixed. Overheads and fixed costs–

PFI repayments, teaching, training, acute and emergency PFI repayments, teaching, training, acute and emergency services, labs etc not factored into tariff.services, labs etc not factored into tariff.

• ‘‘unprofitable’ services reduced or dropped. When this unprofitable’ services reduced or dropped. When this happens user charges/co-payments may be introduced happens user charges/co-payments may be introduced (Queen Charlottes charging £4000 for one to one (Queen Charlottes charging £4000 for one to one midwifery, private dermatology clinics etc)midwifery, private dermatology clinics etc)

Problems at Problems at primary/secondary care primary/secondary care interfaceinterface• Loss of clinical collaboration. Ban on specialist to Loss of clinical collaboration. Ban on specialist to

specialist referrals. Specialists unwilling (or specialist referrals. Specialists unwilling (or banned from) giving telephone advice to GPs. banned from) giving telephone advice to GPs. Some managers have issued instructions to Some managers have issued instructions to hospital consultants not to work with primary hospital consultants not to work with primary care.care.

• As institutions have to be solvent and compete as As institutions have to be solvent and compete as discrete entities it is difficult to plan services discrete entities it is difficult to plan services across boundariesacross boundaries

• Difficult to plan specialised services especially Difficult to plan specialised services especially ones which are needed regardless of demand eg ones which are needed regardless of demand eg major traumamajor trauma

Problems with private sectorProblems with private sector

• Thus far on block contracts. Money up front for ‘start up Thus far on block contracts. Money up front for ‘start up costs’ Increased rate (11% on average over tariff, up to costs’ Increased rate (11% on average over tariff, up to 40%) and guaranteed patients and/or income regardless of 40%) and guaranteed patients and/or income regardless of work actually done.work actually done.

• Private sector thus able to continue work when NHS Private sector thus able to continue work when NHS hospitals stopped when money ran out. Important in hospitals stopped when money ran out. Important in context of patient choice.context of patient choice.

• Cherry picking by private sector – private sector does Cherry picking by private sector – private sector does ‘cheap and cheerful’ operations for the healthy while the ‘cheap and cheerful’ operations for the healthy while the NHS is left with low volume complex and expensive care for NHS is left with low volume complex and expensive care for the unhealthy. the unhealthy.

• As a result the private sector will appear to have better As a result the private sector will appear to have better outcomesoutcomes

• Single product providers can do it more cheaply than the Single product providers can do it more cheaply than the NHS. However the ‘basket of goods’ is cheaper to produce NHS. However the ‘basket of goods’ is cheaper to produce via the NHS than via the sum total of single providersvia the NHS than via the sum total of single providers

Problems with the tariffProblems with the tariff

• The tariff is complex and is based on reference costs (average of all The tariff is complex and is based on reference costs (average of all hospital costs) and Health Resource Groups (HRGs). Withdrawn at hospital costs) and Health Resource Groups (HRGs). Withdrawn at the last minute in 2006 because of problemsthe last minute in 2006 because of problems

• Tariff not sensitive or just wrong (elective coronary?)– specialist Tariff not sensitive or just wrong (elective coronary?)– specialist centres suffer, eg.children’s hospitals (CEOs of 4 major centres said centres suffer, eg.children’s hospitals (CEOs of 4 major centres said that there would be a shortfall of £22 million in funding because of that there would be a shortfall of £22 million in funding because of tariff). Orthopaedic specialist centres – complex osteomyelitis costs tariff). Orthopaedic specialist centres – complex osteomyelitis costs £20,000 to treat, tariff is £2,000. Losses in cardiac, and £20,000 to treat, tariff is £2,000. Losses in cardiac, and neurosurgery.neurosurgery.

• Based on ‘best practice’ eg 3 day stay after THR, then home rehab. Based on ‘best practice’ eg 3 day stay after THR, then home rehab. • Incentive to operate below tariff and cut corners in order to generate Incentive to operate below tariff and cut corners in order to generate

a profita profit• Unbundling of the tariff – diagnostics/rehabUnbundling of the tariff – diagnostics/rehab• Variable tariff ie not fixed as originally promised. Less if done in Variable tariff ie not fixed as originally promised. Less if done in

primary care thus more perverse incentivesprimary care thus more perverse incentives• PbR and mental health. No successful model anywhere in the worldPbR and mental health. No successful model anywhere in the world• Tariff doesn’t include teaching and training costsTariff doesn’t include teaching and training costs

PbR AND PATIENTSPbR AND PATIENTS

• Patients increasingly treated as financial and business unitsPatients increasingly treated as financial and business units• Concept of ‘unprofitable’ patient – those who cannot Concept of ‘unprofitable’ patient – those who cannot

reliably and predictably get ‘better’ wthin a crude care reliably and predictably get ‘better’ wthin a crude care pathway ie most vulnerable are old, multiple needs, pathway ie most vulnerable are old, multiple needs, physical/learning disabilities etc. Overdiagnosis and physical/learning disabilities etc. Overdiagnosis and overtreatment of some and neglect and undertreatment of overtreatment of some and neglect and undertreatment of others others

• ‘‘unprofitable’ services reduced or stopped – 50 patients for unprofitable’ services reduced or stopped – 50 patients for cardiac catheter ablation taken off waiting list as trust cardiac catheter ablation taken off waiting list as trust couldn’t do the procedure for less than tariff.couldn’t do the procedure for less than tariff.

• PbR creates conflict between the interests of patients and PbR creates conflict between the interests of patients and the interests of hospitals. Reimbursement according to risk the interests of hospitals. Reimbursement according to risk leads to exaggerating patients needs and treatment leads to exaggerating patients needs and treatment received and selecting low risk patients, while avoiding received and selecting low risk patients, while avoiding those whose treatment does not generate a surplus. those whose treatment does not generate a surplus.

Other problemsOther problems

• Cost of running PbR – increased Cost of running PbR – increased transaction costs. At the end of 2005, transaction costs. At the end of 2005, £100,000 per hospital. Now up to £100,000 per hospital. Now up to £190,000. The cost increase is unlikely to £190,000. The cost increase is unlikely to prove temporary (DoH)prove temporary (DoH)

• Over 50% of doctors think PbR will worsen Over 50% of doctors think PbR will worsen patient care patient care www.bma.org.uk/ap.nst/content/consultanwww.bma.org.uk/ap.nst/content/consultantcasestudiestcasestudies

• PbR assumes that most health care is a PbR assumes that most health care is a one off encounterone off encounter

QUOTESQUOTES

• John Appleby senior economist, Kings Fund – ‘PbR is the John Appleby senior economist, Kings Fund – ‘PbR is the most profound of all the changes happening in the NHS and most profound of all the changes happening in the NHS and marks a return to the market that Labour said it was going marks a return to the market that Labour said it was going to abolish’to abolish’

• John Appleby – ‘the implications for hospitals are potentially John Appleby – ‘the implications for hospitals are potentially immense. The concept of the District General Hospital immense. The concept of the District General Hospital providing a comprehensive range of services could go out providing a comprehensive range of services could go out of the window’of the window’

• Staff at Nuffield Orthopaedic Centre – ‘we are aware that Staff at Nuffield Orthopaedic Centre – ‘we are aware that the very specialised work that we do is not financially viable the very specialised work that we do is not financially viable under PbR’under PbR’

• Audit Commission – ‘PbR has been time consuming and Audit Commission – ‘PbR has been time consuming and costly to implement’.costly to implement’.

• DoH website –‘Failure to understand costs may lead DoH website –‘Failure to understand costs may lead hospitals to expand activity in hospitals to expand activity in unprofitable areasunprofitable areas which will which will undermine their financial position’undermine their financial position’

• PCT Chief executive – ‘as it stands PbR could destabilise PCT Chief executive – ‘as it stands PbR could destabilise whole health economies’whole health economies’

• DNUK – ‘as a means of destroying patients’ trust it is an DNUK – ‘as a means of destroying patients’ trust it is an excellent tool’excellent tool’

• DNUK – PbR discriminates against specialities with low turn DNUK – PbR discriminates against specialities with low turn over and long staysover and long stays

• John Hutton (health minister) – ‘the inefficient will fail and John Hutton (health minister) – ‘the inefficient will fail and rightly so’rightly so’

• HSJ editorial (May 2007) - The same applies to payment by HSJ editorial (May 2007) - The same applies to payment by results where, even if the premise holds true that hospital results where, even if the premise holds true that hospital trusts are paid more transparently for their activity, there are trusts are paid more transparently for their activity, there are too many unintended consequences for it to be deemed too many unintended consequences for it to be deemed successful in the long term. It will need to be revised successful in the long term. It will need to be revised markedly to survive.markedly to survive.

• Frank Dobson – ‘what the government is doing is neither Frank Dobson – ‘what the government is doing is neither right nor popular, which is a bad combination in politics’.right nor popular, which is a bad combination in politics’.