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Improved efficiency from payment by results

But new hospital payment system has not had a detrimental effect on quality

OnMedica Staff

Friday, 28 August 2009

The payment by results system has improved the efficiency of hospitals in England without compromising quality, a study published on bmj.com has found.

The payment by results system, first outlined by the Department of Health in England in April 2002, is a fixed tariff payment system directly linking the income hospitals receive with the number and case mix of patients treated. The aim of the policy was to increase efficiency, volume of activity and quality of care in English NHS hospitals.

Researchers from the University of Aberdeen, compared measures of volume, cost and quality of care in hospitals across England (at various stages of implementing payment by results) with providers in Scotland (not implementing payment by results) during 2004/05 and 2005/06.

Differences between the phasing in of payment by results by foundation trusts, non-foundation trusts, and Scotland allowed the researchers to estimate the effects of the introduction of the policy.

They found that unit costs fell more quickly where payment by results was implemented. Evidence of an association between the introduction of payment by results and growth in acute hospital activity (volume of patients treated) was also seen.

There was little evidence of any change in the quality of care associated with the introduction of payment by results. However, further analysis on the longer-term impact of payment by results found that the quality of care in foundation trusts increased in association with the introduction of the tariff.

There was nothing to support the proposition that quality of care has suffered as a result of payment by results.

Dr Shelley Farrar, research fellow at the Health Economics Research Unit, University of Aberdeen, Scotland, said that this suggests that cost reductions had been attained through increases in efficiency rather than through reductions in quality.

“Taken together the analysis suggests that payment by results is capable of achieving, and has in the short time since its adoption actually achieved, real changes in delivery of health care in hospitals in England,” she said.

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