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NHS payment system in need of overhaul

Payment by Results system not suited to shift of care to community

Adrian O'Dowd

Friday, 02 November 2012

The current payment systems used in the NHS are not suited to the current challenges faced and could work against a drive to focus more on primary care, concludes a report published today by The King’s Fund.

The health think tank report says the way the NHS currently pays hospitals for the work they do – including Payment by Results – will have to change to incentivise new models of care.

In its report Payment by Results: How can payment systems help to deliver better care? The King’s Fund argued that Payment by Results (PbR) was originally designed to help reduce waiting times by encouraging more activity in hospitals, but the NHS now had different priorities and challenges.

The PbR system has had a positive impact on the NHS in England, the report says, but current payment systems may be obstructing changes in services required to meet current and future health care needs.

The authors argued it was necessary now to experiment with and evaluate new and innovative payment methods that would move away from a system primarily driven by a desire to boost activity rather than outcomes and facilitate more integrated care.

It proposes that the NHS adopt an approach that would allow local experimentation in payment systems within a clear national framework, all of which would be evaluated.

PbR was broadly suited to elective care, said the authors, and provided an incentive to improve technical efficiency within acute providers.

However, its limitations included the fact that it was not well designed to promote or support larger scale shifts in care from hospital to other settings, nor was it well suited to promoting continuity and co-ordination of care.

It also provided almost no incentives for health promotion and disease prevention and did little to support improvements in the efficient allocation of funds or innovation.              

The report therefore proposes the NHS adopt an approach to payment that maximises local flexibility but ensures greater transparency in pricing.

Over time, a more comprehensive set of national currencies and prices should be developed that better meet the needs of the health care system.

John Appleby, chief economist at The King’s Fund and lead author of the report, said: “Payment by Results for hospital services was developed nearly a decade ago in order in part to drive a reduction in waiting times by encouraging more activity in hospitals. But the challenges facing the NHS have altered.

“Tinkering with Payment by Results will not support the service changes increasingly recognised as necessary, and may even be obstructing them. One size does not fit all when it comes to payment systems, and radical changes in the blend of payment methods used in the NHS are essential in order to improve NHS performance and the quality of patient care.”

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