Payment by results

Introduction

The Health Foundation recognises the need for PbR to improve the transparency of business transactions in health. Our interest lies in claims that its introduction and current form lead to improvements in quality of care.  As well as using our learning from all of our programmes of work, we asked leaders from a range of NHS organisations to provide their views and experiences in relation to the issues the consultation raised.

Our response focuses on four areas that relate to the impact of PbR on quality. They are:  

1. Does Payment by Results support quality improvement in healthcare? 
2. Can data from Payment by Results be used to help improve quality
3. What is the impact of Payment by Results on partnership working?
4. Has cost transparency from Payment by Results helped?

We understand that PbR is still evolving and the aim of the consultation is to develop it further.  But, initial reports from NHS staff we support about the impact of PbR on quality have been negative. For example, no one felt that PbR currently incentivised the provision of high quality care: 

• “I cannot think of any causal relationship [between PbR and quality improvement]”.
• “PbR incentivises higher volume, lower cost work, not high quality work.”
• “Hospitals are incentivised to perform procedures that cost less than the tariff, with little motivation to focus on quality”.

Evidence from case-mix systems across the world indicate that there are four main factors that determine how care payments impact on quality

1. The way the items are structured, weighted and costed
2. How payment mechanisms operate
3. The extent to which non direct service activities such as education, training and research exist to complement/offset efficiency drives, and
4. Processes to continuously review and update the items and pricing

Without strong clinical engagement in the development and refinement of the items and weights, and in a relatively sophisticated service environment with caps on overall spending at the PCT level, it is easy for PbR to generate a range of negative and unintended consequences at the implementation stage.

For more information, Read the full response (pdf)

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