The future of the NHS hospital payment system in England From recovery to transformation

How health care providers (such as hospitals) are paid is one way of influencing the quality and efficiency of NHS care. Over the coming years the NHS will face unprecedented challenges as it tries to recover the substantial backlog of unmet need after the pandemic, deliver on already demanding efficiency targets and redesign care, shifting services towards more community and primary care.

Before the pandemic, the NHS payment system was moving towards a blended approach where providers receive an annual fixed payment supplemented by activity and quality-related funding – to replace the payment by results (PbR) tariff.

With waiting lists at record highs, it might be tempting to move back to the PbR tariff to incentivise hospitals to treat many more patients. But over the coming years the NHS also needs to improve care of an ageing population with complex, long-term health problems. Coordinated care across hospitals, community, primary and mental health services is a priority and activity related payments are not well suited to this goal. Even after the pandemic, a blended payment system to replace the PbR tariff remains the right direction of travel to help balance these potentially competing priorities for the NHS.