Payment by results has never been far from controversy. Introduced in England in 2003 as part of an NHS internal market, it has been ignored by every other part of the UK.
The idea behind PbR is simple. Hospitals are paid for what they do, based on an average cost for each activity. There is no long-term guarantee of income, and trusts know they have to cut costs to compete successfully with other providers – both NHS and private.
But there have been suggestions that gaming – manipulation of the system for financial gain – is rife and that some hospitals could be forced to withdraw certain services. As our cover feature shows (pages 20–23), the internal market also tends to discourage capital investment, including through the Private Finance Initiative.
Further criticisms came to light this week when the LibDems claimed that the government had tried to ‘bury’ a critical report on PbR. The PA Consulting report stated that specialist cancer hospitals were losing significant income when they treated patients with complex needs, and that PbR reduced investment in new technology.
Not to be outdone, the Audit Commission also chose this week to publish a report suggesting that average PbR coding error levels are around one in ten. For specialist trusts, the error level was even higher.
Given that the coding determines the payment level, this seems an unfortunately large ratio. As Nigel Edwards, policy director of the NHS Confederation, told PF this week: ‘If you had this level of error in payroll, you’d be changing the contractor.’
There is no likelihood that the government will abandon a flagship policy like PbR. It is crucial to New Labour’s market-driven reforms and is now generally accepted by the finance community.
But there clearly needs to be some reappraisal. Error levels of 10% are unacceptable and specialist trusts – such as cancer hospitals, but also children’s and orthopaedic centres – should not be penalised simply because they are treating people with complex needs.
The LibDems have called for an urgent review of PbR, particularly with regard to specialist care, and the government would do well to accede.
