DiagnosticsPayment By Results Needs Radical Overhaul - NHS Alliance
Payment by Results has inflated NHS costs and encouraged acute trusts to become "profit centres", so nothing short of a radical overhaul will put matters right, says the NHS Alliance.
The independent body is calling for PBR to be regarded as maximum price rather than absolute price as a means to deliver savings and benefit patients and taxpayers.
The fact that Payment by Results is not fit for purpose is nothing new. It failed to deliver on both cost and quality. On top of that, there is a worrying trend regarding the inaccuracy of PBR data. Recent Audit Commission results have suggested that errors in estimating PBR costs may vary by up to 10%, and this excludes the "unsafe to audit" PBR returns studied.
Dr Michael Dixon, chairman of the NHS Alliance, said: "We are talking about quite a large margin, which means that the level of error, up to 10%, may well be the equivalent of total savings required at a time of deficit."
Although the NHS Alliance welcomes the move from "average cost" to "best value cost" when pricing PBR, the organisation recognises that this is not enough - PBR should be regarded as maximum price.
The NHS Alliance believes this should happen for three reasons:
- In those areas where PBR has been thought to inflate costs, some trusts will be able to offer considerably under tariff and thus benefit patients and the taxpayer.
- In any areas where an acute trust is able to undercut PBR by a significant margin, this will again carry benefits to patients and the taxpayer.
- In purchasing primary care and community services, Primary Care Trusts are then able to tender according to best value. If PBR becomes a maximum price, then this will similarly give commissioners more strength in terms of providing the best possible service for patients as well as taking advantage of any substantial savings that might be made.
The NHS Alliance"s proposal carries some caveats. PCTs and practices will need to ensure that commissioners do not fall prey to market tactics such as loss leading or skimming. Contracts should only be moved on the basis of price, where substantial savings can be made. And, finally, primary care providers may themselves face the risk of competition, where acute hospitals can undercut them.
Dr Dixon added: "These risks must be faced if the NHS is to keep within budget. If last year the focus was on quality, then the focus for the future must equally be on cost. Cost has now become the business of every clinician and manager seeking to provide the best value in health and care for patients. Freezing costs, as PBR has, is no longer appropriate at a time when every part of the NHS will be financially stretched."
By offering a fixed tariff for different hospital procedures, the unfulfilled PBR promise was that commissioners would be able to focus on quality rather than price and that PCTs and GP practices would realise savings from reduced activities in some services. In reality, however, tariff prices have sometimes been set high, inflating NHS costs. Some even suggested that PBR has encouraged Acute Trusts to increase the volume of activity regardless of benefit, becoming in effect "profit centres", as described in the recent Nuffield Trust report.*
Dr Dixon added: "It is time to redress the balance and give commissioners the power to choose and the ability to save money. In Japan, tariffs are set very low as the system uses PBR to reduce costs rather than allowing it to increase them. It"s a no-brainer really."
Notes
1. The NHS Alliance is the only independent body that brings together primary care trusts" chief executives and other senior managers, doctors and practice managers, nurses, pharmacists and allied health professionals, along with board chairs and members. We are a value-driven organisation, with no political affiliation, which works in partnership with various bodies associated with the NHS to create a progressive health service that is free from the traditional tribalism of single interest groups.
2. *This report, entitled Health in a Cold Climate: developing intelligent response to the financial challenges facing the NHS, was published in June 2009 by Chris Ham, University of Birmingham. It states: "The consequence of creating strong incentives for trusts to increase activity and income... has been to turn Acute Hospitals into profit centres, whose leaders are focussed on increasing income and surpluses."
NHS Alliance