The risks are large but may be worth while because of potential gains

A revolution is happening in the money flows around the NHS in England. “Payment by results” is essentially a way of paying providers a fixed price for each individual case treated.1 Each case, say an admission to hospital, will be grouped into a healthcare resource group according to the treatment carried out and the clinical condition of the patient. Then a fixed price or tariff will be assigned to each healthcare resource group, based on the national average cost of treatment in NHS trusts in England. From 1 April 2004 locally determined tariffs apply to the growth in activity for 48 healthcare resource groups, covering all surgical and most medical specialties. From April 2005 nearly all specialties will be commissioned on this basis, with the national tariff being phased in over three years. By 2008 all health care will be covered, including outpatients and ambulatory care, and national tariffs will then apply to private providers. Foundation trusts coming on stream this year will adopt “payment by results” a year early. This reimbursement system for providers based on case mix is similar to that used in many countries such as Australia, Norway, and the United States. The difference in …