Payment by results—new financial flows in the NHS
BMJ 2004; 328 doi: https://doi.org/10.1136/bmj.328.7446.969 (Published 22 April 2004) Cite this as: BMJ 2004;328:969
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As a medical practitioner in the States during the 1980's when
Diagnostic Related Groups were introduced, I can provide feedback about
the system. Much like the NHS now, the States experienced extended length
of stay in acute hospitals. Back pain was a common admitting diagnosis and
tied up hospital beds for weeks with little measurable outcome for the
patient. The financial cost of these admissions and others like were
draining money from the system. With the implementation of DRG's all
departments were forced to analyze work loads of all staff, streamline
inefficiences and make hard decisions about clinical vs non-clincal care.
The result, after many screaming sessions from irate doctors because they
did not receive the usual payment for services rendered, was a total
revamping and re-engineering of the hospital environment. Management
finally realized this basic work rule: The most appropriately trained
person at the least cost should provide the service to the customer. An
example: let clinicans, nurses for example, focus on highly skilled
clinical care, remove tray delivery responsibilities from their work load,
train the food staff to provide food service tasks with a smile. Another
example, drive down ancillary service costs by prepping the patient before
admission to the hospital, ie. x rays, lab work performed in outpatient
service centers.
People will manage to a budget if their livelihood depends on it. The
patient receives the best clincial care because this system mandates the
medical team to rely on the expertise of each other to complete the
healing process in the alotted time with real budget constraints. A large
learning curve for the healthcare industry in the States. One of the best
results, a decrease in committee time, sub committe formations, task
groups, auditors, check the checker philosophies. It is amazing what
people can accomplish if you leave them alone and let them practice what
they do best.
Competing interests:
None declared
Competing interests: No competing interests
Sir,
I have read with interest the editorial by Dixon on the new financial
flows of the NHS based on case-mix [1]. After a long preparatory period in
the late 1980s and early 1990s, a case-mix based financial method was
implemented in all the Hungarian acute hospitals in 1993, replacing the
former global budget approach [2]. The rationale was at that time that the
money should follow the patients wherever they go, instead of financing
hospitals automatically through global budget. After the implementation of
the case-mix based financing, incentives have been changed radically in
Hungary too. The hospitals became interested on the one hand, in treating
more patients and on the other hand, in short term hospitalization within
certain limits. Thus during the past 10 years we realized in Hungary a
substantial decrease in the average length of stay of acute hospitals and
an increase in the number of patients’ admissions. Based on the Hungarian
experiences I do agree with Dixon: no doubt that using the case-mix will
encourage hospitals to higher activity.
After more than a decade of experience, there is a strong debate in
Hungary about the future of case-mix based financing. In many cases it is
difficult to evaluate the financial reforms of 1993 because some want to
blame the decrease in financial resources and other problems on the
financial methods implemented in 1993 including case-mix based payment.
It is very interesting that when the UK moves from block contract to
“payment by result”, in Hungary we introduced – in addition to the case-
mix financing – a volume contract, forming a capped budget to the
increased hospital activity and rising expenditures. Thus the rivers in
the UK and Hungary seem to flow into opposite direction.
Yours sincerely,
Imre Boncz
1. Dixon J. Payment by results – new financial flows in the NHS. BMJ
2004;328:969-70.
2. Kroneman M, Nagy J. Introducing DRG-based financing in Hungary: a
study into the relationship between supply of hospital beds and use of
these beds under changing institutional circumstances. Health Policy
2001;55:19-36.
Competing interests:
None declared
Competing interests: No competing interests
In her article, Jennifer Dixon writes that because fixed tariffs are
based on national average costs 50% of acute providers will have costs
below and 50% above the tariff. Surely this need not, and is unlikely to,
be correct. The number of providers above or below the average will depend
on variation in individual costs. There could be many above or many below
or none deviating from the average.
Competing interests:
None declared
Competing interests: No competing interests
Sir
All of the key ideas in this piece reside in the final paragraph.
It paints a picture of a wave of new regulation engulfing the system
before either the system is prepared or the regulations fully thought
through. The central failing of the changes is clearly identified '-
analysis of - the impact, if any [sic], on clinical staff, which cannot be
done from the eyrie in Whitehall.'
Politicians hauling on levers that are connected to the civil service
have no hope of attaining the ends they desire. They fail to grasp the
fact that the 'shop floor' is not populated by an undifferentiated,
grunting, gnarled, industrial peasantry primarily motivated by material
considerations and responsive to the lash. The academic and intellectual
accomplishments of the 'shop floor' are at least equal to and, possibly,
often in advance of management, civil service and politicians. Sophistry,
snake oil salesmen and flannel are all too easily recognised.
' - better management of demand.' should be at the top of the list of
considerations. So far this has received little if any attention.
If the regulations seem likely to set one arm of the service against
another (acute trusts vs. primary care trusts)then the whole should be
delayed until such manifest follies are eliminated.
Nothing of practical value to the front line in the provinces can be
created in London. Never have I encountered evidence that the architects
of policy have a meaningful grasp of the practical realities of health
care and, in consequence, they can never command confidence or engender
enthusiasm in the workforce. The relentless perversity and obliquity of
the centre is the source of the perennial failure of the NHS. It's not the
PBI, it's the donkeys in the department that are to blame.
Yours sincerely
Steven Ford
Competing interests:
It's my NHS too.
Competing interests: No competing interests
For any system to work it needs to be, intellectually, tested to
destruction. This is done by posing a number of worst case scenarios, and
then trying to answer them.
What would happen if a major hospital e.g. Manchester Royal Infimary
(MRI), overspent for the year, and had to stop doing a number of
operations. The people of Manchester, needing those operations, would then
be highly disadvantaged. In that they wouldn't be able to have the
operation done (at least not in Manchester).
A patient finding themselves in such a situation would then be fully
within their legal rights to take MRI to court, and demand treatment. The
whole point of a national health service is that any treatment available
somewhere on the NHS, must be available everywhere. This concept, I
believe, is enshrined in UK law and has been upheld many times in UK
courts.
At this point, what happens? I cannot see that anyone has even
attempted to answer this. How can a health minister be 'relatively
sanguine' about the possibility of hospital closures? Just wait to see
what happens if, and when, the first major hospital does close through
financial mismanagement. I predict that all hell will break loose.
Competing interests:
None declared
Competing interests: No competing interests
Why is this called "payment by results"? Surely this is payment by
activity?
This isn't merely semantics. I recently heard a senior consultant
talk about opening evening clinics and seeing patients fortnightly rather
than quarterly to take advantage of the fixed price for an out-patient
consultation in his specialty. He was joking but how much scope is there
to game the system?
Competing interests:
None declared
Competing interests: No competing interests
Payment needs to be by end-results, not just results
As we approach the centenary of Ernest Amory Codman’s “end-result”
hospital, we are alarmed by the introduction of the “payment by results”
policy in the NHS.1 Codman realised one hundred years ago that only by
systematically recording the outcome of inpatient procedures could a
healthcare system promote quality in all activities.2 Outcome evaluation
became more important in the 1970s as more complex medical interventions
were introduced without adequate examination of the end-results.3 In the
UK, the development of clinical audit further promoted the importance of
outcome and the measurement of quality of life.4
However, with “payment by results”, volume of activity has become the
surrogate for excellence in healthcare provision. Excellence requires
constant attention to outcome to ensure consistent quality. Thus, while
the NHS documents quality control in the form of clinical audit, it has
yet to fully embrace the contribution of quality improvement.5
Consequently, the assumption that “treating more patients upstream to
avert costly admissions many of which may be preventable” requires that
outcomes be at least equivalent from the patient’s perspective.
Without linking payments to the outcome of healthcare interventions,
in particular those aimed at improving the treatment of chronic
conditions, potential healthcare improvements may be compromised, and
delay the realisation of the end-result that Codman looked for nearly one
hundred years ago.
1. Dixon J. Payment by results - new financial flows in the NHS. BMJ
2004;328(7446):969-70.
2. Neuhauser D. Ernest Amory Codman, M.D., and end results of medical
care. Int.J.Technol.Assess.Health Care 1990;6(2):307-325.
3. Wennberg JE, Bunker JP, Barnes B. The need for assessing the
outcome of common medical practices. Annu.Rev.Public Health 1980;1:277-
295.
4. National Health Service Review. Working Paper No 6. Medical Audit.
London: HMSO, 1989.
5. Davies HT. Exploring the pathology of quality failings: measuring
quality is not the problem - changing it is. J.Eval.Clin.Pract.
2001;7(2):243-251.
Competing interests:
None declared
Competing interests: No competing interests