In April 2004 the NHS introduced its new “payment by results” system, starting with foundation hospitals. Under this system, providers will no longer be paid by block contracts, but by case mix adjusted activity.^w1> This new system uses healthcare resource groups (HRGs) as a measure of care based on diagnosis and complexity of treatment. HRGs are analogous to diagnosis related groups (DRGs) used in other countries. This new system has already run into problems: evidence shows disproportionate rises in the numbers of short stay inpatients admitted through accident and emergency departments. As a consequence, the planned implementation of payment by results across all NHS trusts for April 2005 has been restricted to elective admissions only.^w2> In addition, there is concern that “gaming” may result, whereby providers reclassify patients into more complex and therefore more …