Paying hospitals for all patients’ visits increases activity without necessarily improving quality, report shows

BMJ 2012; 345 doi: (Published 04 September 2012) Cite this as: BMJ 2012;345:e5922
  1. Matthew Limb
  1. 1London

The NHS can learn from recent attempts elsewhere in Europe to reform healthcare payment systems but it will take time to create the “optimal blend” of strategies that works best in the United Kingdom, a new report has concluded.

The health policy think tank the Nuffield Trust has studied trends in payment reorganisation across Europe and considered what lessons may apply for healthcare systems such as the NHS. The trust’s report was published on 23 August.1

Its director, Jennifer Dixon, who co-wrote the report, said that it was clear from the review that payment reform in England was “going in the right direction.”

The report says that the search for efficiencies in healthcare is wide ranging and that, although national payment systems can be used to encourage hospitals to improve the quality of care and value for money, some systems can have unintended consequences.

The commonest way of paying for hospital care involves making payments prospectively by using a classification system for diagnostic related groups, says the report.

But because this had tended to increase activity and total costs without necessarily improving quality, many countries were “now looking for ways to reduce incentives to increase hospital admissions.”

Some countries, notably the Netherlands, are experimenting with episode based payment. This is a fixed amount for the cost of providing some or all patient services for a complete episode of care, such as for diabetes.

An initial evaluation of a Dutch episode based payment initiative found that it led to better collaboration between providers but that administrative costs were high.

In Europe capitation payments are becoming more common in primary care. These give providers a fixed amount of funding per patient to cover some or all of the medical needs of a specified group of patients for a specified period of time.

In Spain the Alzira public-private partnership has been operating under a capitation budget covering hospital and primary care since 2003. The Nuffield Trust researchers said that a full capitation model places the provider at “significant financial risk” if the care needed costs more than the funds provided.

Factors to be taken into account in designing payment systems include the degree of “bundling” (grouping activities and services together in one payment), whether payment is set prospectively or is reimbursed retrospectively, and how best to reflect the performance of the provider.

The report says that some countries are seeking to supplement payments for diagnostic related groups with “pay for performance” incentives to bring about specific quality goals.

In England the quality incentive scheme called the commissioning quality and innovation (CQUIN) payment system links a proportion of a hospital’s income to local quality improvement goals.

In Germany capitation (providing an average flat rate of €100 (£79; $126) a year for every enrolled patient) has been used to incentivise family doctors to improve the care of chronically ill patients, says the report.

It concludes that the development of “value based contracting,” in which episode based payment to cover a pathway of care for patients is coupled with a pay for performance element, is “promising and [that] more experiments are likely in future.

It says, “Most countries are continuing to experiment to find the right blend in line with changing circumstances and priorities.”

The authors conclude that payment systems can develop only if good quality data on activity, costs, and outcomes are available and warn that policymakers should not overestimate their potential systems’ effects on quality.

The Nuffield Trust’s chief economist, Anita Charlesworth, a coauthor with Dixon and Alisha Davies, said that the review had found wide variation in practice. “It is important that countries strike the right balance between cost control and efficiency,” she said.

The report arose from a collaboration between the Nuffield Trust and the consultancy firm KPMG.


Cite this as: BMJ 2012;345:e5922