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Ministers relaunch their payment by results scheme

BMJ 2006; 333 doi: (Published 20 July 2006) Cite this as: BMJ 2006;333:170
  1. Lynn Eaton
  1. London

    The government has announced plans to reintroduce its ill fated payment by results system for funding health service hospitals in England. It has also increased its funding to three children's hospitals because it fixed payment tariffs for children's treatments too low.

    It also intends to “unbundle,” or disaggregate, some of the funding for certain treatments, so that specific elements can be costed separately and provided away from acute hospitals, in the community instead.

    The payment by results system, under which providers are paid from a fixed tariff for each individual case treated in NHS hospitals, had to be hastily withdrawn last year because the Department of Health got its sums wrong. It emerged that the calculations on which the tariffs were based were wrong and would have led to a 4% increase in costs, rather than the intended 1.5%.

    The tariffs were hastily withdrawn and, although the figures were recalculated more accurately, they were published so late in the financial year, in January 2006, that trusts were unable to work out their budgets in time to apply them in 2006-7.

    The Department of Health has announced that these recalculated tariffs will form the basis of the 2007-8 budget. The tariffs will include an increase to take account of inflation, yet to be decided, and built-in efficiency savings of 2.5%. The exact figures for 2007-8, however, will not be published until mid-December 2006.

    Ministers have also accepted that the tariffs for specialist children's hospitals have not worked in all cases. They will give an additional cash injection to the Royal Liverpool of £4.9m (€9.0m; $7.2m) in 2006-7, £3.4m to Great Ormond Street, and £0.9m to Sheffield.

    Health minister Lord Warner admitted that last year there was “an unfortunate error” in the calculations. He said that the department accepted the findings of an investigative report by John Lawlor, the chief executive of Harrogate and District NHS Foundation Trust, which was published to coincide with this week's announcement.

    He also explained that the department was trying to “unbundle” the various financial components which go to make up the tariffs, so that certain aspects of care might be more readily provided in the community, rather than in hospital.

    “We need to take a view of the extent to which we can unbundle the tariffs for 2007-8,” he said. “We have asked Professors Roger Doyle [the national director for heart disease] and Ian Philp [the national director for older people] to look into this area.”

    They will look specifically at fractured neck of femur, elective hip replacement, community acquired pneumonia, and patients with stroke.

    “What we are not trying to do is to take practices outside to [community] settings where it is not safe to do so,” said Lord Warner.

    In relation to stroke some of the diagnostic procedures, care in the acute phase, and rehabilitation could be provided outside an acute hospital setting, it was suggested.

    Lord Warner denied they were hiving off certain services that could later be privatised. “We are very clear that we should not be drawing people into acute hospitals who do not need to be there,” he said.

    “One of the reasons for unbundling the tariff is to enable clinicians to define what the most appropriate ways of treating conditions,” he said. “What we are responding to is what some clinicians say to us. It is driven by clinicians looking at the most appropriate clinical pathways.”

    The report on the tariff setting process for 2006-7 is available at

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