The effects of payment by results

In the linked study (doi:10.1136/bmj.b3047), Farrar and colleagues assess the effect of payment by results—a fixed tariff payment system based on case mix that reimburses acute care hospitals for the type and number of patients treated—on volume, cost, and quality of care in acute care hospitals in England for 2003-4 and 2005-6.1 By linking provider income to activity, the tariff is expected to provide incentives for higher output and lower costs per patient. The study found that in hospitals where payment by results was implemented the length of stay decreased and the proportion of day cases increased, but indicators of quality of care changed little.

Perhaps the most exciting part of forming health policies is that you do not know what will happen once a change in policy occurs. The Medicare prospective payment system in the United States in 1982-3 shares many similarities with …