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Return to Payment by Results for NHS trusts

With NHS England insisting on ‘strong’ return of Payment by Results to drive elective activity, we review the historical effectiveness of Payment by Results and what its re-introduction means for NHS trusts moving forward.

Background

Payment by Results was initially introduced by the Department of Health in 2002 as a way of reimbursing hospitals for the activity they carry out using a tariff of fixed prices that reflect national average costs. The theory behind this was that it would create a more competitive environment between providers, putting pressure on them to make best use of their capacity and improve the quality of care.

In a national survey carried out shortly after the introduction of the scheme, Payment by Results was largely deemed a success as it reduced unit costs, reduced length of stay and increased the proportion of elective care provided as day cases; all without compromising the quality of care.

But as with any policy or guidance, there is never a one size fits all approach and whilst the overall trend was positive, there was still significant variation in performance across the country.

In recognition of this, as the NHS moved towards a place-based model of care, it was determined that the Payment by Results model also needed to evolve and pre-pandemic, there was a move towards a blended payments approach. This approach did not just rely on a single payment; rather, it was a flexible framework that could reflect local requirements and feasibility at a given point in time. Different models of blended payment allow a range of payment approaches to be combined:

However, this was benched when the reality of the pandemic had materialised and NHS England swiftly moved all providers to a simplified contract to ensure they had sufficient funding to respond to the crisis. This contract was based on NHS providers receiving block contract payments on account from commissioners, in addition to income from non-NHS sources.

Re-introduction of Payment by Results

As recovery begins, the key objective of re-introducing Payment by Results in the current climate is to drive productivity; encouraging providers to reduce the elective care backlog quicker and be creative in their strategies to tackle this.

When the move was announced by NHS England’s CFO Julian Kelly, he even gave a nod to trusts to revisit local initiatives employed at the height of the pandemic to empty hospital beds including the use of hotel rooms or care homes in the absence of domiciliary care packages.

In addition to this, NHS England has agreed a deal worth up to £525m for independent providers to reserve and then potentially supply capacity to mitigate the impact on elective work if the NHS sees a surge in admissions due to the Covid-19 pandemic.

But it is going to take much more than just money and incentives to tackle the elective care backlog.

Moving away from short-termism

It is widely acknowledged that the success of an approach like Payment by Results hinges on the management and culture of the organisation in which it is implemented. Poorly designed Payment by Results implementations could in fact result in perverse incentivisation if there is a focus on short-term results or if the results are not effectively mapped out.

The onus is therefore on NHS trusts to take a long-term approach to continuous improvement alongside realising the opportunities for quick wins along the way; using Payment by Results as an incentive but acknowledging that it should not just be a driver for reducing costs.

Payment by Results presents NHS providers with an opportunity to standardise performance; to optimise care pathways and create the necessary balance of capacity and demand to drive elective care waiting lists down to pre-pandemic levels and beyond. But to do so, there must be an understanding of the performance baseline and opportunities for improvement so data is critical to this change programme.

Communication and collaboration are also key. NHS trusts must break down not only intra-organisational boundaries in the pursuit of efficiency but also cross over inter-organisational boundaries; working across integrated care systems and regions to plan capacity and demand at both a micro and macro level, therefore reducing the dependency on independent providers and taking full advantage of the internal incentives available.

About Four Eyes Insight

We use the combined power of people and data to get to the root cause of NHS elective care pathway inefficiencies; working collaboratively and engaging with all stakeholders to get buy in for change from the ground up. We implement interventions that optimise elective care pathways and provide tools to monitor their effectiveness ensuring that a culture of continuous improvement to drive long term, sustainable change is embedded along the way.

If you would like to find out more or discuss your requirements, please email info@foureyesinsight.com