Payment by Results: Not What it Seems

Abstract

In 2002, the UK Department of Health set out proposals for a radical change in the way in which National Health Service (NHS) hospitals in England would be reimbursed for clinical activity [1]. Instead of block contracts with inherent specifications of cost and volume together with ceilings and tolerances, all providers – including providers in the private sector – will be reimbursed according to a single national tariff. The intended benefits include managing demand and risk, supporting patient choice and rewarding efficiency and quality. Similar systems already exist in North America, Europe, Scandinavia and Australia but its implementation is a bold initiative for the NHS, which carries significant risks. These include severe financial destabilisation for many NHS hospitals and Primary Care Trusts, a trend towards mediocrity in standards of care and loss of services, particularly those of a specialist nature [2,3]. A total of 15 hospital trusts will have to make savings in excess of £10 million to achieve the national tariff. The timetable for its implementation has recently been slowed down with the inclusion of elective care in 2005/2006, but the aim of including 90% of hospital care within the scheme by 2008/2009 remains. This is a very short timescale [1]. Medicare in the USA has been modified every year since its introduction in 1984. To a clinician the title – Payment by Results (PBR) – is a complete misnomer that smacks of political propaganda because the ‘results’ represent activity and bear no relationship to any clinical outcome. The relationship of quality to activity is questionable. One would hardly expect the success of a football team to depend on the number of games played rather than the goals scored! The tariff will be based upon healthcare resource groups (HRGs) allocated by speciality. The concept of HRGs was originally derived from diagnostic-related groups (DRGs), which have been widely used in the USA for reimbursement. They are intended to define groups of patients that are both clinically relevant and