Conservative Draft Manifesto 2010: Dissection Part 4

An analysis of the Conservative Draft Manifesto 2010.

"we will implement a 'payment for results' system throughout the NHS."

This is a nasty piece of misinformation.

At the moment NHS hospitals are funded by a system called Payment by Results (by not for), PbR. This is a system developed in the US by the not-for-profit healthcare provider Kaiser Permanente and was first introduced in the NHS in 2003 (you can get more information about this scheme from the Department of Health website).

So what is the current system? PbR means that each hospital is paid for each procedure they perform, and the more procedures performed means a higher payment to the hospital. If the hospital can perform the procedure for less than the payment of PbR then the hospital can generate a surplus which may be spent on other healthcare. This encourages more efficiency in NHS hospitals. Every year the Department of Health gathers information about the costs of each procedure, it then generates a national average cost for the procedure, taking into account that, all other things being equal, it is most expensive to provide a service in one part of the country than another (this is known as the Market Forces Factor, MFF). This average is the "baseline" tariff for the procedure, and you can download all the tariffs from the Department of Health website. The Market Forces Factor includes geographical variations in staff costs, costs of land and buildings and London weighting (MFF is the least for Cornwall and Devon and the most for London). So the actual money that a hospital receives for each procedure is the national tariff adjusted by the MFF. Note that this means that there is a regional variation, which is important when you consider other Conservative health policies (which I will cover in a later article).

As you can see Payments by Results (the current system) is a bit of a misnomer, it should have been called something like Payment per Procedure. The important point is that each hospital is paid per procedure performed, money that the procedure is expected to cost. If the hospital improves efficiency then they will be paid more money than the procedure actually costs and the hospital can use this surplus for other healthcare activity. However, this will not result in quality affecting cost cutting because if quality falls the hospital will have to remedy the effects, and that will cost the hospital more. There is thus an in-built incentive for efficiency and quality.

The Conservative policy is NOT payment by results, it is based (apparently, but they do not explain how exactly it will work) on the outcome of the procedure. Presumably this means that if a procedure fails then the hospital will not be paid. It raises other questions, what is the outcome of each procedure expected to be? Who will decide that the outcome has not been achieved? If it is the clinician who performed the procedure, then it is in their interest to say that the procedure succeeded. Clearly patients do not have the skills to determine themselves whether the outcome of a procedure is successful, so if a third party clinician is required to make this judgement there is clearly an extra cost involved. Some procedures are expensive and difficult and may lead to a range of outcomes. How will this be handled? Will the hospital be paid on a sliding scale, and if so, who will determine where on the scale the patient outcome lies?

What will the result of this proposed new system of payments? Clearly there will be an increase in administration, there will also be more demand on clinicians since a qualified clinician will be required to determine the outcome of a procedure for the basis of payment (and not healthcare). Ultimately, there is a danger that hospitals will refuse to perform procedures that do not have a 100% success rate. This is understandable because procedures cost the hospital: the time of their clinicians, the cost of drugs and resources they use. If a hospital is not paid for their incidental expenses they will not be willing to perform the procedure in future. The consequence of this on the patient is that there will be few providers for some of the more complicated procedures, and hence choice will be taken away. One further point: it is no use looking to the private sector to provide more choice, because the private sector already avoids performing the more complicated procedures putting the risk of those procedures on the NHS.

In the 2009 Conservative Health policy document they talked about basing payments on "outcomes" a lot. The policy authors would have known about the current NHS funding policy of PbR, so it makes you wonder why they deliberately chose the term payment for results in the "Draft Manifesto" a term that sounds very much like the existing system. An attempt to mislead, I think.

Over all the Conservative Payments for Results is a badly thought out policy and it will lead to more costs to the NHS and less choice for the patient.