Comment / Balancing act

Bill Shields considers payment by results’ potential in helping the health service through the anticipated spending squeeze

Last month I joined the King’s Fund Windmill 2009 simulation exercise. Held every few years, it takes an economic or policy scenario and, through role-playing, determines how fit the NHS is to cope.

With a colleague, I played the part of a ‘central’ strategic health authority grappling with a poorly performing overspent health system – not much role playing required there, I hear you say. Inevitably I reverted to type fairly early in the process, having tried to use the system levers unsuccessfully. But I was struck by the difficulties presented for system management in what is, and will increasingly become, a fragmented delivery system.

Old-style command and control is unlikely to be successful with a plethora of independent and autonomous providers not directly managed other than by delivering annually negotiated contracts.

Perhaps QIPP – quality, innovation, productivity and prevention – provides the potential to provide a more successful framework for delivery? But while we wait for details, we need to consider how we can drive delivery of a more productive healthcare system. Particularly given that many of the savings are trapped in secondary care providers paid on a national tariff reflecting the average cost of delivery.

PBR has raised its profile. For instance, the Conservative party has indicated its preference to see the tariff become the maximum rather than the actual price paid by PCTs. This was deliberately shied away from when payment by results was introduced over fears that price competition would reduce quality. Would the regulatory framework overseen by the Care Quality Commission be robust enough to guard against such a possibility?

Other ways forward have been suggested – tariffs based on best practice, normatively set or costing care pathways. These may all be more equitable, but how long would it take to develop something robust enough to be implemented? We should not forget how long it has taken to get this far with the current tariff.

The basic premise is straightforward. The tariff has led to, and was specifically designed for, significant increases in secondary care capacity delivered through the creation of surpluses. It is unlikely to be sustainable if payment continues at its current level when resources come under renewed pressure.

We must all accept less money will be available for secondary care. Once we have, and accepted that providers will no longer be able to earn their way out of low growth by increasing income, the precise method for reducing income becomes less important.

My view is we need to look again at those areas not currently covered by any tariff (typically 40% of all activity undertaken by providers). We need to consider whether payment for excess bed days (which in effect reflects performance worse than the average) can be sustainable. After all we need to move beyond median levels of performance to upper quartile and then upper decile levels if we are to avoid the more drastic spending reduction scenarios being trailed by some commentators.

So what does this mean for providers? Is this an unfair set of suggestions or a realistic view of the actions needed to ensure we can deliver healthcare in a balanced system? Finance professionals have known longer than most how challenging the future will be. We need to take forward some of the solutions because if we adopt a bunker mentality now, the chances of success will be much diminished.