News / Fund calls for radical rethink on funding flows

By Seamus Ward

Payment by results (PBR) does not suit patient needs and policy requirements and should be overhauled, according to the King’s Fund.

In a report published last month, the fund acknowledged that PBR had made a positive impact – by boosting elective activity, for example. But it could now be obstructing the changes in services required to improve the quality of care and support the transfer of care out of hospitals. Payment by results: how can payment systems help to deliver better care? said PBR did not promote continuity of care and provided little incentive for health promotion or disease prevention.

In addition, it argued, the policy of setting below-inflation tariff increases to incentivise cost reductions was not sustainable.

Tinkering with PBR was not enough – a radical overhaul that would allow greater local experimentation within a national framework was needed. PBR was best suited to elective care, but less so in services where lower activity levels are desirable, choice and competition are limited and the main requirement is to ensure capacity to meet variable demand.

In the fund’s scenario, commissioners and providers would seek approval from Monitor and the NHS Commissioning Board for variations to national tariffs, and would evaluate their impact. The national bodies could support this by publishing benchmarks rather than mandatory prices, monitor deviations from these tariffs, support evaluation and spread best practice.

Comprehensive capitation payments should be developed, which would shift more risk to providers and allow greater flexibility for developing new relationships between providers.

King’s Fund chief economist and lead author of the report John Appleby said: ‘One size does not fit all when it comes to payment systems and radical changes in the blend of payment methods used in the NHS are essential in order to improve NHS performance and the quality of patient care.

‘The report proposes the NHS adopt an approach to payment that maximises local flexibility but ensures greater transparency in pricing and the development over time of a more comprehensive set of national currencies and prices that better meet the needs of the healthcare system.’