Comment / Time to take stock of PBR?

The Department of Health, NHS Commissioning Board and Monitor are all engaged in reviews of payment by results (PBR), giving an opportunity for much-needed change. Over the past 10 years PBR has evolved into a complex suite of payment methods, incentive schemes and contracting rules. Reports have identified the need to improve the cost data underlying it and stabilise tariff prices, while reviews have found widespread non-compliance with PBR guidance. Common work-arounds put financial stability ahead of compliance rules intended to drive productivity gains, raising doubts on whether PBR is still an effective driver of efficiency and financial discipline.

PBR has not engaged clinical commissioners in the main. It is seen by many as an impediment to service redesign to improve and integrate care for people with chronic illness and shift care into the community. It seems timely to take stock of PBR and what we know about payment systems, and ask if there is a better alternative for meeting the NHS’s current challenges. John Appleby, colleagues from the King’s Fund and I set out to do this in How can payment systems help to deliver better care?, published in November.

Clear lessons on payment systems emerged from our research. First, payment systems cannot do everything. If we load too many objectives on PBR,

it increases the risk that conflict between the objectives will make the impact unpredictable and impossible to evaluate.

Second, one size does not fit all. Different services call for different payment methods. Innovations in payment methods internationally have not produced a new paradigm that could replace PBR. Bundled payments for pathways or extended episodes show promise for some services but they add to complexity and require up-front investment in information systems. Benefits exceed costs only under some circumstances – where a consensus exists about the optimal pathway, say. But for much of healthcare, reality is less predictable and less well understood.

Third, any payment system needs to be flexible, so that it allows the health system to innovate, learn and seek local consensus among providers along the pathway about how best to provide care. 

Fourth, payment systems cannot drive major service change, though it may play a supportive role. Service reconfiguration creates another rationale for flexibility. Geography, population and legacy provider infrastructure affect current cost structure and optimal future organisation. A single fixed price schedule cannot create the right incentives in widely different contexts.

Finally, further developments in payment systems will need to be supported by high-quality data and analysis. Abandoning PBR and reverting to simple block contracts cannot be expected to drive improvement. Standardised output and outcome metrics and costing systems need to be implemented where these are lacking, such as in sub-acute and non-acute care in the community. Without data, development of payment for pathways or integrated care will have high transaction costs and will risk unintended side effects.

So how should the Department, Commissioning Board and Monitor approach their PBR reviews? They could carry on as they have in recent years, with incremental development of PBR, adding more adjustments, best practice tariffs and pathway payments to the existing system. They could develop centrally a wider range of activity-based payment systems to cover services currently outside PBR and mandate them for all NHS commissioners in England.

However, in our view they are more likely to foster new models of care if they allow local experimentation. But this should be within a national framework focused on shared metrics and a commitment to evaluation and public disclosure of information to enable tracking of innovation.

Loraine Hawkins is a health systems consultant and a co-author of the King’s Fund report, How can payment systems help to deliver better care? See www.kingsfund.org.uk