Payment by results is now a reality for most NHS bodies. Foundation trusts have been operating the system since April 2004 and NHS trusts, for elective care only, from April 2005. The intention is that all acute trusts will operate under payment by results fully from next April, although the full impact on funding will not be realised until 2008/09.
Of all the major changes facing the NHS at present, payment by results is arguably one of the most important. As well as providing incentives to stimulate productivity, it underpins the NHS modernisation agenda, facilitating patient choice and plurality of provision.
Under payment by results, providers of NHS services will be largely funded through a single rules-based system, where payments are directly related to the work they do. Acute hospital activity, classified according to healthcare resource groups (HRGs) will be paid for at a national tariff. While the tariff will determine the price, PCTs and service providers will negotiate volumes, setting strict cost and volume contracts within the national framework. This approach is similar to payment models already used in many other countries, in Europe and beyond.
The Audit Commission's July 2004 report, Introducing Payment by Results, concluded that payment by results had considerable potential to improve services and efficiency, and provided greater fairness and transparency in funding. However, the financial incentives inherent in payment by results are strong, particularly for providers, and there will be serious consequences if the system does not work as intended.
Payment by results creates an unprecedented level of financial risk for both PCTs and trusts, and greater potential for financial instability across the NHS as a whole. It raises some critical financial management questions both nationally and locally.
Included in this report:
- Early experiences
- Priority areas
- Questions for all NHS board members
- Question for acute trust board members
- Questions for PCT board members
- Questions for SHAs