Transcript Payment by Results: Implications for Acute Trusts

Payment by Results: Implications for
Acute Trusts
CIMA briefing, November 2004
What this briefing covers
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Why the NHS is doing this?
How it will work?
Main immediate implications for Acute Trusts
Longer term issues to consider/discuss
WHY MOVE TO PbR?
• Facilitate patient choice
• Enable diversity of provision
• Introduce some of the benefits of a market without
haggling over prices
• Promote efficiency at higher cost Trusts (because
they have to reduce costs to a national tariff level)
• Evidence that it works in other countries
Patient choice
Requires a financial system that:
• Is flexible enough to allow money to move as the
patients do (no block contracts)
• Allows patients’ choices to be made on the basis
of quality and responsiveness not price
• Ensures choices are affordable for PCTs and good
value for money
Diversity
Requires a financial system that:
• Works for new as well as traditional providers
• Minimises transaction costs
• Sets a common national framework and
contracting arrangements for all providers of
services to NHS patients
Experience in other countries
• Most OECD countries use casemix payment
methods or are planning this
• Most OECD countries use standard tariffs, not
competition, to pay for most healthcare
• Casemix payment increases productivity, reduces
use of inpatient care
• Researchers have not found adverse effects on
quality
HOW IT WILL WORK
• Trusts to be paid for actual patients they see and
treat
• Payment is based on national tariffs
• Tariff is set at national average cost, excluding
regional cost differences
• Tariff uses over 500 Healthcare Resource Groups
(HRGs) to reflect relative patient complexity
Tariffs for admitted patients (1)
• Tariffs cover the entire spell between admission
and discharge or death. Finished consultant
episodes (FCEs) are not a contract currency.
• Tariffs for each HRG (over 500 of them)
• Some specialist work is excluded. Some earns a
premium on the HRG tariff (the HRG grouper
software decides).
Tariffs for admitted patients (2)
• Separate tariffs for elective & non-elective, at least
in 2005/6
• Elective includes day cases – no separate price
for these
• Additional payments for very long stays (based on
national “trim-point” by HRG)
• Lower tariff for short stay emergencies (these
have been increasing, and it would be unfair to
pay the normal price)
Outpatient tariffs
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Prices for each specialty
Higher prices for children
First attendance has a higher price than follow-up
No additional payment for minor procedures done
in outpatients
A&E tariffs
• Three price bands per attendance: normal (£61),
high cost (£93) and minor injuries (£35)
• Most payments are fixed based on expected
activity: 20% variable for under performance, but
full tariff if over
• Existing payment arrangements (normally by host
PCTs on behalf of all) continue for 2005/6
What is NOT covered by tariffs in 2005/6
The main activity excluded is:
• Some specialist work, e.g. burns and transplants
• Critical care (but costs of coronary care are built
into relevant HRG tariffs)
• Ward attenders
• GP direct access services
These will all be covered eventually.
The transition to tariffs
• PCTs pay Trusts for planned contract activity at
tariff (it’s not negotiable).
• Tariffs are based on NHS average costs. But any
Trust’s costs may be higher or lower than tariff.
• Trusts with costs above tariff receive extra income
(tapering off over three years). This is taken from
Trusts with lower costs.
Contract arrangements in 2005/6
• Trusts will continue to have contracts with each
PCT (legally binding contracts for Foundation
Trusts)
• These will specify all the detailed planned activity
valued at national tariff, and the value of work not
covered by tariff
• Activity variations in year will nearly all be at full
tariff (for PbR activity)
• Separate arrangements to replace “OATs”
What about non-NHS providers?
• Essentially the same rules apply (but some of the
non-NHS contracts work differently from NHS
ones at present)
• PCTs pay the same tariffs to non-NHS providers (if
the DoH negotiates anything different, the DoH
handles the difference)
• Patients should choose who treats them based on
quality and waiting time, not price
MAIN IMMEDIATE IMPLICATIONS
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Volatility of income
Savings required
Information needed
The importance of coding
Some activity earns high prices, some low
Understanding the Trust’s own costs
Volatility of income
• Income earned depends on work done
• PCTs will scrutinise work done more carefully, and
won’t pay for work done against their wishes
• PCTs still have cash-limited budgets, and will aim
to manage within the total they set aside for acute
activity
Savings required
• The national tariff assumes 1.7% cash-releasing
efficiency savings in 2005/6
• In addition, Trusts with costs above tariff have to
find further savings – up to 2% a year
• This isn’t negotiable – it is simply removed from
Trust income
• Trusts also have to sort out any underlying
financial problems
Information needed
• All needed at PCT level, possibly at GP practice
level
• HRG activity should come automatically from the
grouper software
• So should information on short and long stays
• Outpatient attendances should be easily available
• A&E might be more difficult?
The importance of coding
• Coding affects the HRG which an episode is
coded to
• The HRG affects the price
• So it’s important to get coding right (it always was,
but now it affects income)
• Longer term, the NHS may audit counting and
coding of activity more rigorously
High and low prices
The NHS has set fairly low prices for activity it
doesn’t want to encourage, i.e.
• Outpatient re-attendances
• Short stay emergency admissions
• Long stays (over the “trim point”)
This largely fits with good clinical practice.
Understanding the Trust’s costs (1)
Relatively high costs can be caused by:
• Activity not counted or coded properly
• Poor throughput and productivity
• Diseconomies of small scale
• Site problems creating inefficiency
• Poor clinical practice (e.g. infections)
• Cross-subsidising R&D or education
• Rich case mix not really covered by tariffs
Understanding the Trust’s costs (2)
The important things are:
• Recognise what you can change in the short term
and what you can’t
• Accept that there’s little information on other
Trusts’ costs (but plenty on lengths of stay)
• Aim for real changes, not re-allocations of
overheads
LONGER TERM ISSUES (Discussion
topics)
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Internal financial control under PbR
Critical mass under PbR
New capital expenditure – affordable?
Clinical practice and quality
Practice Based Commissioning
Will PbR change where care is delivered?
Internal financial control under PbR
• Fixed budgets for expenditure start to be
inappropriate if income starts to vary significantly
in-year
• In principle, spending £50k more can be justified if
you earn £100k more income
• But departments which earn less income would
similarly have to save money
• Financial contribution (however defined) could
start to be a key measure
Critical mass under PbR
• Ultimately PCTs no longer “fund” anything. They
simply pay for work done.
• Hence there is no longer a “funded establishment”
of doctors and nurses. If the work reduces, some
of the people can’t be afforded.
• If income levels don’t support the level of staffing
required by Royal Colleges, Trusts will have hard
decisions to make.
Funding new capital expenditure
• In the medium and long term, any new
development has to be affordable at tariff
• Important to make robust assumptions, as the
Trust carries the risk
• There may be some short term NHS Bank funding
for major PFI schemes for five years at most
Clinical practice and quality
• HRGs distinguish different types of work
• And some sorts of work can earn a premium for
complex cases in an HRG
• But there is no financial reward for providing better
than average NHS quality (unless it reduces
overall cost, or attracts more business)
Practice Based Commissioning (1)
• New policy, expected to be introduced in 2004/5.
Any GP practice which wishes can have an
indicative budget – largely covering acute care
subject to PbR.
• This may improve (but may complicate) how
health care is commissioned.
• It will demand more detailed information.
• And practices are more likely than PCTs to
challenge the detail.
Practice Based Commissioning (2)
• PCTs see PBC as a means of controlling the rise
in acute activity. Practices may be better than
PCTs at controlling what is done.
• Practices can reinvest savings in other healthcare:
this is their incentive for taking on a budget.
• Savings for practices will mainly come out of Trust
income. PBC increases risk?
Will PbR change where care is delivered?
• PbR is meant to encourage choice and diversity of
provision
• PCTs can pull out income if they shift work from
secondary to primary care
• How much is this likely to happen?
• What should the Trust’s strategy be?